Real estate market is a house divided
Posted: Monday, October 17, 2011 7:03 pm
By: By Michelle Conlin, AP Business Writer
By MICHELLE CONLIN
AP Business Writer
In America, it’s starting to feel as if there are two housing markets. One for the rich and one for everyone else.
Consider foreclosure-ravaged Detroit. In the historic Green Acres district, a haven for hipsters, a pristine, three-bedroom brick Tudor recently sold for $6,000 — about what a buyer would have paid during the Great Depression.
Yet just 15 miles away, in the posh suburban enclave of Birmingham, bidding wars are back.
Multi-million-dollar mansions are selling quickly. Sales this August were up 21 percent from the previous year.
The country club has ended its stealth discounts on new memberships. And Main Street’s retail storefronts are full.
“We’re getting more showings, more offers and more sales,” says Ronni Keating, a real estate agent with Sotheby’s International.
Think of this housing market as bipolar. In the luxury sector, the recession is a memory and sales and prices are rising.
But everywhere else, the market is moving sideways or getting worse.
In the housing market inhabited by most Americans, prices have fallen 30 percent or more since the peak in 2007.
That’s a steeper decline than during the Depression. Some people have had their homes on the market for a year without a single offer.
Almost a quarter of American homeowners owe more on their house than it’s worth. Another quarter have less than 20 percent equity. About half of homeowners couldn’t get a mortgage if they applied today, says Paul Dales, senior U.S. economist for Capital Economics.
But then there is the other housing market, occupied by 1.5 percent of the U.S. population, according to Zillow.com. The one with outdoor kitchens and in-home spas; with his-and-her boudoirs and closets the size of starter houses. The one that is not local but global, with international buyers bidding in all cash. And where the gyrations of the stock market are cause for conversation, not cutting expenses.
In this land of luxury properties, the Great Recession seems over. Prices of $1 million-plus properties have risen 0.7 percent since February, according to Zillow.
Prices of houses under $1 million have fallen more than 1.5 percent.
Normally, these two segments of the housing market rise and fall together. But now, they’re moving in opposite directions.
“Luxury is the best performing segment of the housing market right now,” says Zillow.com chief economist Stan Humphries.
After every recession since World War II, housing has led the economic recovery.
Not this time.
The renewed vitality in the comparatively small market for luxury homes is not enough to power a full-blown recovery.