Beat The Glut!

To show you how far down home prices have gone in Metro Detroit after years of steadily rising prices, most good agents are now quoting 2001 figures when they do a competitive market analysis (CMA) on a home. Several weeks ago, I did a CMA in my Troy subdivision and the couple who owned the home, said "we'd love to list our home at the 2001 price." Well, not really and here's why.....

They lived in a medium sized ranch that sits on a main street. Living on a main street means you discount the value of the home 5 to 10% over similar homes in the sub that are not on a main street. In 2004, this home would have gotten an asking price of $182,500 with that main street discount included, but in 2001 it's selling price would have been about $160,000. Home prices in Troy rose about 15% from 2001 to 2004. I quoted them what I felt was a generous listing price of $169,900. They have since listed with another broker for $176,500.

Another point for those waiting before listing, hoping for a return to pre 2005 prices, don't hold your breath! That wait could last 4 or 5 years before market prices rebound. The current Southeastern Michigan housing market appears to be steadying after 2 solid years of declines, but it's not ready to go up and the big reason is the housing glut. 75,000 homes on the market in Metro Detroit speaks for itself. There are buyers out there, but with 75,000 homes to choose from, compared to around 25,000 available in Augusts prior to 2005, buyers can be very picky. The best thing a homeowner can do right now, fix or update your home so when the time comes to market it, it will be appealing enough to "beat the glut."

Bonds Works For Me!

So Barry Bonds is now baseball's all time, home run king. Congratulations Barry!! Is it possible we've all misjudged this man over the years? I saw an interview with him on Wednesday night August 8 on "The Best Damned Sports Show Period" on Fox Sports Network and Barry came across as very genial and friendly in the lengthy sit down with Giants broadcasters Duane Kuiper and Mike Krukow. Detractors might say "well Bonds was being interviewed by a pair of his own, a couple of ex major league ballplayers and current Giant broadcasters." That's true, but it's not like these 2 guys were "schlock's." Krukow, a former pitcher and one time 20 game winner with the Giants and Kuiper, a longtime shortstop with both the Indians and Giants, are both 5 time Emmy award winners. Both had excellent questions for Bonds in my opinion and both shared incites into his career as both had played against Bonds.

And it was great to hear Hank Aaron inject his two cents worth in a pre-taped recording which was played on the scoreboard after Bonds had broken Hank's record. Aaron's words were well chosen and hit the mark right on the bullseye. I did hear some local Detroit sports talk show hosts claim that Hank looked "uncomfortable" on camera as he read his statement. But having followed Hank's career over the years, I remember him as always being "uncomfortable" in such situations! Hank is and was always a quiet and humble man. The fact that he was not on hand live for Barry's record breaker, doesn't surprise me. Hank said he did not want to become the center of attention and take away from Barry's moment. After all, Babe Ruth was not on hand when Hank broke the Babe's all time career home run record (the Babe was dead at the time!) nor was future Hall of Famer Roger Connor on hand when the Babe broke Roger's career home run record (Roger was alive and well and living in his home town of Waterbury, Connecticut).

Finally, I heard one of the best comments I've ever heard on the "Bonds and steroids" issue the other day on another one of those local sports radio talk shows. The hosts were talking about a possible asterisk being placed by Bond's name for holding the career homer record. A caller phoned in and told the hosts that if you put an asterisk by Bond's name for holding a "tainted" career home run record, then "you'll have to put an asterisk by every major league baseball record which was made prior to 1947." That would be all of the yearly batting champions, all of the annual hits leaders, all of the season's wins leaders, all of the shutout leaders, all of the yearly home run champions, etc. Why place an asterisk before all of those records? Replied the caller "Because blacks were not allowed to play major league baseball before 1947."

Bernanke and the Fed

So the Federal Reserve Board has kept interest rates at 5 1/4% with no sign of dropping them for the near term anyway, which will more than likely be for the rest of 2007. If there's any good news from the Fed's August 7, 2007 meeting, it's that they didn't raise rates, which I say with my tongue firmly planted in my right cheek. So what does this all mean for the real estate consumer? Frankly, very little. It means the Fed is worried about a slight upswing in inflation, even though employment remains high and economic growth nationally is still solid. Our economy, nationally, is still humming along.

It's surprised me in my years in real estate, how many people think that mortgage interest rates are based on what Alan Greenspan and now Ben Bernanke and their colleagues do with the Federal Reserves interest rates. But such is not the case. That 5 1/4 rate that the Fed held steady at, is what the Federal Reserve charges other U.S. banks to borrow money from them. If you want the real barometer on what's happening with mortgage interest rates, keep an eye on the 10 year, U.S. Treasury note. It's rate will always be your basic rate for a 30 year fixed mortgage.

Yes, what the Fed does is important, because it shows what they feel about the U.S. economy, not the home mortgage market. So the next time you hear someone touting on radio or TV "better get your mortgage now, before the Fed raises interest rates," pay little heed to what they're saying. One thing I do know for sure right now, when it comes to mortgage rates, you're better off with a 30 year fixed than with anything else. And this final note, for those who think house prices are not dropping. My next door neighbor in Troy closed on his house last week, selling it for $178,000. 4 years ago, he paid $201,000 for it and it's a beautiful home!