Michigan Foreclosures Causing Mess to Local Home Markets

by Simon Lindsay on Foreclosure Rates

In Michigan, particularly in Washtenaw County, home prices have dropped considerably low to levels not seen since the 1990s. This is due to the number of short sales and Michigan foreclosures flooding the market. Despite an 11 percent increase in homes and condos sales last October with 304 units sold, prices dropped 20 percent compared to last year, averaging at $184,324.

In Ann Arbor, the average home price is $216,883, which is down 13.6 percent from levels last year. This city also tallied 3,180 home and condo sales with a 24.5 percent reduction in listings, most of which are coming from foreclosed homes.

This is contrary to what a normal market should behave. An increase in demand and fewer inventories to supply that demand should trigger an increase in prices. But this is not the case with foreclosure properties. Banks and financial institutions want these off their books and are selling below the standard market.

With prices down, some sellers forego selling their properties as the reduction in home values resulted in little or no equity left in their properties. They are holding on to these properties until the foreclosures crisis dies down and the housing markets rise back to original levels. Some homeowners opted to rent out or lease their properties instead of directly selling them, delaying the process until the values of their homes goes back up.

Most counties in Michigan had home values fall last October at considerable rates from the previous month. Almost all counties were affected except for Ann Arbor where about 57 homes were sold at an average price of $330,804, a little bit higher from $306,580 of October 2007.

However, realty professionals advise caution to such figures as a few above average sales can affect these numbers but does not show a true trend. However, the same experts gave insights that there are parts in Ann Arbor where prices remain stable despite the number of foreclosures.