January home sales in Genesee and Oakland counties increased by more than 21 percent while home sale prices nudged slightly higher according to a report issued by Realcomp last week.
The higher home values are a possible change in a three year downward spiral said Jeff Dawley, of Goodrich based Atlas Real Estate.
‘Our inventory levels of homes continue to decline,? said Dawley. ‘It’s a supply and demand thing right now’the sales numbers for Genesee and Oakland counties which are reflective of Atlas, Brandon and Groveland townships. I do see an improvement of consumer confidence’that’s a big step forward. It seems people are more positive about the economy then a year ago.?
‘Right now, however about 30-40 percent of the homes in our area today are underwater, they owe more than what their house is worth,? said Dawley. ‘Today it’s also more difficult to obtain financing’but there’s still some great incentives to buy a home. Consider interest rates are some of the lowest in history and the first time home buyer 2010 tax credit of $8,000 and $6,500 which is expected to expire on April 30 has made a difference. In addition prices are more affordable then ever.?
For states like Michigan with more than 20 percent home price declines, such borrowers underwater often find it difficult to sell their property ? lenders may not agree to a sale that fails to pay back a mortgage in full. To assist with this short fall the Obama administration has allocated $1.5 billion to five states of which Michigan will receive $155 million according to a White House press release. While details of the plan are uncertain state officials may experiment with programs that would assist borrowers to negotiate with lenders to write down mortgages.
Forrest Carter, associate professor of marketing in the Eli Broad School of Business at Michigan State University said the Obama program is rather limited in what the funding could do.
‘The underwater issue in communities, assuming homeowner are making their payments, is not a serious factor. However, if you are getting out of your home then the shortfall comes into play,? he said. ‘It’s a matter of time before home sales are going to drive prices higher. Therefore, people need to stay in their homes as long as possible to let the market come back. Until then, I don’t believe any amount of funding will have an impact on the housing market.?
Carter said that right now a true value of the homes is not reflected and speculates that many of the homes underwater in northern Oakland and southern Genesee counties are not from unscrupulous sub-prime lenders.
‘The real problem for the average homeowner comes from an unrealistic decline in home values’no fault of their own. Consider, even if homeowners have a conventional mortgage with 20 to 30 percent down, purchased within the past five years’today they’d be underwater with price declines of 40 percent. The built-in equity is just gone.?
Dawley said that once foreclosed homes come off the market then demand will increase and new homes will be built.
‘At some point soon that will turn around and construction will start up once again,? said Dawley. ‘Each day there’s less bank-owned property out there’a lot of people are still walking away from their homes, but other avenues and options are out there.?