The future of real estate in Northern Michigan

Feb. 22, 2009

I know we’ve all been shaken dramatically by the double whammy of the stock market dive and the real estate market dive. Worse yet, none of this was our fault – we were just playing the Great American Dream the way we were taught. Yet, tens of thousands of dollars have disappeared from our vision of what we thought we were worth.
I have good news for you. This is not the end of times. Most of us will be worth that much, again – and more. There have been nine other pronounced real estate declines in the history of this great country – and, every time, real estate has bounced back in dramatic fashion. This one will have the same result.
If you’re a seller, you hate this market. If you’re a buyer, this is the market you dream of. Keep in mind that most sellers will turn around and become buyers – so, even their dilemma is not as painful as the headlines suggest. Does it suck to be in this position? Absolutely! But whining doesn’t accomplish much. Besides, there is a silver lining to this “crisis,” so let’s have a look at the situation and decide how to proceed:

2009 Important Points:
Supply and demand continues to be out of whack in our market. We have far more houses available than buyers. The bad news is it may get worse with further ARM adjustments hitting this year. The credit card crunch poses a huge iceberg, as well. Detroit’s problems mean more waterfront properties will be coming on the market.
Prices may continue to decline in 2009 -- simple supply and demand meeting employment and wages. A huge factor to watch will be how much benefit Northern Michigan’s economy gets from the public works programs President Obama is rolling out. Another huge factor will be what kind of national exposure Northern Michigan receives. There are all sorts of wonderful story lines, here.
Real estate investment will rise in the area. We’ve received a bit of benefit as a ‘safe haven’ for Michigan real estate investment. We’re on a lot of ‘cool places’ lists. When it turns around, we’ll likely be the first to benefit.
Obama Drama and taxes. Just when we don’t need further obstacles, tax problems loom: property taxes with that stupid, stupid homestead exemption notion continue to have an adverse effect on the second home market. Capital gains are likely to rise in some fashion. The good news? President Obama’s new plan certainly will help stem the foreclosure tide. And the $8,000 tax credit for people who haven’t bought a house in three years will work some magic as well.
This too shall pass. Some 80 years ago, you could have bought a 5,000-square-foot beautifully-done Victorian on Sixth Street in Traverse City for $25,000. The same house 40 years ago would have cost you $75,000. The same house 20 years ago cost $250,000. The same house today will cost you $850,000. Point is – even when it looks bleaker than bleak (1930s, 1970s, 1980s) – it eventually turns around, the economy recovers and prices go up. And those who were smart enough to buy real estate get to bore their grandkids with stories about “what we bought and for how little” in the same tones used by generation after generation after generation.

What do I do if I’m a seller?
Condition, marketing, pricing – the three keys in any market. In this market, you also have the added problem of too few buyers for too many houses. You have to be creative! Plus, your marketing has to be in the places where today’s buyers are looking. It’s not the newspaper, it’s not magazines – it IS the Internet. And, just as it’s always been, it’s in the networking. Some 94% of all home buyers shop on the Internet. Make certain you have the best Internet and networking presence
available.

What do I do if I’m a buyer?
Work with someone who knows how to fight through obstacles – and get deals done. Obstacles and misinformation rise dramatically in a market like this. Everyone is proclaiming their house “a steal.” Some are, many aren’t. Title, loans, inspections, appraisals and offers are all filled with new problems that weren’t around prior to this mess. Work with someone who can guide you through it.

Last word
This is not the end of the world. We are four years into a decline. History suggests we are closer to the end than we are to the beginning. There are only four reasonable places wealthy people can put money – the stock market (or emerging businesses), precious metals, government treasuries, and real estate. Real estate will become the darling, again, at some point.
Of those four categories, real estate is the one that’s been beaten down the longest. And therefore is poised for the quickest rebound. It takes courage and intelligence to act when everyone else is wringing their hands – but loads of America’s wealth was built in just such moments. When the news is all about the dramatic turnaround, the real bargains will already be gone.
There you have it – that’s where we are at the beginning of 2009. The rules have changed dramatically. Throw a dart into the dark and you can’t help but hit a bargain. There are still all sorts of deals being done. There is a major advantage for the buyer, right now – but that will change. The trick, as always, is to figure out how to capitalize on what’s taking place. And to act.

Jack Lane is an agent with Real Estate One in Traverse City. He has a weekly radio show on WTCM-AM.