Robert Smith

(c) Robert Smith, 2008

Analyzing data released by the RealComp multi-list system to its members, it appears that Livingston County finished 2007 with an small upswing.

While homes (single-family houses and condominiums) on the market were down by almost 7% from the same period in 2006 (419 homes vs. 450), total listings on the market, which includes vacant land, multi-family and commercial listings, were dead even (4698 for 2007 vs. 4695 in 2006).

In December, there was a slight rebound in both the average and median sale prices. While these are only good as a larger view, it's encouraging to see increases at the end of the year in these indicators. Comparing 2007 to 2006, the median price showed an overall drop of 8.6% from $215,667 in 2006 to $197,195 in 2007.

Houses fell from $218,900 median sale price in 2006 to $190,000 in 2007, and condominiums took a much larger hit, going from $155,000 in 2006 to $104,000 in 2007. Vacant land prices also fell dramatically, but on a significantly smaller sales (dollar) volume. This is probably due to the massive decrease in new home construction.

Another postiive indicator was in the monthly residential sales totals. Both November and December 2007 showed increases vs. the same two months in 2006, 145 in Nov 2007 vs. 130 in 2006 and 135 sales in Dec 2007 vs. 125 in 2006. The year finished with a 10.4% drop in total residential sales. The sales volume (total dollar value of all sales) fell 19.1% in this last calendar year.

We saw a lot of value drop in this last year. My personal opinion is that we'll see another 6% loss in value in calendar year 2008 in the County. In addition to more foreclosures coming into the market, tightening credit, increased scrutiny by lenders and more rigid borrower requirements may make home loans difficult to obtain for many potential buyers, even though the overall interest rates remain very good.

If you absolutely, positively have to sell your home now or at any point in 2008 be prepared to take a lot less than your last refinance or mortgage appraisal value. I'm sorry, but there it is. A full-time local Realtor that keeps their eye on market conditions in the various Livingston County home market areas (Cities, Villages, Townships and School Districts) and price ranges will be your best bet to maximize your selling price.

Buyers are poised to find some value in this market providing that they can meet the tougher new lender requirements to obtain financing. It's still possible to get 100% financing through FHA loans, but almost all other loan types are going to require some money out of your pocket. As home values continue to fall, this buyer's market will persist through 2008.

The Livingston County Health Department is giving away free radon test kits through the end of January 2008. They can be picked up at the County's East Annex at 2300 E. Grand River, at Chilson.

Radon is a colorless, odorless gas that can cause lung cancer. It is estimated to be present in one of every five homes in Livingston County. Radon gas accumulates in the lower level of the home (basement) and enters via cracks in the foundation or the sump. It can also be found in homes built on a slab, and is easily remediated by qualified firms.

All homes should be tested for radon, especially if you spend significant time in the basement. January is National Radon Action Month.

For more information please check this link to the Indoor Air Quality section of the Environmental Protection Agency's web site (EPA), this page at the Michigan Department of Environmental Quality (DEQ), and at the Livingston County Health Department web site.

This afternoon, I dropped off an executed purchase agreement to an area lender who was working with a buyer. While there, I took a few minutes to compare notes with the loan officer. We talked about the housing market in general, the tightening of requirements by underwriters, and our prospects of what 2008 will hold for the industry.

The talk came around to investors who are having the same problem that many homeowners are experiencing - time to refinance but there's not enough equity in the property with dropping values. Making it somewhat worse is that there are fewer recent solds to use as a basis for determining value.

A good rule of thumb for any investor is to critically examine a property's cash flow. Don't just think about the old PITI guidelines, Principal, Interest, Taxes and Insurance. Build in a vacancy rate in case you have turnover. If you have a single unit house, one month's vacancy is 8.3 percent for the year. Are you able to comfortably carry the payments without rental income for a month? How about two months?

Before you buy, do a rent survey to see what rent prices are working and how long it's taking to fill vacancies. Add a certain amount for routine maintenance, even if you require tenants to do things like lawn care and snow removal. And don't forget about start-up repairs or remodeling that you may have to do rent a home.

It's a wonderful time to buy investment properties, but keep cash flow as your number one goal. Number two should be likelihood of and rate of appreciation. Number three is a 'no-brainer' - the tax benefits you'll get from owning investment property.

By the way, we think that 2008 will see property values continue to drop (at least through mid-year) unless there is a strong stimulus to jog the economy. And another quarter point interest rate cut by the Fed won't qualifty! Again, if you're looking to move up to a larger more expensive home, buy a vacation home or investment property, the first six months of 2008 should be that time.