Louis J Sheehan 80103

November 25, 2007
NATIONAL PERSPECTIVES
Where Mansions Go Begging

By KEITH SCHNEIDER
Grosse Pointe, Mich.

WHAT is striking about the mansions and tree-lined roads of this exclusive suburb of Detroit is not the elegance and wealth — it’s the real estate signs.

Almost 700 homes are currently on the market in the five Grosse Pointe communities, according to brokers, twice as many as in the same time in 2005. And since June, prices for the most expensive houses have dropped by around $100,000 a month.

Ever since the mid-19th century, when the first grand summer mansions were built along the shores of Lake St. Clair, just north of Detroit, the name Grosse Pointe has conveyed exclusivity and wealth. While nearby Detroit declined over the last five decades, this affluent suburb thrived, with some episodic downturns in the early 1980s and 1990s.

Its untouchable reputation held up so well that in 2001 the former WB Network aired “Grosse Pointe,” a prime-time drama about pampered teenagers. Now, six years later, Grosse Pointe is very much touched by market trends.

Home prices in the greater Detroit area have fallen by 20 percent, and in many instances more than that, in just a year. Homes that sold for $450,000 in 2006 have typically sold for $360,000 or less in 2007, real estate agents say.

The resulting market here in southeast Michigan has created a legion of frustrated sellers and plenty of opportunity for choosy buyers.

Mary Alice O’Toole, a sales representative, raised four children and spent 32 years in the Grosse Pointe Woods home that she and her husband, Joe, bought in 1975 for $85,000. (They spent $100,000 more for an addition in 1982.)

They are hoping to sell their home — a 3,500-square-foot brick colonial with five bedrooms and three and a half baths — for $479,000. Originally, it went on the market in June for $549,000.

“I think we’ve had seven people go through, and two people are interested,” Mrs. O’Toole said, “but no offers.” The couple are planning to move to downtown Chicago, where Mr. O’Toole will start a new job.

In other Oakland County enclaves that rival Grosse Pointe — Birmingham, Bloomfield and Bloomfield Township — the real estate market is just as soft. According to housing sales data compiled by Bob Taylor, an agent and researcher in Birmingham with Weir Manuel Realtors, sales peaked in the Birmingham and Bloomfield region in the second quarter of 2004, when 281 homes sold for an average price of $528,000 and a median price of $395,500. At the time, homes stayed on the market an average of 65 days.

In the second quarter of 2007, just 173 houses were sold in the three communities, he said. They stayed on the market for an average of 174 days, though prices were up, to an average of $605,828 and a median price of $446,750.

In all, there are nearly 41,000 homes on the market in Detroit and its three surrounding counties, twice as many as in 2005.

“You can’t invent buyers,” said Mr. Taylor, who noted that in 2004, his agency had an average of six open houses for each listing. This year, it had just two for every listing. “These numbers prove what we’ve experienced,” he said. “There are substantially less people looking in this market.”

Indeed, Michigan has lost 369,000 jobs since 2000, according to an analysis by the University of Michigan, with 60 percent of those positions coming from the Detroit region alone. Many of those jobs have been from higher-paying manufacturing positions related to designing and building cars and trucks.

The state’s unemployment rate of 7.7 percent in October is the highest in the nation, and adjusting for inflation, its median income has fallen 12 percent since 2000, according to the Labor Department.

The crisis in the mortgage industry has struck hard here, too, especially for those who bought their homes with adjustable-rate financing. As of last month, 60 homes had been foreclosed in Grosse Pointe; at the same time last year there were 16, according to the Michigan Multiple Listing Service.

Brokers say that tastes have changed as well. Young high-earning professionals prefer newer homes, and will settle for older homes only if they have been completely updated. The 1920s homes in Grosse Pointe and Birmingham that have not undergone extensive remodeling are not nearly as attractive as they once were.

Tamara Smith, an agent with Coldwell Banker Schweitzer Real Estate in Grosse Pointe, says the hardest part of her job is persuading sellers to be realistic about how much they can ask for their home when it’s put on the market.

“They come in with a number in mind, and it’s just way out of the realm of possibility,” she said. “And even if we work to get the right price, I tell them it could be 12 to 18 months.”

Mrs. Smith says brokers and sellers are deploying every strategy they can think of to market homes, like hiring professional “stagers” to tidy yards and redecorate interiors to make homes more inviting to buyers.

It has helped. In the first 10 months of this year, 592 homes were sold in the five Grosse Pointe cities, according to Mrs. Smith. During the same period last year, 465 homes were sold, she said.

Falling prices mean that buyers are finding what they view as bargains.

George C. Watson, a 57-year-old lawyer, and his partner, John Fitzpatrick, 44, a communications manager for Aramark in Detroit, went into contract in October on a ranch house in Grosse Pointe Shores with three bedrooms, two bathrooms and 2,100 square feet of living space. They paid $340,000. Two years ago, Mr. Watson said, the same home would have cost $450,000.

Mr. Watson is concerned about the market’s instability, but said he planned to stay in the house for many years and believed the market would rebound before he needed to sell.

Chuck Rizzo, the owner of a waste-hauling company, is a seller and a buyer. He has two homes listed for sale in Grosse Pointe; one has been on the market since 2006 and the other since June. Neither has had any offers.

Last month, Mr. Rizzo bought a 5,900-square-foot home in Bloomfield Township for $1.5 million — $500,000 less than the asking price. “On that one I did well,” he said, explaining that personal circumstances involving his young son prompted him to move to a new school district. “With the other ones, I’m dying,” added Mr. Rizzo, who is 37. “There’s just no security in this market.” Louis J Sheehan

In other affluent real estate markets around the country like Palm Beach, Fla.; Orange County, Calif.; and Scottsdale, Ariz., inventories of expensive homes are growing and prices are falling, according to brokers.

“People in this business much older than me say they’ve never seen anything like it,” said Keith Stonehouse, a vice president with the Franklin Title Agency who teaches professional development seminars, like the “Reality of Realty,” in the region.

“I saw a guy buy a house for $2.1 million in Bloomfield last year — a brand-new house,” Mr. Stonehouse said. “He got hit by the economy and never moved in. Now the house is on the market for $950,000, and it might not sell for that much.”