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Rochester real estate rebounds!

Rochester real estate rebounds

Rochester real estate has rebounded and there continues to be a shortage of homes for sale in the market. This has caused a further increase in property value and in many cases has buyers bringing more money to the closing as appraisals are not keeping pace with increase in market price. The lack of "used" product has also incresed the volume of new contrction in the area and most builders are telling me that price increases are coming!

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Kristin Bull (Editor) September 25, 2012 at 04:29 PM
Well, that sure is good news for a Tuesday afternoon ...
Brian Kirksey September 25, 2012 at 11:42 PM
"...appraisals are not keeping pace" not quite correct. The bidding war that is created from a low inventory, is not a rational process that can be modeled via market value. Most Realtors report offering prices much higher than listing prices, and including clauses within the purchase agreement that says a buyer can withdraw if the appraised value is below the contract price. Typically this is found out days before closing forcing the seller to lower the price, require cash at closing or abandoning the buyer and re-listing. Most opt for lowering the price...re-listing has hazards if the buyer sought FHA financing as the prior appraisal is tied to the property not the buyer. If buyers were indeed bringing cash to closing, then the sales would have already picked up the upward trend.
Mackey Chandler September 26, 2012 at 11:55 AM
How about some honest disclosure that Drew Colburn is a real estate agent with a professional interest in cheer-leading the market?
Drew Colburn September 26, 2012 at 12:03 PM
No sense in cheer leading the market when we have seen the largest increase in prices since the early 2000's in the area. The lack of product will continue the market upswing unless there are economic issues that are unseen
Brian Kirksey September 26, 2012 at 12:14 PM
Why would he need to disclose that? Every homeowner would also be a cheerleader by your conflict preposition, given that most Americans single largest investment is their house. Should they disclose too?
mac September 26, 2012 at 05:01 PM
Rochester is not the only area that this is happening in. I have a friend who bid on a house in Troy the evening after he saw it and it was sold. Luckily he did get the larger house in Troy for his family. His house in Royal Oak sold the same day it was listed for over asking price. Most people who drive on Rochester Road or read the local papers would know Drew Colburn is in real estate. That was not his point. FYI - I work in the automotive industry.
Mark Ford September 27, 2012 at 11:27 AM
There is no question that Rochester is one of the most desirable, sought after places to live in south eastern Michigan. That said, one would think that "supply and demand" would be a major factor in determining home values. However, Rochester was not exempt from the devastating housing devaluation resulting from the current recession. As such, many of us that own homes in Rochester witnessed our neighbors losing their homes in foreclosure. Couple this with the fact that our streets are filled with homes that are 100 years old sitting next to brand new custom built homes. Enter the appraiser! How in the world could anyone possibly determine a home's value given the current economic conditions? How do you get realistic "comp" home values when homes range from a 1941 bungalow to a home built in 2007 for $500,000 next to a vacant home in foreclosure? Why should the home in foreclosure effect the value of the bungalow? If someone can explain the rationale for this crazy formula, I would be interested to know. FYI, I'm the guy in the bungalow...
David Gifford September 27, 2012 at 01:15 PM
I notice very few for sale signs around Rochester lately, especially close to downtown. Perhaps it is time to start building houses near downtown again! There are two vacant "brownfields", one being the old paper mill site, a nice hill top spot at the corner of Walnut and First, property south of First on Diversion and open land south of the OPC (I believe is wetlands though). There is obviously a demand and nearly 50% rental occupancy in the city, it would be good to have some more home owners.
Drew Colburn September 27, 2012 at 03:45 PM
Mark, Agreed they should not affect "privately" owned homes and most appraisers understand that. The appraisal process should be held to higher standards as far as apple to apple comparisons, however they are not. The appraisers I have talked with are under pressure from the banks and their appraisal review process to be "ultra conservative" which in effect hurts the recovery. We will recover much slower because of this and many 1st time home buyers suffer because their lack of money if a property doesn't appraise and the seller will not come down. Home ownership is the backbone of American society and has been seriously challenged 1st by the lack of Gov. controls and now by the over correction of Gov. controls
Brian Kirksey September 27, 2012 at 05:07 PM
Appraisals are based on economics, however they are based on a concept called market value...which to someone outside the business and economics may seem strange. Typical residential appraisal are based on the economic principle of substitution, that states if you could not have the subject property...what would be a reasonable alternative? The question then becomes, what is the subject and what defines its characteristics...generally location...followed closely by size...then typically age....The appraisers job is to know what the market is for that particular home, who the typical buyer might be and what things are important to them. From that comparables are selected, based on what would be a substitute. A 2007 built home of 4,000 SqFT is not comparable to a 1,200 SqFT 1940s house, regardless if they are next door to each other. For one, a buyer that could afford a 1,200 SqFT generally cannot afford the 4,000 SqFT (there are exceptions, most people shop based on their pre-approval). In that way they are not substitutes to each other.
Brian Kirksey September 27, 2012 at 05:11 PM
In the case of the bungalow, in Rochester Hills those homes are generally located along the Auburn corridor, and can be located in either the Avondale or Rochester Schools. In that situation a home located in Avondale should only be compared with homes also located in Avondale. It becomes important to find homes that have sold recently that are similar in SqFT and age. What Drew was referring to about appraiser pressure, is true most underwriters want 4-6 sales, all sold within 3-months of the appraisal date, and located well within a few blocks (there are exceptions). Every lender is different, and every AMC the lender uses is also different.
Brian Kirksey September 27, 2012 at 05:16 PM
In regards to foreclosures (better referred to as REOs, foreclosure is the act of taking the home back through auction, where REO is the end result of the bank taking it back and selling it). A foreclosure can easily be compared to a non-distressed subject property provided the market (buyers) see them as a viable alternative. if the market says I could buy a house that is 1,200 SqFT for $10,000 that is privately owned, or I could buy an REO 1,200 SqFT next door for $8,000 same condition as the privately owned...a rational buyer would obviously pick the $8,000. With a limited number of homes on the market, and if that happens enough times then you can see how it becomes the market very quickly. Most times buyers prefer to not buy REOs, and often times REO and privately owned homes become a bifurcated market. These homes may exist next door to each other, but represent two different markets...your appraiser should know if they are a bifurcated market or one market.
Daryl Patrishkoff September 29, 2012 at 08:00 PM
I can see the perspective of a boom from a real estate agents view, it has been a lonely life the past few years and any activity is an increase. I also do believe there is pent up demand and that is driving sales, however at a very low price compared to a short few years ago. From a homeowner’s perspective, we can sell our houses in the area, sometimes quickly. However, the price is very low to what people have into the property, so from a homeowner’s perspective this is no boom time. I and many of our neighbors would like to sell and move on, but the prices are too low and keep us in our place of current residence. So we stay put, keep what we have and wait to see if things return enough to make the change and sell. Now we watch our local governments think things are great and are raising taxes, for example Rochester Hills 2.5 mill increase, the increase for the DIA, what are these people thinking?

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