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Posted on Tue, Oct 26, 2010 : 6:02 a.m.

Real estate recovery? Not in Ann Arbor despite national sales uptick in September

By Paula Gardner

National home sales data from September released this week spurred National Association of Realtors economist to declare that the U.S. is starting to see a housing recovery.

What supports that claim? Existing home sales grew by 410,000 that month over August - though skeptics may point out that year-over-year numbers didn't improve.

“A housing recovery is taking place but will be choppy at times depending on the duration and impact of a foreclosure moratorium,” said NAR chief economist Lawrence Yun, in a statement released Monday.

That made me wonder: Do September sales give us that indication in Washtenaw County?

Our September numbers, as reported by the Ann Arbor Area Board of Realtors, show sales of both homes and condos were essentially flat over 2009. The gain of 3 homes and 5 condos in the "sold" column represent small percentage increases. The days on market dropped in both categories.

And the dollar volume grew by less than $1 million for homes, climbing to $49.3 million, while it fell for condos, even through more sold for a collective $660,000 drop to $6.32 million.

Does that signify a rebound?

Not really, I thought.

And I confirmed that with the owner of one of the county's leading real estate companies, Edward Surovell Realtors.

Surovell noted that at this time last year, sales were buoyed by the federal first-time home buyers tax credit and a few hundred more homes listed for sale.

Today, inventory is shrinking, "and that's good for people with houses already on the market," Surovell said.

Also notable about this fall is that "if you need to sell your house and you're able to sell it at market price, it will sell," he said. "... There is a real market."

But the number of foreclosures and short sales are still pressuring prices, as is the lack of inflation. The average sale price in September was $184,965, compared to $188,774 in September 2008.

And it's that price dynamic that has Surovell watching for signs that all of the activity soon could be boosted by climbing prices, too.

"The prices are extremely stable," he said, "... but we don't want them to be stable. We want them to go up."

Sellers who are "under water" on mortgages struggle when they need to sell, and that stifles the natural market when people get inspired to find more space, a different neighborhood, new room configurations - in other words, the type of housing market that we witnessed for years. The one where if we decided we wanted a new home, we'd go out and shop for one, knowing we could get financing and sell our old homes.

"For many people, they have made the decision not to move because they can't afford to do so," Surovell said.

But the key concern moving forward continues to be inflation and how it affects the housing market, Surovell said.

He points out that interest rates are low enough - under 5 percent for both 30-year mortgages and under 4 percent for 15-year versions - that the fed "is giving money away," but values remain low.

"And there's no indication from the number of foreclosures or number of short sales or from the flat prices that it's fair to say we can look next year to a reasonable rate of inflation," he said.

Could the NAR economist end up being right?

On a national level, Surovell sees stability, "which does matter."

And the Michigan election, which will send a new governor to Lansing with hopes of change could reinvigorate consumer confidence.

He also is staying hopeful that the local real estate market - since Ann Arbor is a prosperous town by most standards in Michigan - will improve further in 2011. Overall numbers for the year show some gains.

"Next year I'm just hoping for better," he said. "We're getting back on the right track, just not very quickly."



Wed, Oct 27, 2010 : 10:19 p.m.

You are quite correct. NAR was one of the leaders, unabashedly promoting the hype with plenty of advertising many have called deceitful, and certainly not acting in their client's best interest, though they represent themselves as doing just that. And the rating companies...but that's another story. Thanks.


Wed, Oct 27, 2010 : 5:45 a.m.

Bob Martel: You may perform your own research online through assessing offices. They have sales studies for you to access. AlphaAlpha: "NAR was a key enabler of the RE bubble..." Everyone involved in the process was an enabler... buyers, sellers, brokers, agents, title companies, lawyers, mortgage brokers, bankers, secondary market purchasers, lawmakers...


Tue, Oct 26, 2010 : 9:07 p.m.

Also, it would be interesting to know whether local RE sales numbers are being skewed by the so called Z sales: sales prices which are unreported to MLS leading to the list price being substituted for the sales price. This scandalous practice is happening in many, but an unknown number of, markets nation wide. Another example of 'Realtors' aka real estate agents, manipulating data to their benefit, much like NAR SOP. This is not name calling; NAR has long been accused by many credible experts of misrepresenting data, as much as they can, to maintain the illusion of rising RE prices and the 'wiseness' of a RE 'investment'. NAR was a key enabler of the RE bubble, though certainly not the only enabler. These bubbles have happened with great regularity every 2-3 generations, for centuries. And, like before, things will eventually improve. Btw: just so everyone knows, Zillow is essentially worthless; their numbers are unrealistic and inaccurate. It's an interesting concept for a website, and it is telling that it became popular at the peak in RE; nobody much questioned their methods on the way up; they do now.

Bob Martel

Tue, Oct 26, 2010 : 7:33 p.m.

@ a2grateful, kindly post your data re: polo and barton so we can all see it. thanks, b


Tue, Oct 26, 2010 : 7:23 p.m.

1930s US. 1030s was across the pond...nasty time that was...


Tue, Oct 26, 2010 : 7:21 p.m.

Financial disaster unfolding in super slow motion. So slowly it's not fully appreciated for what it is: a depression. Best historical analogies suggest a bottom in 2016 or 2023. Whichever, your clue a bottom exists will be that 'everyone knows' real estate is a bad investment; the complete opposite of the social mood and social 'knowledge' which was so pervasive in 2005... It will get worse before then; banks are indeed withholding many properties from the market; deleveraging has not yet gathered much momentum; job growth continues to be negative not positive; we are due for another recession soon; the fraudclosure scandal has yet to be appreciated, and has the potential to dramatically (in caps) slow RE sales, pressuring prices further; etc. Look to 1030s US and 1990s Japan for recent examples and other analogies.

Paula Gardner

Tue, Oct 26, 2010 : 2:05 p.m.

Here's an article from today's Wall Street Journal that adds some national insight into the "housing rebound"


Tue, Oct 26, 2010 : 1:45 p.m.

"It would be interesting to compare resales of the same homes that changed hand in both 2004 and 2010 to get a better apples to apples comparison." 2004, 2005, 2006 sale prices v 2009 & 2010 ytd? That data exists and is easy to find. I have seen it. The downward change is both stunning and heart-wrenching for sellers. If you're really curious look at sales/resales in the Polo Fields for examples. Or, look at some current listings and sales in Barton Hills. A low-price housing phenomenon? Not even close... Its a broad spectrum issue!

Bob Martel

Tue, Oct 26, 2010 : 1:13 p.m.

Using the figures that Paula quotes above, the drop in median prices from the 2004 YTD peak to 2010 YTD is about 33%. That's a pretty big drop! Of course, simply using the median may not account for a change in the mix of houses that were sold. If, for example, higher end homes were a bigger part of the mix in 2004 than in 2010 the actual loss in home value would be less than indicated by change in the medians. I suspect that a disproportionate number of homes sold YTD are in the Thornton Farms subdivision on Jackson Road in Lima Township. Those are very low end homes and are likely skewing the 2010 medians down somewhat as compared to the 2004 figure when that subdivision did not yet exist. It would be interesting to compare resales of the same homes that changed hand in both 2004 and 2010 to get a better apples to apples comparison. However, if that data were available, I suspect that the sample size would be quite small and thus hard to use in any generalization.

Paula Gardner

Tue, Oct 26, 2010 : 12:41 p.m.

The average sale price in Washtenaw County in September 2005 for a single-family house was $253,461. In 2004, it was $261,437. The median YTD sale price in those years: $227,250 in 2005; $229,000 in 2004. The median YTD sale price so far this year: $152,500. The average for September 2010, as mentioned above, was $184,965.


Tue, Oct 26, 2010 : 12:21 p.m.

Dobsonian - that's funny, because yesterday Corelogic reported price declines for August, and today Case/Shiller reported widespread price declines in their national and regional indices for the June/July/August period (this is the three-month rolling Case/Shiller national index.) Calculated Risk covered those today ( Pjohn3 - Case/Shiller says that prices have declined 45% from the peak in the Detroit Metro market. I don't know if Ann Arbor is considered part of that market, but I'm pretty sure Ann Arbor hasn't had that level of decline. At least not yet. Could we fall another 20%? Japanese prices certainly did after their real estate bubble broke. And as to Surovell's statement, "if you need to sell your house and you're able to sell it at market price, it will sell", that's either a clear statement or utter nonsense, depending on how you read it. If you read it as "and you're willing, and can afford, to sell it at market price", then it makes perfect sense, and points out that if your mortgage is underwater, you may not be able to afford to sell.

Bob Martel

Tue, Oct 26, 2010 : 11:41 a.m.

House prices in a given market will not increase until there is an increase in demand for housing. Demand increases when we have an increase in household formations or from people moving into the area. Household formations are basically young people moving up the ladder of life, and for them to stay in the area requires good interesting jobs for them. For new people to move into the area we also need new jobs. So, no matter how you look at it, house prices will not increase until we get more jobs. This will take time. For the past several years I've been saying that it will take ten years for things to get back to anything like what we had in the early 2000's. By my reckoning, we may still have ten years from today.


Tue, Oct 26, 2010 : 10:21 a.m.

"If you need to sell your house and you're able to sell it at market price, it will sell." Actually, Surovell's statement is quite profound and on target. Market price refers to TODAY's market price... a price that is often lower than an earlier acquisition price. "Able to sell," is the key phrase. It refers to a seller's ability to absorb associated loss... Maybe a seller loses some, or all, equity... Maybe a seller takes a check to closing to pay for the market loss... Maybe a seller negotiates a short sale with their lender... Maybe they just walk away... Foreclosure? Bankruptcy? All of these are current scenarios. Prices are lower, interest rates are great... It's a good buying environment for those with purchase ability. We all still need to live someplace...

herman gardens

Tue, Oct 26, 2010 : 9:43 a.m.

T Baggins: I could probably have put it better myself, but I would not have dared.


Tue, Oct 26, 2010 : 9:43 a.m.

Question: How many foreclosed residental properties have the big banks chosen to keep off the realty market for a long while? I'll guess that this is done a lot less inside Ann Arbor. where a large university with well-off students drives the local economy, but elsewhere it appears to have a major impact on propping up already diminished home prices. Were the banks to flood the market with every foreclosed house they have, prices might fall through the floor in a number of local markets. While this strategy aids realtors and sellers for the time being, at some point these now-empty (or rented?) properties will have to be dealt with by the banks.

Top Cat

Tue, Oct 26, 2010 : 8:57 a.m.

So it seem like the last thing we need is a millage for a government agency to purchase land to prevent it from being developed.


Tue, Oct 26, 2010 : 8:37 a.m.

Here's another way to look at it. Our homes are now more than ever a depreciating asset. Just like servicing a car, a home requires a certain amount of upkeep such as new paint, carpeting, roof, furnace, fixtures, etc., etc. We already know the foreclosure inventory is not being adequately maintained, hence the selling price will reflect the amount of fix up required. I would also submit that many other homeowners are putting off a certain amount of essential home maintenance repairs. The longer this recession lasts, the longer many of these repairs will be postponed, in some cases severely jeopardizing some structures and adding to the general home price depreciation of whole neighborhoods (ie: Detroit as a worse case scenerio).


Tue, Oct 26, 2010 : 8:19 a.m. is showing a significant uptick in RE prices in the area since June, after a significant slide Jan-June.


Tue, Oct 26, 2010 : 8:08 a.m.

I'm not sure this area and/or Michigan is gonna see another 20% drop because we declined so dramitically before other regions did but foreclosure prices will continue to depress values. This painful process of deleveraging will exist for some time. An article I read recently stated that home values in the Detroit area (I'm assuming surrounding areas as well) will not return to their 2007 values until 2020. That's a scary thought.

Bob Bethune

Tue, Oct 26, 2010 : 7:18 a.m.

"if you need to sell your house and you're able to sell it at market price, it will sell," Badly put, since the definition of "market price" is "the price at which something will sell." However, I think the intended idea is that the market is functioning; there are buyers and sellers and they can reach a point of agreement, though that point will undoubtedly be lower than the seller would wish (and isn't it always so?) That's in contrast to conditions in which the market just stops, in which there are essentially no buyers or there are essentially no sellers.


Tue, Oct 26, 2010 : 7:01 a.m.

The NAR has a vested interest in the housing market. Their numbers are probably accurate enough, but they always put a marketing spin on the analysis. It's good to see that Mr. Surovell is a bit more realistic, but even he's putting on a rosy pair of glasses. We have nearly 11 months of existing housing supply. Normal is four to five months. The banks have been ramping up their foreclosure mills. That process was slowed by foreclosuregate, but Michigan doesn't use judicial foreclosures, so robo-signed affidavits are accepted just fine here. "But the key concern moving forward continues to be inflation and how it affects the housing market, Surovell said." Almost. The key concerns moving forward continue to be disinflation, with possible deflation, foreclosures and short sales, and the stalled economy. Since housing construction usually leads the economy out of recession, we're not likely to see much growth until construction picks back up, which isn't likely to happen until we work through the foreclosures, which will probably take a few more years. The banks are foreclosing on people now who haven't made a payment in 16 months. Back in March the average delinquency for houses in foreclosure was 13.6 months. (

Steve Pepple

Tue, Oct 26, 2010 : 6:11 a.m.

A comment that violated our conversation guidelines was removed. Please avoid name-calling in your posts.


Tue, Oct 26, 2010 : 6:03 a.m.

The Clear Capital Home Data Index, which has accurately tracked and preceded the more widely known Case-Shiller index, is showing a dramatic decline in prices has resumed, commencing in August. We can expect another 20+% drop in US real estate prices during the next couple years or so. Here is a link to a reasonably good story about the decline in real estate values: With another 20% drop, nearly half of all home owners will be upside down in their loans. This condition would likely have profound effects...


Tue, Oct 26, 2010 : 5:22 a.m.

"if you need to sell your house and you're able to sell it at market price, it will sell," Sort of like: If you build it - then you will build it... Or maybe not.