"A Tale of Five Cities"-Southeast Michigan
Wednesday, May 07, 2008SUSIE GHARIB: One of the areas that could benefit from the housing bill is southeast Michigan. The region is dealing with one of the nation's worst housing markets on top of an ailing U.S. auto industry and a stagnant economy. Experts blame job losses and demographics for rising foreclosures and declining property values. But as Diane Eastabrook reports in part three of "A Tale of Five Cities," some are turning adversity into opportunity.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fanny and Alvin Marshall are shopping for a home in suburban Detroit. The Marshall's are hoping to trade up from a condominium to a small ranch style house. And while the couple just began house hunting, they are amazed at what they are seeing.
ALVIN MARSHALL, HOUSE HUNTER: There's a lot on the market today. We see programs -- hear programs all of the time. They even have buses to take you to see homes now.
EASTABROOK: When it comes to real estate, southeast Michigan is not only a buyers' market, it is a market in distress. In the first quarter of this year, the Detroit metro area ranked sixth in the nation for foreclosures. One in every 68 households received a foreclosure filing during that time, nearly triple the national average. Experts say the housing crisis here in southeast Michigan is very different from the housing crisis afflicting the rest of the nation. They say the issue here is less about a melt-down in the sub-prime mortgage market and more about a melt-down in the local economy.
In the past few years the Detroit area has lost about 300,000 manufacturing jobs, about half of them in the auto industry. But Detroit isn't just losing jobs; it is also losing people. Since 1980 Detroit's population has plummeted nearly 30 percent. Robert Van Order is a professor of real estate and finance at the University of Michigan. He doesn't see a turn-around in Detroit's real estate market anytime soon.
ROBERT VAN ORDER, REAL ESTATE & FINANCE PROF., UNIV. OF MICHIGAN: I don't think there is much that is likely to be done in the short-run and it will require a major change in demographics and that is hard to see.
EASTABROOK: That economic uncertainty combined with the crush of foreclosures, are causing home values to tumble. February's Standard & Poor's Case-Shiller home price index saw Detroit home values declining more than 16 percent versus the same period a year ago. That was a steeper decline than its 20-city composite index.
JAMES CRAVER, REAL ESTATE BROKER, RE/MAX ALLIANCE: This property was listed back in October of 2007, listed at $169,900. Today we're at $136,900.
EASTABROOK: Veteran Remax real estate broker James Craver says falling home values are triggering short-selling in some areas. In a short sale, a lender allows a homeowner to sell a property for less than the remaining mortgage amount.
CRAVER: Many of them took second mortgages when the market was better and now they simply can't get what they owe on their homes.
EASTABROOK: Still, some are betting the motor city's real estate market is poised for a rebound. Urban Detroit Wholesalers is buying foreclosed properties at bargain basement prices and fixing them up for sale. Jared Pomranky and his partner have purchased 15 Detroit homes since last fall. So far they have successfully sold two houses to out of state investors who plan to use them as rental properties.
JARED POMRANKY, PARTNER, URBAN DETROIT WHOLESALERS: What I find is that out of state investors, they see the opportunity here in Detroit with our price points. I think people in Detroit and in Michigan may be a little too close to it to see the opportunity.
EASTABROOK: The state of Michigan is also trying to prop up the region's housing market. It recently launched two programs helping at-risk homeowners avoid possible foreclosure by refinancing them into lower rate mortgages. But as spring comes to southeast Michigan, many experts say it could be years before the area's housing market is blooming again. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Redford, Michigan.
GHARIB: Tomorrow as we continue "A Tale of Five Cities," we head west to California where affordability is still a key issue for buyers.
