Arbor Update

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Ann Arbor Fastest Falling Housing Market in the Nation?

10. September 2006 • Bruce Fields
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75c liquidation sale!

Ken Clark writes:

Thought you guys would be interested in this. This CNN/Money story reports on a new Office of Federal Housing Enterprise Oversight report. The OFHEO is the federal oversight board for Fannie Mae and Freddie Mac. While real estate values are still increasing across most of the nation, the rate of increase is falling fast. In some markets, the price of real estate has actually fallen in the past year. Many of those markets are in Michigan, and the worst in the nation for real estate values over the past year is Ann Arbor.

Page 22 of the OFHEO report shows that Ann Arbor real estate values lost 1.28% of their value in the past year, lost 1% in the most recent quarter, and gained 20.97% over the past five years. That makes us worst of the largest 275 MSAs in the past year.

  1. 1.28% does not strike me as accurate. I think it is much worse. It seems that in my neighborhood the going price per square foot is around $140 down about 20% percent, this last year alone. Yet houses have begun to sell around that price, which is a relief to see. Maybe with Google and Toyota coming to the area, things will stabilize.

       —Emilia    Sep. 10 '06 - 05:23AM    #
  2. Emilia,

    As I understand it, this particular measure is not based on median sale price, which is what you’re talking about. I believe this particular measure is looking at homes that aren’t for sale, not as a “what are things selling for right now,” but, “what is it worth right now, even if you’re not selling it?” Nit-picky, but apparently important? Usually I just smile and nod when economists make up indicators…

       —Murph    Sep. 10 '06 - 06:34PM    #
  3. Murph,

    That OFHEO study looks at sales of homes from year to year. It naturally excludes new home sales, and studies only resales on chosen homes. Also, that study only looks at conforming loans originated/backed by Fannie Mae and Freddie Mac.

    From the study, page 2: “OFHEO’s House Price Index is published on a quarterly basis and tracks average house price changes in repeat sales or refinancings of the same single-family properties. OFHEO’s index is based on analysis of data obtained from Fannie Mae and Freddie Mac from more than 31 million repeat transactions over the past 31 years.”

    An interesting metric, to be sure, but what the heck does it mean? Especially considering the rise in foreclosures is, in part, due to “drive-by” appraisals where the bank is told the property is worth more than it really should be valued.

       —Todd Waller    Sep. 11 '06 - 02:08AM    #
  4. I just got back from NJ, on a work trip. People there are apoplectic about the drop in home prices. Far more hysterical than Ann Arborites. I’m not concerned about AA’s home prices.

    I AM concerned that the Mayor and Council have apparently done nothing to help smooth the way for Google to move downtown….

       —Just a homeowner    Sep. 11 '06 - 05:00PM    #
  5. Homeowner: At the last meeting they passed a resolution that basically tells Google they will do everything they can to get them downtown. Don’t know what else they can do, they have already offered them sites and parking.

       —Dustin    Sep. 12 '06 - 07:31AM    #
  6. That must have happened while I was away. When I left, there was a lot of Google handwringing. Thanks.

       —Just a homeowner    Sep. 12 '06 - 04:33PM    #
  7. My first reply seems to have been eaten, so I’ll try again. The Economist Magazine says that the OFHEO numbers are more valuable that National Association of Realtor (NAR) numbers, but come with larger time lags.

    America’s housing market has certainly caught a chill. According to the Office of Federal Housing Enterprise Oversight (OFHEO), the average price of a house rose by only 1.2% in the second quarter, the smallest gain since 1999. The past year has seen the sharpest slowdown in the rate of growth since the series started in 1975. Even so, average prices are still up by 10.1% on a year ago. This is much stronger than the series published by the National Association of Realtors (NAR), which showed a rise of only 0.9% in the year to July.

    The OFHEO index is thought to be more reliable because it tracks price changes in successive sales of the same houses, and so unlike the NAR series is not distorted by a shift in the mix of sales to cheaper homes. The snag is that the data take time to appear. Prices for this quarter, which will not be published until December, may well be much weaker. A record level of unsold homes is also likely to weigh prices down. The housing futures contract traded on the Chicago Mercantile Exchange is predicting a fall of 5% next year.

    There’s a story in today’s CNN/Money that talks about a mass foreclosed-home auction in Michigan.

    More than 250 bank-owned single-family homes, condos and duplexes in Michigan are going to hit the auction block en masse in late September, according to Hudson & Marshall, the company handling the auction.

    The state’s housing markets have been crushed by lay-offs in the auto industry. On Monday, Ford was reported to be eyeing another round of cuts in its workforce. It has left many homeowners unable to keep up their house payments and lenders have built a big inventory of repossessed properties.

    More than 92,000 homes entered into some stage of foreclosure nationwide this July – up about 5 percent from June and 18 percent higher than in July 2005, according to RealtyTrac, an on-line marketplace for foreclosed properties.

    Michigan was one of the hardest hit of all the states, with a 25 percent spike from a year earlier.

    Dave Webb, owner of the Hudson & Marshall, reports that the majority of the 250 Michigan properties primed for auction, about 150 in all, lie within 60 miles of Detroit. The rest are scattered throughout the state, including in the relatively rural Upper Peninsula.

    It could be that in Ann Arbor, houses are still selling, albeit at lower prices, whereas in the rest of the state they’re just headed for foreclosure.

    Another possiblity is that Ann Arbor is one of the few representatives of Paul Krugman’s “Zoned Zone”, and the rest of “Flatland” Michigan is in the economic sink so the housing bubble in “Zoned” Ann Arbor is popping faster than elsewhere.

    Finally, it may be that there are more auto-related white-collar workers here than people think.

       —Ken Clark    Sep. 12 '06 - 09:18PM    #