Crisis yields 18.9-month supply of homes for sale

Crisis yields 18.9-month supply of homes for sale

Inventory hurts owners but great news for buyers
BY GRETA GUEST • FREE PRESS BUSINESS WRITER • April 13, 2008

Metro Detroit had a staggering 18.9-month supply of homes for sale at the end of 2007, and some cities were swamped with four years or more worth of housing inventory that people are desperately trying to sell.


That's almost double the national average of 9.6 months of existing home inventory at the current sales pace, itself a sign of trouble in the U.S. housing market where a three- to six-month inventory is considered normal.

The vast oversupply of houses could depress prices further as Michigan struggles to remake its economy, said Caroline Sallee, a consultant for Anderson Economic Group in East Lansing, and others said the phenomenon is crimping retirement plans or the ability to move for jobs.

Sales prospects in many spots are grim. Huntington Woods had a 45.7-month home supply, and Oakland County had a 20.2-month inventory overall, according to listing data released last week by Real Estate One in Southfield.

Detroit had a 51.1-month inventory of homes listed.

Home sellers in some spots had better prospects, such as in Pleasant Ridge, with an 8.8-month supply on the market. But most places were well above the national average.

The 18.9-month combined inventory for Wayne, Oakland, Macomb, Washtenaw and Livingston counties marks an 11.8% rise from the end of 2006 and a 60% climb from 2005.

High unemployment and continued cutbacks for Detroit's automakers has hit Michigan's real estate market harder than most around the country. And while speculators drove prices sky-high in Florida, California and Nevada, metro Detroit did not ride the price bubble up as far.

Still, metro Detroit led the nation last year in the rate of foreclosures, pushing up inventory, and home prices have fallen 15%. Even with prices down, prospects for droves of home buyers are darkened by such factors as the state's net outmigration of 90,000 people for the 12 months ending in June 2007.

And the inability to sell a home is affecting lifestyles and the ability to seize opportunities.

Home becomes a burden
Many people can't move to take better jobs in other cities, can't downsize their housing or retire because their biggest asset -- their home -- can't be sold, said Dana Johnson, chief economist at Comerica Bank. Some who took buyouts from the auto companies are staying put because they don't want to take a beating on their home sales price, he said.

"I think it is creating less mobility for people who for career reasons or life changes may want to move. You are stuck to a greater degree than normal," Johnson said.

Don Grimes, a University of Michigan economist, said buyers are here but they are waiting for prices to hit rock-bottom before they buy. Family formation is still going on. Once they start buying, inventories will fall to normal levels, he predicted.

"From what I am able to tell, it may be getting down to the bottom in the Detroit area," Grimes said. "People need to see that prices have hit bottom so they won't be kicking themselves six months from now."

One of the biggest reasons for the oversupply is that sellers overpriced their homes, Grimes said.

That seems to be the issue in Huntington Woods, said Greg Barnas, an agent with Sine & Monaghan in Royal Oak.

"A lot of what is still out there in Huntington Woods is still overpriced. The houses that are priced well and in good condition are still showing well and selling," Barnas said.

Other agents in Huntington Woods say that sales have picked up this year.

On Friday, there were more children playing in yards and riding bicycles along the city's tree-lined streets than real estate signs. A few signs had "sold" on them while others advertised a reduced price.

Betsey Rubel isn't worried about selling her 2,086-square-foot home on LaSalle Boulevard. The four-bedroom, two-bath home has been listed since January for $299,900. The Rubels, who want to move to Bloomfield Township to be closer to their daughter's school, paid $220,000 in 2001.

"We're not in a time crunch," said Rubel, 33. "When our house is ready to sell, it will."

Rubel said she has seen houses linger on the market in the city over the past several months, but she said she believes some of them have been overpriced -- like one down the street that sat for about a year, listed at more than $800,000. The Rubel house has drawn interest, with about 10 showings.

Money matters
Charlie Lutz, a realty agent with Re/Max Acclaim in Roseville, said it's all about price. He has had a Macomb Township home listed for six months that's gotten two offers in the past three months.

But the home has been on the market for more than two years with different agents and had no offers until this year. Seller Jackie Odbert won't budge off the current price of $249,900. That's down from the original price of $329,000 for the four-bedroom, 2,600-square-foot home.

"After over 40 showings, Jackie is one of many sellers who are in shock when they understand the market controls the price, not the seller or the Realtor," Lutz said. "The buyer is the market and they don't negotiate on an overpriced property."

Odbert, 52, a nurse at St. John Macomb, built a new house in St. Clair County just before putting her home on the market in August 2005, just when the market started to slow. She's working overtime to take care of both homes.

"As we keep going down with the price, it's disappointing," Odbert said. "The people come in, and it seems they want everything for nothing. They want you to pay closing costs, they want a finished basement, a three-car garage. They don't seem to realize how much the owner put into it, and we won't get it back.

"I just might have to let it go to the next person who makes an offer of $220,000," she said. "Who knows if it's going to get better in Michigan?"

Buyer's paradise
Although sellers find anguish and frustration in the market, realty agents and builders say there won't be another buyer's market like this for a decade or more.

Herb Lawson, president of Windham Development in Bloomfield Hills and past president of the Building Industry Association of Southeastern Michigan, said pent-up demand in the area will be unleashed soon.

"At the end of 1983, they claimed there was a 12-year supply of homes. It was a matter of 36 months when they were all gone," Lawson said. "There hasn't been new development in the last two to three years. People buying today are going to say how smart they are for having bought a home or condominium."

He noted that in the new home market, the supplies are smaller. For example, when looking at single-family detached housing in the five counties, there is a four- to 10-month supply, according to Housing Consultants Inc. in Clarkston.

The Real Estate One report compiles closely guarded multiple listing services data usually available only to Realtors and is the first comprehensive look at metro Detroit's housing supply. Real Estate One started compiling the reports two years ago for its agents, but decided to issue them to the public late last year, said Dan Elsea, president of brokerage services.

The report, issued quarterly, pulls listing information from several sources including RealComp Inc., a multiple listing service in Farmington Hills.

The report predicts that as a recovery starts in early 2009, this year will be remembered as the "best buying point over the next 10 years or more."

Richard Komer, president of homebuilder Wineman & Komer Building Co. in Southfield, couldn't agree more.

"Something like this only happens once every 25 years or something. This is a real drop," Komer said. "I don't know if the buying public really understands that."