It is not yet noon this Monday morning (12/14/2009). Yet, I have already had several conversations with clients who are disconcerted. On the one hand, they have heard that the market is improving, but the news about their specific home in their specific Grand Rapids, Michigan neighborhood seems to paint a different picture. This information seems at odds with recent headlines.
They are not alone...
Those of us in the Mid-West have been listening to the media reports that the economy has turned the corner and that jobs will come roaring back in the spring of 2010. But current reality begs to differ. This news seems to obscure the reality that our unemployment rate in Michigan is still one of the highest in the nation. The recent newspaper headlines about the surge in year to date home sales may inadvertently obscure some very pertinent details. Facts which if they happen to relate to the situation in your particular neighborhood dramatically alter your perception of the real estate marketplace.
It is said that perception creates reality. But it is the facts which ultimately ground reality. But facts sometimes mask the underlying assumptions which serve as their bedrock foundation.
While it is true that there has been an increase in sales over the past year (sales year to date over 2008 are currently up about 35%), it is ALSO true that these sales have largely comprised of distressed properties and therefore PRICES have been driven down almost 13% since the same period last year. And remember, 2008 is on the record for being a year in which home equity plunged dramatically across the nation.
Going back to the conversations I alluded to earlier...in one case, a home that was sold for $90,000 just a mere 3 years ago has been re-sold and closed in June of this year for $38,000! This is not an isolated situation. I have witnessed many homes within the last year that are now retailing for 60% - 75% of what they would have retailed for 3-5 years ago. That's quite a loss!
So how does one reconcile these numbers? Are homes selling? Yes! Are there bidding wars on the best deals? Absolutely! We've had the experience of being told to 'take a number' to await word on a multi bid situation. Most of these homes selling today in bidding wars are retailing so far below normal market values, that buyers are waiting in line to get a good deal.
But even these situations should be approached with caution. Under- market pricing does not guarantee a smooth path to home ownership. Some of these homes have been abandoned and severely neglected or they may have hidden underlying issues. It's important to do careful and thorough research and to have a complete inspection.
If you're considering flipping a property for a quick profit, it may be prudent to check with your mortgage company to ensure a comprehensive understanding of potential limitations of your financing vehicle in the new lending environment.
Lastly, make sure you have a realistic appreciation for the current housing values in your area. A below market purchase not only impacts the homes around the neighborhood, but will also impact the re-sale value of the remodeled home you intend to place back on the market. This factor should also be kept in mind when contemplating an area which has been dramatically impacted by the housing crisis.
We are available to provide comprehensive counsel and statistics on neighborhoods in the Grand Rapids area for home owners, home buyers and investors. Please contact us for a confidential inquiry at: info@auduhomes.com
Lola Audu, is the Designated Broker & Owner of Audu Real Estate. Our company specializes in helping people buy and sell homes in the greater Grand Rapids, West Michigan area. We've had the privilege of helping hundreds of clients succeed in their goals of purchasing and selling property including demonstrated success in the negotiation of Short Sale Transactions. You can contact us via e-mail @ info@auduhomes.com or by phone at 616-791-0511.
Hi Lola . . . you're right! The media and the reality are akin to oil and water -- not mixing too well! It's important for people considering to buy and/or sell real estate to consult a LOCAL experienced agent to help them read through. You'd be who I would call!! You've got a good take on things!!
Thank you for your comment Carla. After several conversations today and over the past week, I realize that many people are really confused about how this information relates to their specific situation. The reality can be enlightening and sobering...
It's like listening to the national weather report..it's not the same all over. It's not a wonder the consumers are confused. They hear the general national over view and it is not matching local area numbers. The only way to make sure is to talk with an area real estate specialist to give you the local update. It can also vary from community to community in a local area.
Is the cup half full or half empty? Hopefully we can find clients with right outlook. I agree that the national news media is not the best to listen to in this day and time.
Thanks for blogging. I know what you mean, I have some clients who are frustrated, but what can you do besides provide them with info?
Slam dunk. I had the same conversation this morning with an investor that wanted me to bring my crystal ball to a meeting. (I told him Santa didn't gift me with one yet..however, I still ask every year.) Then we had a nice long chat about the reality of the economy in Michigan, and well you know..
I enjoyed your blog. You are telling it like it really is in many parts of our country.
Proving once again that real estate is itself hyper local and to get the best feel for the market, to fully understand how to proceed, buyers and sellers need the help of a competent local professional!
Lola, what we have been seeing here are many homeowners on edge faithfully expecting the market to turn over in their favor, while investors are bracing for markets to plummet even more. Good to SEE you posting!!!
Hi Lola, the media are idiots. Even the experts do not know what the market will bring 6 months down the road. All I know is that my local market is moving towards up. Houses are coming off the market almost as fast as they are coming on and the bidding wars are nuts. I do not like media frenzy. Makes our jobs harder.
Lola, Great blog, it is so local. Even some areas of Atlanta are better than others. Some neighborhoods have NO listings, while other streets or areas seem to have a house listed every third house. Sellers need to have someone who KNOWS the area looking out for their best interests. Also, by the time we are out of this, is when the people and media will know for sure. There is always a risk rewards kind of system for those willing to guess ahead of the market. All the best, Michelle
Dorie, in today's market, local is now hyper local. Every neighborhood has it's own unique dynamic. So even an overall report may not be completely related to what is happening on your street. We've been offering our clients 'Free Neighborhood Seminars' help people to gain the knowledge about their local communities.
Randy, the national media can be a starting point, but when you get serious about selling or buying, it's best to get a local expert.
Jeff, although more people recognize that the market has taken a serious downward drift, if you've not been in the real estate market recently, it's definitely a rude awakening.
Kris...LOL, Crystal Balls are definitely not making any predictions in this current market...goodness, even seasoned real estate have to revise estimates on a monthly basis sometimes. I must confess to still being stunned by the decline in some areas...I can understand the anger and confusion.
Allen, Thanks for your comment.
Jason...in the future our business cards may read 'Neighborhood Expert' instead of real estate specialist/consultant.
Diane...very interesting! Savvy investors are waiting for continued declines while the rest of the market hopes for a return to normal. I do think that there is a stabilization process gaining ground in our area, but a return to normal is not going to be around the corner for awhile. Interest rates are great and prices in most areas are way down...maybe we need to re-define a new normal. :) Somewhere between investors and a real estate market re-establishing it's footings again.
Jackie...boy your market is off the charts! The media are simply trying to do their jobs, the problem is that the industry they are reporting on is going through such a rapid transition that making assumptions or predictions is a difficult, if not impossible assignment. That being said, the unemployment issue is a huge part of the puzzle. Solving that problem should be a national priority!
Michelle, it's always interesting to hear what is happening in other areas of the country. What you describe can be found in local communities here as well.
Lola, it seems to me that the one on the ground working the streets/area has the best information. We feel it here, six months ahead of the media reports. We have pockets...pockets of good and pockets of problems. It seems to be a national dilemma.
It's happening the same way here in Metro Detroit. Multiple offers, prices moving up, but we haven't turned the corner.
Jane, good way of putting things...there are pockets of good and pockets with problems. Sometimes the pockets are blocks apart. Knowledge of the local community is where local real estate agents who actually work 'on the ground' can set themselves apart. Sharing this knowledge with people who live in the community can provide much needed assistance in making wise decisions and protecting their investment in real property.
Russ, it truly is a strange phenomenon...It does seem that there are some indicators that prices may be on a slightly upward rise which is good news as they have been a rock bottom for some time. What we're monitoring now is if the trend continues.
Lola
It seems to me that you should start capturing the right information about your market on video and sharing this with your local community on youtube. They could look to you for right information and you could become the local expert in your market.
I can imagine that all the misinformation could make your job really hard
Lola, I love your blog post. My clients are also confused like this in the Chicago area. I love how you explain it
Lola, don't you just love the media! They seem to march to a different band in many cases with their own take on things instead of reality. Especially when they spin numbers. Real estate is sooooo local and in many cases even local reporting doesn't provide the people with the whole picture.
Sue of Robin and Sue
Lola, how true to temper national news with realities of a neighborhood. Real estate is inherently local and local people should trust local professionals like yourself for the straight scoop.
Lola, I so agree with all things being hyper-local. I hope consumers will soon catch on to this notion and hire truly local agents like us! Thanks for the great post.
Hi Lola -- All real estate is hyper-local and selling or buying a home should be viewed in that context. Well said.
Congrats on the feature. And we're having the same problem. I was just having a conversation with a colleague this morning. We were actually discussing the NAR slogan last year (Now is a great time to buy) which was jumping the gun. How is the public supposed to take us seriously or view us as professionals when our own leaders are making statements to put money in our pockets, instead of doing what's best for the clients?
I think it is our job to provide our clients with the information relevant to our own markets.
Anything that happened in the past is fact, anything that happens in the future is speculation, anything that happens today is subject to interpretation.
Lola:
When it comes to the market for a specific property, national or even local statistics can be misleading. The best way to determine the market for a property is to utilize a CMA or Appraisal from a professional with experience in the subject market.
I have seen cases where different property types are moving in opposite directions in the same market (luxury homes decreasing in value and condo units increasing in value, for example, probably due to the lack of jumbo financing).
Lola~ Thanks for posting! So relevant in today's 'market'! I think that we do the best that we can with providing our customer's with the latest information and we sleep well in doing that. We are Realtors...not fortune tellers! All the best this holiday season!
It's such a good discussion to have about the macro environment and then the specific market people live in which is their neighborhood. Here in Manhattan there are so many different types of markets and neighborhoods that the disparity between sales prices and volume numbers is widely different.
Lola:
The media has to be optimistic so they jump on any potentially positive statistic and made a headline out of it. "Sales are up, etc." Of course, all real estate is local and people need to check with a professional in their area to see what is really happening in the market.
Lola, what a fantastic piece. Very well written, very poignant!
It just goes to show that what we have always said, REAL ESTATE IS LOCAL! It can vary neighborhood by neighborhood even!!!!
Prices up in one section of town does not translate into the same one zip code over!
Good luck with your people -- your market is one of the hardest hit.
Lola well said- I think they market is prime for short turn arounds if done properly and within lending guidelines. There is money to be nade in Real Estate and in all reality this current market climate is not going to last forever. I hop-e you have a great 2010
i like the importance of check with your local Realtor to get the accurate scoop on the mixed signals.
Anyone who says they can predict the housing market for 2010 is off their rocker. As they said in Hill Street Blues, be careful out there.
Concice and well written, you point out again that we must be careful what statistics really mean!
Lola... You're so right! I always tell my clients and caution anyone else who will listen... "Never mistake the "News" for the "Truth!" And that's from a guy with a degree in Journalism... me. LOL
Real estate is local. It's great that your posting information about the Grand Rapids real estate market so that locals can understand what is truly going on with their home and not just with the nation in general.
Great post. Real Estate is local and even in the same city you may find different trends .
Excellent post Lola! The Byron Center area is a good example of a hyper local area. The building inspector mentioned that he's had over 15 permits pulled in 2010 already, which is more than all of 2009!