Detroit area Condo Market a complete Disaster

This article really hits home, you can read my condo story here.

The housing market in the Detroit area is bad. However, people here seem to have an irrational, almost mentally retarded thinking when it comes to the condo market. Although the condo market was booming 2 years ago, now, people here will not even consider a condo when the price is substantially below rent in the area for a similar unit.

It simply defies all logic and reasoning.

I can almost understand in big bubble markets like Miami or California, why buy a condo for 3,000 a month PTI when you can rent the same place for 1500. Very logical and understandable choice by the consumer to avoid that situation.

In SE Michigan for example, it is just downright dumb. Rent Cost 700 a month, Condo cost 550 a month to OWN. They will avoid buying like a plague.

They Psychology has turned so much, and so quickly here regarding real estate in general, but especially towards condo that it almost defies all reason.

I can only hope that eventually people here will realize that if a condos expenses; Mortgage, Taxes, And Association fee's actually cost less than equivalent rent in the area that it IS A GOOD BUYING OPPORTUNITY FOR THE LONG TERM.

I think with people fleeing the state of Michigan in droves, apartment complex drastically cutting prices and offering incentives fighting over the people who are left, the situation will not recover until 2010-2011.


Housing slump wallops condos

Segment is hardest hit as construction, sales plummet

Nathan Hurst / The Detroit News

BLOOMFIELD HILLS -- Metro Detroit's once-booming condo market has hit the skids.

From Downriver up through the northern reaches of Macomb County, condominium developers are slashing prices and offering incentives as they struggle to sell a glut of units languishing for sale even longer than single-family homes. Others are canceling projects that promised to bring fresh development geared toward young buyers into popular suburbs like Ferndale and Royal Oak.

The number of building permits issued for condos in Metro Detroit has plummeted from a 2004 peak of 6,377 to only 692 through October of this year, according to data compiled by the Southeast Michigan Council of Governments.

Caught in the middle of the condo slump is Anne Feighan, a 34-year-old strategic planner, who bought her two-bedroom, two-bath condominium at the SkyLofts Market Square building in Royal Oak for $310,000 in October 2005. Just two years later, it has lost $50,000 in value.

"I wish I would've rented," Feighan said. "It stinks. For me to try and sell right now would be insane. I know that no matter what happens, I'm going to lose money on it."

Condo sales in Metro Detroit are included with single-family house sales in monthly reports from Realcomp Inc. multiple listing service, so tracking the condo sales decline is difficult. But agents, developers and experts say the condo market has been especially hard hit in this housing slump, one of the worst in Michigan in decades.

"Condominiums tend to be much more volatile than any other part of the housing market," said Don Grimes, a senior economic research specialist at the University of Michigan.

"There's more turnover, and the projects tend to come together and fall apart much more quickly than traditional single-family developments."

Recent reports from the National Association of Realtors are pointing to another troubled year for the U.S. housing sector in 2008, with some uptick as the nation's credit crunch begins to ease. Locally, agents and analysts predict a similar situation.

But Grimes said a recovery in the residential condominium sector will follow that for single-family properties.

"Because of the volatility, the eventual gains could be more," he said. "But whatever recovery happens will be later."

Buyers offered incentives

Feighan in Royal Oak plans to wait the downturn out.

Engaged and house hunting, she's resigned herself to leasing her loft at a loss until the market picks back up.

"I'd rather bleed slowly than gush blood all at once," she said. "Every other weekend, there's fire sales on these condos. The builders are desperately trying to get rid of them, and I just can't compete."

For those developers in the condo game, their troubles can be seen in the signs touting incentives for buyers and the empty lots awaiting new construction.

On Hickory Glen Drive in one of Bloomfield Hills' earliest condominium developments, "For Sale" signs are as prevalent as the meticulously manicured lawns and shrubberies.

The going prices on some of the units have fallen below what previous owners sold them for back in the early 1990s.

Jane Figueiredo, who spent much of this year competing with more than 40 other sellers in the nearby Adams Woods subdivision to get rid of her property, upgraded the home, dropped her price and even offered the property for trade.

After nearly a year on the market, she finally got a break-even deal.

But she's sworn off any future Metro Detroit condo buying.

"It was hell," she said of the property's sale. "Never again."

Agents for Admiral Homes, one of Macomb County's largest builders of residential condos, are hoping slashed prices and $10,000-off coupons offered on its Web site will be enough to sell what's been sitting on the market for months in its developments in Chesterfield and Shelby townships.

Downriver, agents are pitching incentives such as six months free of mortgage payments to boost the appeal of townhouses sitting unsold for several years.

Developers shelve projects

Elsewhere, developers have shelved much-hyped projects.

Jason Lewiston, co-developer of the Woodward Ave. Lofts project, planned it for a site along Woodward in Ferndale south of Nine Mile.

But earlier this month, he pulled the plug after presales of the units, which would have cost from just under $200,000 to more than $700,000, went much slower than expected.

In Southfield, the mid-rise luxury 10 Ten project slated to go up on 10 Mile has been canceled as well.

Agents and condominium owners said that they hoped the pullback on new projects would help the condo supply fall more in line with demand.

Cheryl Standard, a 62-year-old Birmingham retiree, said she yanked her two-bedroom condo off the market this summer after people kept passing it up in favor of newer units. She's hoping to move to Florida to be closer to her two sisters, but said she'll have to wait to avoid a loss on her home.

"Who could blame them?" Standard said of the buyers she courted. "I couldn't compete with these developers giving away free cars and mortgage payments. But if there's less building, it'll give everyone time to adjust to a different market."

Standard was told by numerous agents that she would likely have to take a $30,000 or $40,000 hit on her unit to get it off her hands.

But because she bought it just a few years ago, that was more than she could handle.

"I've got friends who've had trouble selling their houses, and I can't help but think this is much more extreme," Standard said. "I feel like I've been locked into a bad situation that just keeps getting worse."

Grimes, the U-M economic researcher, said Standard's inclination is right.

"If you look at real estate losses across the country, condos have been right at the front of the trouble spots," he said. "You see it in a lot of overheated places like Florida, California and Nevada. But in Michigan there's been a continued predisposition toward single-family homes. So while demand for real estate is faltering in general, it's gotten worse in the condo sector."

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