Reconciling Confusion…Making Sense of Conflicting Statistics in the Grand Rapids, Mi Real Estate Market!

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.  News that 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 may 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 above 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 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 you 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 to some extent.  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

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