What has been the effect of the auto bailout on our market? So far not that dramatic. November and the first portion of December continue to follow the prior months patterns of units sales up and median sale price down. As we have said before, those with auto related jobs have not been buyers of real estate for 12-18 months or longer, so our market already reflects much of the auto effect. To our benefit, it does appear that in spite of the politics, the government will figure out an auto work-out. However, should one of the big three file for bankruptcy our market will slow further from the effect on the tangent/support businesses. How much of an effect on home sales is tough to tell. It will certainly balloon inventories but will have less of an effect on the supply of buyers as a result of lower prices and interest rates so it wont' be fun but it will not be the housing Armageddon that some have feared.

Determining the true home value change is tricky since both the median and the average price reflect as much the change in the type of home that is being sold (investors and first time buyers) as a decline in value. For example, the typical home in the city of Detroit is not worth just $7,500, but the typical home that is being purchased is. The Case-Shiller report, although not perfect either, provides a reasonably accurate look at overall market values. The exact number for any specific market lies in a blend of the two. It is clear that, although inventories are declining, they have a ways to go to reach to point where home values will begin to climb. Therefore what is most relevant in setting a home price is finding the most recent strongest comparable sales, adjust for the home differences and then reduce that price. It is reasonable to estimate the price decline rate is at least 1 to 1.5% per month, so if that comparable home sold 8 months ago, your adjusted home value is 10-12%  or more to get ahead of the market. A reminder of those sellers who are looking to move-up in terms of home value and size: With rates currently hitting the 5% range, now is the time to act! What you might give up on your sale you will more than make up on the buy, it is a basic law of mathematics!

In our effort to maintain the leadership position in marketing our homes to more potential buyers than any other broker, we are now sending our listings to Yahoo Real Estate, one of the top real estate designations on the web with 5.1 million visitors is September alone.

The monthly market report is provided by Dan Elsea, President of Brokerage Services for Real Estate One.

The Standard & Poor's/Case-Shiller National Home Price Index dropped a record 16.6 percent in the third quarter compared to the same quarter last year.

And a separate monthly price index for 20 U.S. metro areas also fell a record 17.4 percent year-over-year in September.

The monthly index is based on repeat sales of resale single-family homes over time, and the quarterly national index is a composite of single-family home-price indices for the nation's nine Census divisions.

The indices do not gather sale prices associated with new construction, condos, co-ops/apartments, multifamily dwellings and other properties that cannot be identified as single-family homes.

All 20 metro areas in the monthly report experienced year-over-year price and month-to-month price declines in September.

In a separate announcement this week, the National Association of Realtors reported that the median price of U.S. resale homes dropped 11.3 percent year-over-year in October -- the largest ever drop since the National Association of Realtors began tracking the statistic in 1968 (see Inman News).

October sales continued on the same track as prior months with sales units continuing to rise (and reduced home prices). I have been waiting for the other shoe to drop as a result of the negative national financial news along with the GM/Chrysler impending changes. To that end, showings for the first week in October fell 10% compared to 2007, but they jumped right back up the next week to the same pace we have seen all year. The sales pace has slowed a bit as have showings in the upper end areas, but the rest of the markets continue to pick up the slack keeping things relatively consistent with the prior months.

So what does all this mean? The trends were heading in the right direction, sales units up and listing inventory is down. With additional impending layoffs, the bottom is likely to be reset to a new level for 2009 and extend our overall recovery time. The silver lining in this is that the new bottom may not be as big a change as it might seem. Here are a few of the key areas of influence in the upcoming year.

Buyers: Additional auto layoffs should not have a major effect on the supply of Buyers so activity should remain at 2008 levels. Few if anyone related to auto has been in the market as a Buyer for the past two years so most of the auto effect as it relates to Buyers has already occurred.

Listing Inventories: Inventories will most likely continue to fall for the first half of 2009 and then remain the same for the balance of the year. Banks are working towards policies to work with homeowners and avoid foreclosures which will reduce or at least spread out the foreclosure rate for late 2009 and 2010. However, additional home inventories from auto related changes will offset some of that, keeping inventories about the same.

Home Values: Home values will continue to decline for 2009. The exact amount is difficult to peg, but it should continue in the 1% per month or more rate. Vacant homes still comprise about 40-60% of the listing inventory. Significant appreciation will not return until those rates fall to 20% or lower.

Economic Stimulus Programs: The current and future stimulus programs will focus on housing; either in making home buying easier or helping lenders repackage mortgages to avoid additional foreclosures. Either way the net effect for 2009 will be positive in reducing or spreading out the foreclosure rate and drawing more buyers into the market. Its full effect will probably not be felt until the second half of 2009.

Auto Bailout: It appears some plan will be implemented, giving Detroit a breather and helping to spread the inevitable continued downsizing over a longer period of time. The positive effect we are looking for is to spread out the number of auto related homes that will go on the market over 3-5 years vs. the 1-2 years it was headed for, thereby helping to maintain values.

Housing Affordability: Our strongest asset, with the economic stimulus making it even stronger. For 2009, low rates and falling prices will continue to create bargains many will not be able to refuse. We may see the strongest affordability index in the past 30 years in 2009!

We can't control the market, but we can control how we react to it. Regardless of how the market shifts in 2009, for Sellers aggressive pricing ahead of the falling market is the key to a successful strategy. For Buyers, a home purchase is a very personal and unique event, trying to time it to the perfect balance of interest rates and pricing is nearly impossible. Start your home search process now and be ready to act quickly, because of aggressive pricing, the best homes are still selling in 30 days.

Daniel Elsea, Real Estate One
President of Brokerage Services 

Here are our stats and the overall market for October:

Total Company Summary - Oct 2008
# of Buyers to Open Houses	2,872
# of Showing Appointments	14,307
# of Homes Sold/Leased	1,364
# of Web Inquires (Unique Visitors)	109,895
# of Mortgage/Title/Insurance Closings	356

	Number of Homes Pending				Available Homes for Sale
Area	Oct 07	Oct 08	% Change		Oct 07	Oct 08	% Change
Oakland County	988	1,484	50.2%		20,356	17,064	-16.2%
Macomb County	729	1,055	44.7%		9,702	8,054	-17.0%
Livingston County	127	186	46.5%		3,631	2,948	-18.8%
Washtenaw County	255	252	-1.2%		4,589	3,591	-21.7%
Wayne ( - Detroit & G.P.)	646	896	38.7%		12,267	11,102	-9.5%
Detroit	853	1,476	73.0%		15,562	12,753	-18.1%
Grosse Pointe(s)	61	63	3.3%		808	929	15.0%
Northwest Michigan**	263	134	-49.0%		10,120	9,957	-1.6%
Total	3,922	5,546	41.4%		77,035	66,398	-13.8%
	Median Sale Price				Ave Chance of Selling (in 120 days)
Area	Oct 07	Oct 08	% Change		Oct 07	Oct 08	% Change
Oakland County	162,000	$   120,000	-25.9%		19%	35%	79.2%
Macomb County	119,000	$    80,000	-32.8%		30%	52%	74.3%
Livingston County	185,950	$   155,000	-16.6%		14%	25%	80.4%
Washtenaw County	194,000	$   149,475	-23.0%		22%	28%	26.3%
Wayne ( - Detroit)	131,000	$    90,000	-31.3%		21%	32%	53.3%
Detroit	16,000	$      8,000	-50.0%		22%	46%	111.1%
Grosse Pointe(s)	219,200	$   147,500	-32.7%		30%	27%	-10.2%
Northwest Michigan**	138,900	$   134,900	-2.9%		10%	5%	-48.2%
Total	$       119,344	$    80,922	-32.2%		20%	33%	64.1%
Data Source: MiRealsource, Realcomp, Ann Arbor Board & BrokerMetrics
Ave Chance reflects the % chance the average home will sell in the next 120 days under the current rate of sales
** Includes Grand Traverse, Kalkaska, Antrim, Leelanau and Benzie counties, waterfront properties and vacant land

Metro home sales up, but prices plunge
Foreclosures fuel trend

BY GRETA GUEST • FREE PRESS BUSINESS WRITER • October 14, 2008

Read the Article   (also read the feedback)

The Sales chart follows the owner occupied sales pace over the past 20 months. Overall the numbers of home sales are up in the metro area over 2007. In most counties investor sales have skewed those numbers. Investors are an important component to our market, helping to absorb excess inventory, however the true underlying strength of any housing market is the pace of sale for owner occupied housing.

By focusing on sales above $40,000 we have filtered out a significant share of the investor and rental transactions, leaving the vast majority of owner occupied sales to set a trend. The Western Wayne county numbers do not include the City of Detroit. Because most of the current sales in the city are under $40,000, we were not able to create an accurate investor filter for that market.

The trend line for each county shows where the sales are headed. In all counties, except Western Wayne, you can see the current trend shows a pretty clear bottoming out of the market, and in the case of Oakland County, a possible upward trend in the sales pace. Although these numbers are not as optimistic as the total sales numbers, they do confirm what we have been seeing in the last 90 days, that we are in a bottoming out phase in terms of sales units for owner occupied homes/condo's. 

The second graph, outlining median home values is more of a mixed bag, with Washtenaw, Oakland and Western Wayne showing a downward trend at the same pace and Livingston and Macomb showing a slowing in their price decline pace. In all cases values continue to decline but the rate is not increasing. Combine that with a reduction in housing inventory and you have lined up all the core real estate conditions for a neutral to improving market over the next 24 months. There is quite a bit of excess housing inventory yet to absorb in all price ranges before we will see these numbers translate into price appreciation.

Does this mean we are at the true bottom or are we in for another level of correction based on the current economic conditions? We are too early in the Wall Street reactions to make a prediction of any merit. We do know however that the result will certainly not increase our growth rate; it will either be neutral or a further downward trend. With that in mind our advice for Sellers remains the same, price aggressively; do not expect the market to rise to your price. Our current price decline pace of about 1% per month will either remain constant for the next 12 months or accelerate, either way; a 10% price reduction today is the smartest hedge you can have against the uncertainty of the future markets.  It is important to remember that the 10% number is based on a reduction from current market values. Many homes are currently listed anywhere from 5% to 25% above the current values, so for many the price decline needed is quite steep.

For Buyer's there may be a tendency to hold back to see if prices fall even more, but again, the news is will either be neutral or possibly worse for buyers. Right now for the majority of Buyers mortgage money is surprisingly plentiful with the availability of FHA programs. If the financial crisis does worsen it will likely mean less mortgage money available, not more and higher rates, not lower. There is always the personal financial uncertainly that effects a home buyer's decision regardless of the great deals in the market, however those who are comfortable with their financially position (understanding that your stocks will return their value over time) this is that once in a life time opportunity to buy.

Sincerely

Dan ElseaPresident – Brokerage Services
Max Broock and the Real Estate One Family of Companies

The numbers are the graph represents the annualized sales pace each month for each county. The data has been seasonally adjusted for the normal business swings in spring and winter which allows for an "apples to apples" comparison of each month to the other.

 Data from Realcomp, Ann Arbor MLS, MIRS