Good credit scores + savings for a down payment + job security = consumers that can afford to build a new home. But tighter lending guidelines are impacting even that group. Government data suggests that a new home used to cost about 15% more than a resale home, but the difference now may be closer to 48%.
Blame a weak housing market, where existing homes are more affordable than they have been in a long, long time. Add in the foreclosures that lower prices even further, and the short sales that often see homes selling for as much as 10%-15% under market value.
On top of that, the prices of new homes have risen about 6% nationally, although prices vary quite a bit from one part of the country to another. Many of the smaller homebuilders are literally out of work, and some have lost their tradesmen to areas where work is more readily available. On top of that, the price of materials keeps increasing, too.
New homes represent a small portion of total home sales, even in a ‘good’ market. But they do add jobs not only for construction, but to the real estate, lending and home services and products areas. Think of all the new appliances, furniture and furnishings that often go along with a new home purchase.
The National Association of Realtors (NAR) February Report on Existing Home Sales (released March 21, 2011) indicates that cash sales reached a record of 33% of sales in February 2011, with 19% of sales attributed to investors. While this may seem ‘unfair’ to potential homebuyers, the investors actually help by purchasing properties that are often not financeable (they need too many or major repairs), and by repairing damaged homes they are helping neighborhoods to retain value. It’s amazing what a couple of run-down houses can do to a neighborhood.
Wednesday, March 30, 2011
Michigan Takes Huge Census Hit
Yes, we are the only State to lose population from 2000 to 2010, dropping 0.6% of our residents and ending with a head count of 9,883,640. Large cities dependent on auto manufacturing fared the worst. Detroit lost 237,000 people for a 25% drop, Flint lost 18%, Saginaw 17%, and Pontiac lost just over 10% of it's population. But some areas gained in population.
My ‘home base’ – Livingston County – actually fared well in the census, gaining 15.3% or 24,024 people since 2000, the second highest gain among Michigan counties. Clinton County was the winner with a 16.5% population gain. The other 81 counties were either negative or slightly more than 2000 census levels.
Some other counties that gained were Macomb at 6.7%, Washtenaw at 6.8%, and Ottawa County with a 10.6% gain. Ottawa County is on the west side of the state. Recognizable cities in Ottawa County include Grand Haven, Zeeland and Holland.
Among Michigan’s top 20 largest cities, only 5 remained unchanged or gained in population, with Sterling Heights in Metro Detroit leading the way at a 4.2% increase, and Wyoming, near Grand Rapids showing a 4.0% gain. Detroit, Flint and Pontiac were the biggest losers in this category, with -25.0%, -18.0% and -10.3%, respectively.
For an easy to use interactive map, go to http://www.detnews.com/article/20110322/SPECIAL05/110321001/1413/Interactive-map--Population-changes-by-Metro-Detroit-community this link on the Detroit News web site.
For more 2010 State census data, visit Michgan’s web site at: http://www.michigan.gov/cgi/0,1607,7-158-54534---,00.html
My ‘home base’ – Livingston County – actually fared well in the census, gaining 15.3% or 24,024 people since 2000, the second highest gain among Michigan counties. Clinton County was the winner with a 16.5% population gain. The other 81 counties were either negative or slightly more than 2000 census levels.
Some other counties that gained were Macomb at 6.7%, Washtenaw at 6.8%, and Ottawa County with a 10.6% gain. Ottawa County is on the west side of the state. Recognizable cities in Ottawa County include Grand Haven, Zeeland and Holland.
Among Michigan’s top 20 largest cities, only 5 remained unchanged or gained in population, with Sterling Heights in Metro Detroit leading the way at a 4.2% increase, and Wyoming, near Grand Rapids showing a 4.0% gain. Detroit, Flint and Pontiac were the biggest losers in this category, with -25.0%, -18.0% and -10.3%, respectively.
For an easy to use interactive map, go to http://www.detnews.com/article/20110322/SPECIAL05/110321001/1413/Interactive-map--Population-changes-by-Metro-Detroit-community this link on the Detroit News web site.
For more 2010 State census data, visit Michgan’s web site at: http://www.michigan.gov/cgi/0,1607,7-158-54534---,00.html
Saturday, March 26, 2011
Great New Condo Listing
http://www.realestatemich.com/10/listing/20580
Tuesday, March 22, 2011
New Construction Market
I participate in, and receive the results of a monthly survey of Realtors from across the country. This survey from Credit Suisse is a comprehensive look at various market areas. This month's report notes that the new home market is increasingly driven by buyers that are responding to "great deals, strong affordability, and the fear of higher mortgage rates."
The Metro Detroit data signals that buyer traffic for new construction was short of agent's expectations, that builder incentives were rising, prices were still falling and it was taking longer to sell a home. No surprises there!
There are opportunities to pick up lots or even completed homes at good prices. You do have to be careful about developments that are not fully built out and that have Home Owner Associations (HOAs), though. Typically the developer keeps control of the HOA until it reaches some pre-determined occupancy rate, 50%, 60%. At that point management transfers to the residents who elect officers.
Many smaller builders and developers have gone out of business and your selection of communities is somewhat restricted to the larger production companies. Some consumers are buying lots and operating as their own 'general' contractor, finding the tradesmen to do the specialized jobs like HVAC, electrical and plumbing. House 'packages' from some area lumber companies are also another choice for a new built home. If you decide to go this route, be sure that you have enough time to attend to all of the details required with building your new home. Often it's better to pay a little more to get an experienced general contractor on the job site as your 'eyes and ears'.
It's also a bit tougher to find financing for vacant land and for construction loans, but they are available. Vacant land sales are still depressed. Here's a quick summary of Livingston County YTD vacant land sales as of the end of February for the last seven years:
2005 - 67
2006 - 41
2007 - 17
2008 - 10
2009 - 12
2010 - 18
2011 - 16
The Metro Detroit data signals that buyer traffic for new construction was short of agent's expectations, that builder incentives were rising, prices were still falling and it was taking longer to sell a home. No surprises there!
There are opportunities to pick up lots or even completed homes at good prices. You do have to be careful about developments that are not fully built out and that have Home Owner Associations (HOAs), though. Typically the developer keeps control of the HOA until it reaches some pre-determined occupancy rate, 50%, 60%. At that point management transfers to the residents who elect officers.
Many smaller builders and developers have gone out of business and your selection of communities is somewhat restricted to the larger production companies. Some consumers are buying lots and operating as their own 'general' contractor, finding the tradesmen to do the specialized jobs like HVAC, electrical and plumbing. House 'packages' from some area lumber companies are also another choice for a new built home. If you decide to go this route, be sure that you have enough time to attend to all of the details required with building your new home. Often it's better to pay a little more to get an experienced general contractor on the job site as your 'eyes and ears'.
It's also a bit tougher to find financing for vacant land and for construction loans, but they are available. Vacant land sales are still depressed. Here's a quick summary of Livingston County YTD vacant land sales as of the end of February for the last seven years:
2005 - 67
2006 - 41
2007 - 17
2008 - 10
2009 - 12
2010 - 18
2011 - 16
Should I Think About Selling?
Like many answers, this one is conditioned upon your reason for selling.
Career and/or location change. This is the group I most often see that absolutely has to sell their home. A great new opportunity out of state, the desire to be closer to family, or retirement to a warmer climate are the most common reasons.
While you can try to rent or lease the existing home, it is very difficult to be a 'long distance' landlord. Many consumers that don't have enough equity to make the sale at least a break even proposition are hiring property management firms to handle tenant screening, rent collection and property maintenance. Their reasoning is often that they are waiting for the market value to go up, but most Real Estate industry and national economic experts are predicting a 5+ year wait for that to happen.
Move-Up Homeowners. This group needs a larger home and may or may not have a lot of equity in their existing home. The family has grown and they need more space. Why not take advantage of buying a bigger house while prices are down? Often that is a good plan, but it depends on their ability to bring money to the table when the current home is sold in many cases. Often there's not enough left to make an appropriate down payment on the new house.
This group also thinks about leasing or renting their existing home, and that sometimes works, but remember to plan for at least a one month vacancy period when the lease is up. You will also need reserves in case a furnace or water heater goes out, or for other small repairs. While the rental market seems to be pretty good right now, it's still all about the money. It's easier to rent an $900/month house than a $1800/month house.
Discretionary Move. This group doesn't have a particularly strong motive to move. Perhaps it's a longer than desired commute to work or they want a change in setting for no particular reason. The days of selling (at a profit, of course) are pretty much gone at this point in time. If you purchased before 2002, you may be OK, especially if you purchased with a 20% down mortgage program.
Everybody's situation is different, and I am happy to go over the benefits and pitfalls of selling with you and to provide you with an approximation of your selling costs without further obligation.
Career and/or location change. This is the group I most often see that absolutely has to sell their home. A great new opportunity out of state, the desire to be closer to family, or retirement to a warmer climate are the most common reasons.
While you can try to rent or lease the existing home, it is very difficult to be a 'long distance' landlord. Many consumers that don't have enough equity to make the sale at least a break even proposition are hiring property management firms to handle tenant screening, rent collection and property maintenance. Their reasoning is often that they are waiting for the market value to go up, but most Real Estate industry and national economic experts are predicting a 5+ year wait for that to happen.
Move-Up Homeowners. This group needs a larger home and may or may not have a lot of equity in their existing home. The family has grown and they need more space. Why not take advantage of buying a bigger house while prices are down? Often that is a good plan, but it depends on their ability to bring money to the table when the current home is sold in many cases. Often there's not enough left to make an appropriate down payment on the new house.
This group also thinks about leasing or renting their existing home, and that sometimes works, but remember to plan for at least a one month vacancy period when the lease is up. You will also need reserves in case a furnace or water heater goes out, or for other small repairs. While the rental market seems to be pretty good right now, it's still all about the money. It's easier to rent an $900/month house than a $1800/month house.
Discretionary Move. This group doesn't have a particularly strong motive to move. Perhaps it's a longer than desired commute to work or they want a change in setting for no particular reason. The days of selling (at a profit, of course) are pretty much gone at this point in time. If you purchased before 2002, you may be OK, especially if you purchased with a 20% down mortgage program.
Everybody's situation is different, and I am happy to go over the benefits and pitfalls of selling with you and to provide you with an approximation of your selling costs without further obligation.
Monday, March 07, 2011
Upcoming Real Estate Seminars
Preview Properties will be hosting some real estate seminars in the near future.
This Thursday, March 10th, we will have a 'Homebuyer Seminar'. Learn the ins and outs of buying a home in this market. Hear from Real Estate professionals, lenders and title company representatives about the different parts of the buying process.
On Wednesday, March 23rd, there will be an 'Investing In Real Estate Seminar'. Learn how to make the best choices when buying properties for investment purposes.
And last, on Wednesday, March 16th there will be a Real Estate Career Seminar. If you've wondered about what it's like to work in Real Estate, please drop in.
All seminars start at 6pm at our office at 130 W. Grand River, Brighton. Feel free to contact either me or Lisa Bohlen at 810-220-1505 for more info.
This Thursday, March 10th, we will have a 'Homebuyer Seminar'. Learn the ins and outs of buying a home in this market. Hear from Real Estate professionals, lenders and title company representatives about the different parts of the buying process.
On Wednesday, March 23rd, there will be an 'Investing In Real Estate Seminar'. Learn how to make the best choices when buying properties for investment purposes.
And last, on Wednesday, March 16th there will be a Real Estate Career Seminar. If you've wondered about what it's like to work in Real Estate, please drop in.
All seminars start at 6pm at our office at 130 W. Grand River, Brighton. Feel free to contact either me or Lisa Bohlen at 810-220-1505 for more info.
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