Midwest Housing Due For a Correction?
According to the WSJ, parts of the Midwest might experience a drop in house prices even though they didn’t have any appreciation. Its mainly due to job losses.
Midwest May See a Sharper Housing Slowdown
By LINGLING WEI
September 21, 2006; Page D3Homeowners in the Midwest — the nation’s industrial heartland — are starting to see a housing bust without ever experiencing a housing boom as more job losses trigger mortgage delinquencies and foreclosures.
For months, the biggest worries over the slowing housing market in the U.S. have mainly focused on parts of the country that have seen exceptional price increases from 2000 to 2005, places with growing populations and strong economies such as California, Florida and Nevada. But recent data from the federal government and private-sector researchers point to areas in the Midwest that are witnessing a more dramatic slowdown in home prices and, in some cases, higher borrower defaults than the rest of the country.
Home prices in the region have hardly budged over the past few years because of its weaker economy as compared with other regions. Michigan, for example, has lost nearly 300,000 jobs since 2000, and its jobless rate has been consistently higher than the national average.
A recent report by the Office of Federal Housing Enterprise Oversight looked at housing prices in 275 metropolitan areas across the country. Six of the seven metropolitan areas that showed housing-price declines for the 12 months ended June 30 were in Indiana and Michigan. The study also stated that housing prices in states like Indiana, Ohio and Michigan were fairly flat over the past year but actually declined in the second quarter.
An analysis conducted by First American LoanPerformance, a research firm in San Francisco, based on the latest information available, found that the percentage of loans in foreclosure in the Midwest states of Michigan, Ohio, Illinois and Wisconsin reached 0.93% in June, while foreclosures across the country averaged 0.5% — still historically low. Michigan, hurt by job losses in the automobile industry, booked a 26.8% jump in foreclosure rates — to 0.69% in June from a year earlier, the largest year-on-year increase within the Midwest. Meanwhile, the percentage of loans delinquent for more than 90 days in the hard-hit area was 15% higher than the national average.
Rising foreclosures as a result of job losses are likely to depress local markets even more. According to a residential real-estate risk-scoring system maintained by analysts at Credit Suisse, which ranks the likelihood of home-price declines within a year, the most troubled metropolitan areas are mainly in Michigan — cities including Detroit, Saginaw, Holland, Ann Arbor, Monroe and Jackson — and New England areas such as Boston. The least troubled metropolitan areas are in the Northwest.
Remember to do you due diligence before investing anywhere! Always look for job growth and inward migration.
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January 10th, 2008 at 10:21 am
Living here in the St Louis area, I find it puzzling why this part of the midwest gets so little bubble coverage. West of St Louis in the vicinity of I70 and Hwy 40, there are about fifty new home developments. NONE are full of new houses. Most of them are less than one third complete and have been so for years. The builder bankruptcies are rampant.
RealtyTrac doesn’t list all the REO’s, preforeclosures and auctions either. They have most of them but not all. The Real Estate agents here are ridiculously ignoring the obvious. “It’s a great time to buy!” is their mantra but there are precisou few buyers and precious few closings.
When we got our occupancy inspection last August for the house we rent, the city inspector said he used to inspect several homes per week and used to sign off on 5 building permits per week. He said he hadn’t signed a new building permit for over three months and said ours was the first occupancy inspection that summer.
As far as resales go, the sellers are still clueless as to why their homes have been on the market for over a year at their original listing price. The local RE agents keep telling them the bottom just hit and this spring it will be better (they obviously fail to tell them that credit is REAL hard to get now and that 1.5 million more foreclosures will hit the US market in 2008, and that much more subprime resets will occur this year). Some sellers have reduced their prices by a few thousand but not by nearly enough. Many have taken their homes off the market, some are empty waiting for the Citi, BofA, Countrywide, Deutschebank, et al property management companies to get all of them listed on RealtyTrac.
It’s not the Central Valley of California or Florida (we have only one out of every hundred homes in foreclosure), but it’s not that far away.