Lake Orion Michigan Market Conditions

Lately I’ve been hearing on TV and radio that the real estate market is on the rebound. That because of the first time home buyer tax credit and the “economic recovery” that housing sales are through the roof. My mother even received a mailer from another Realtor stating that we are at record sales (units).

I don’t know where these reports are coming from. It’s like one of those stupid little videos that gets posted on Youtube and goes viral for no apparent reason. I try to update real estate sales- both units and prices- for the Clarkston, Oxford and Orion areas on a monthly basis. I have been keeping sales records for the Orion and Oxford areas since 2000, and those reports I referred to above are no where close to accurate.

 Maybe after Alice ate a mushroom and was out frolicking in strawberry fields, she posted something on the internet, and it went viral like one of those silly videos. And since it was “on the internet” various reporters and pundits took it as gospel and repeated it, and repeated it, and repeated it again, until now it is a “fact”- we are at the beginning of a housing recovery. NOT!!

The facts: unit sales are about the same as last year and median sales prices are down drastically.

 Let’s start with the unit prices. For the first three-quarters of the year Orion has had 2 less sales than last year- 267 closings as opposed to 269 closings for the same period last year. Last year- 2008- had a total of 357 closings for the entire year. Compare that to the amount of closings in 2004- 476 closings. There were 525 closings in 2003, 434 closings in 2002, 444 closings in 2001 and 475 closings in 2000- the first year I started keeping track. Hardly record sales.

Now for the really ugly news- the median sales prices. The median sales price so far this year in Lake Orion and Orion Township is at $152,000! That’s down 28.3% from last year which was down 15.8% from the previous year. Of the sales so far this year over 43% are either short sales or foreclosures- a big reason for the drastic drop in prices.

If you are a seller- life sucks for you right now. If you are a buyer – this is a beautiful market. Houses are so on sale, interest rates are low, and there are many many tax credits for home improvements (the topic for another post). I had a buyer purchase a house this year in Orion Twp for $31,500! Over 1300 sq. ft. on a huge lot. A house that had sold for a little over $130K a few years ago. Sure- it needed some work. SOME work- not a ton.

I showed another house in Orion that my buyers decided to pass on but I thought was a real steal in Orion Woods. It was built in 1997, over 2300 sq. ft., finished basement, 2 car attached garage, backed to Bald Mt state land. It appeared the only problem with the house was one broken pipe and 2 sheets of drywall. Other than that the house was immaculate. It sold for $95,500 with $7,740 in seller concessions- that’s an actual price of $87,760. For a house that sold for $225,000 in 2005. There was new construction on Newton Ct that sold for $130,660 after concessions- over 1700 sq. ft., 3 bedrooms, 2 1/2 baths, basement, garage. There was the 2384 sq. ft. house in Forest Hills that sold for $149,460, that 2107 sq ft house in Round Tree that sold for $179,450, and that 3082 sq. ft. house on Shrewsbury in Heather Lake Meadows that sold for $200,000. This particular house sold for $515,000 in 2006! And the list goes on and on.

I did an MLS search today for houses in Lake Orion and Orion Township built in 1990 or newer with at least 3 bedrooms, 1 1/2 baths, garage and basement, under $200,000- 27 houses came up. In that list there are probably at least a few deals like the ones mentioned in the paragraph above.

For ACCURATE, up to date sales stats for Lake Orion and Orion Township, please refer to my stats page. It is long, dry and very detailed. And the best part is it is totally accurate!

I want to start by saying that I’m just venting. There are a lot of great deals out there and most of them are bank owned listings (foreclosures). The value is can be great- terrific houses at very discounted prices. BUT THE PROCESS ISN’T ALWAYS THAT ROSIE!!!

I wrote an offer for a buyer last Wed morning on a bank owned house. We wrote over asking price and submitted a very strong pre-approval letter. We didn’t expect to get an answer on Wed- heaven forbid some pencil pusher at the bank actually respond in a timely manner. But we were hoping to get an acceptance on Thursday. At this point we were still the only offer. But alas- Thursday comes and goes and still no word.

Friday morning- still no answer and we’re still the only offer. Then Friday afternoon we receive an email: “you are in a multiple offer situation so have your buyer submit their highest and best offer. And oh- by the way- have them sign the attached form acknowledging they were notified of the other offer(s) and have it back to the listing agent by 5pm.” (this is a bit paraphrased).

So- Friday afternoon we submit an offer for slightly higher than our original over asking price offer. Then Monday comes and goes and no word. As of this writing- just before 9 pm Tuesday- still no word!

These banks go to Congress and ask for money- our tax money. But when they get an over asking price offer they can’t respond in less than a week?! Most “regular” sellers respond to an offer within 24 hours. Many times the same day the offer is submitted.

Are the banks just too busy to sell their inventory? Are they incompetent? Are they dragging their feet in order to get an even higher offer? Whichever it is, this behavior is unacceptable. This isn’t an investment property for my buyer. They’re purchasing a home, and for whatever reasons the bank/seller is toying with their emotions. My first thought is it’s greed. But my gut says it’s plain ole incompetence on their part. Either way, it’s wrong.

If you are a first time home buyer (defined as someone who hasn’t owned a principle residence in the past 3 years) and you bought a home on or after April 9, 2008 you may qualify for up to a $7500 tax credit.

There ARE a few conditions and caveats. The tax credit is refundable, which means you have to pay it back. So it’s more like an interest free loan that gets paid back over the next 15 years starting for the 2010 tax year for houses bought in 2008, 2011 for homes bought in 2009. Houses must be bought between April 9, 2008 and July 1, 2009.

The amount of the tax credit is dependent on the price of the house – 10% of the cost of the home with a maximum credit of $7,500. And there are income restrictions which are explained quite thoroughly in the link below.

All in all, it’s worth looking into and worth discussing with your accountant. If you’re thinking about buying a house, but not quite sure if this is the right time, this is something else to consider along with low housing prices and low interest rates.

Click here for more details about the first time homebuyer tax credit

I heard from a lender I work with at National City- interest rates are down! Yeah! Right now you can get a conventional mortgage with no point for 5.5% (with good credit of course). FHA rates run about a quarter per cent higher. Great time to buy- prices are down. Rates are down. And a lot to choose from!

If I had a crystal ball and could tell you exactly when prices were going to bottom out, I would be wealthy. The best I can do is compile stats and keep up to date on changes in the industry. We all know that home prices have been dropping drastically. For example, there were a few more sales in Clarkston/Independence Township for the first 10 months of this year compared to the same time period last year, but the median sales price was 19.2% lower this year. It was also 31% lower than the median sales price for 2005 (year ending stats). For a detailed chart click here.

One of the main reasons for this sharp decline in prices is the heavy inventory of foreclosure listings on the market. The banks typically price their listings to sell quickly. If they don’t sell- they lower the price. And keep lowering it until it sells. When the foreclosure market dries up, prices should start to stabilize and eventually increase again. Though I doubt they will increase as quickly as they had in the past. The 90’s and early 2000’s were great for Realtors and sellers.

Today is great for buyers. But for how much longer? The banks have been taking a bath on these foreclosed homes for quite a while, and now it seems they are finally going to do something to avoid taking homes back. It is expensive to foreclose on a home, so now some of the bigger banks are starting to work with home owners to try to keep them in their homes.

Citigroup has announced recently that they will be reaching out to 500,000 non-delinquent borrowers over the next six months to see if they are struggling and to offer to modify their mortgages to keep them from falling behind.

JPMorgan Chase & Co. and Bank of America Corp. have also become more aggressive in modifying loan agreements in the face of mounting defaults and plunging home values.

Then today I read that the government is considering using over $24 billion of the $700 billion of bail out moneys to modify loans. They figure this could prevent 1.5 million foreclosures.

IF these programs work, we could see the foreclosure market dry up. This is good for sellers and great for the economy in general. But if you are waiting for the market to hit bottom, we may be there. One other thing to consider- right now, interest rates are GREAT. But there will be more about that in my next post.