Double Whammy for Michigan Mortgage Holders
The American dream of owning a home is becoming a nightmare for some Michigan mortgage holders and families.
After investing their life savings in a home, many families facing layoffs or pay cuts are finding it impossible to pay their mortgages. What’s worse, the value of their homes - often their key investment - is deteriorating.
Michigan was the only state in the nation to see its home prices decline in value in 2006, according to a recent study by the U.S. Department of Housing and Urban Development. The national average was a 5.87 percent increase, compared with Michigan’s decline of -0.44 percent.
In the Grand Haven-Holland statistical area, housing prices were flat in 2006 while they fell one-third of a percent in the Muskegon-Norton Shores area. Over the past five years, housing prices have gone up 15.95 percent in the Grand Haven housing market; while in Muskegon they’ve gone up 14.35 percent.
“You have this incredible overlay of worry in Michigan as people respond to declining jobs and declining incomes,” said Dana Johnson, a Detroit-based senior economist for Comerica. “For many families, their house is their largest asset. To see it eroded in value after having seen only modest increases in the last year or two causes real concern.”
Michigan was second in the nation in the rate of new foreclosure filings in January 2007 (Nevada was first), according to RealtyTrac, a national real estate and foreclosure tracking site. Michigan saw 11,554 new filings, up 147 percent from a year ago. Nationally foreclosures totaled 130,511 or one for every 866 U.S. households; Michigan had one for every 355 households.
It’s not news that Michigan finds itself in a one-state recession, or that the state’s economic fortunes have turned sour as a result of the ailing automobile industry and the flight of companies such as Pfizer Inc. and Comerica.
But what is shocking for many families is that the place they call home could become a stone around their financial necks as they try to stay afloat during rough economic times and rising home mortgage payments.
“Typically people worked one job to reach a certain income level and now they have to take three jobs to survive,” said Karry Reith, manager of the Oakland County Community and Home Improvement program, which provides housing counseling. “It’s very difficult times for a lot of people. Their only option may be to leave their house and turn it over to a mortgage company with the hope they can become a homeowner again in the future, when things are better.”
Many experts say it’s hard to know when things will get better. The Michigan housing market had ticked along at a steady if not spectacular pace in the last five years while the rest of the nation was experiencing a real estate boom. Today the future is uncertain, and a number of economists don’t think the area has hit bottom yet.
The Michigan Association of Realtors reports that the average selling price of a home in December 2006 was $149,753, compared to $153,297 in 2005. The number of residential sales in Michigan dropped from 137,069 in 2005 to 118,407 in 2006.
It’s been more than 22 years since Michigan saw a three-month period with a decline in home prices, according to the U.S. Department of Housing and Urban Development. The last time was the third quarter of 1984 — the tail end of the 1980s recession — when home prices declined by -0.28 percent. In 2006, it happened in both the third (-0.51) and the fourth (-0.44) quarters. Many economists expect it to continue in 2007.
“We’ve had bad patches here before in this state,” said Lee Schwartz, executive vice president for government affairs for the Michigan Association of Home Builders, which represents the state’s builders. “But I don’t think we’ve had anything like this for a while.”
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