With the Threat of a GM Bankruptcy looming, what does it mean for Michigan Real Estate?

A Bird’s Eye View

With the Threat of a GM Bankruptcy looming, what does it mean for Michigan Real Estate?

April 1st, 2009 by roostblog in Real Estate

The new chief executive of General Motors, Frederick A. Henderson, said Tuesday that bankruptcy was “more probable” than ever for the automaker but that he still hoped to successfully restructure the company out of court.

The state of Michigan has already been hit hard with the long downturn in the auto industry, extremely high foreclosure levels and an unemployment rate well over 12%. The complete collapse of GM would be devastating for not only Detroit but the state as a whole.

Manufacturing accounts for approximately 30% of Michigan’s economic production, more than twice as much as any other sector. The manufacture of automobiles and transportation equipment is by far the state’s chief industry, and Detroit, Dearborn, Flint, Pontiac, and Lansing have always been the center of automobile production, although the industry is now in dramatic decline throughout the state.

But even with the decline, the state is still staying afloat even though Michigan has not prospered since the good old days of the 50’s and 60’s when the U.S. auto industry dominated the global market with 83% of all sales.

So getting back to our original question of what will the bankruptcy of GM mean for Michigan real estate? I obviously think it will be extremely challenging for the state as a whole. Even though Detroit has already been hit hard with drastically falling home prices and more than their fair share of foreclosures, people are buying and trying to make living there better. In just the last month alone, we have seen almost 10,000 homes take out of some form of foreclosure status on the Roost site. Does this mean the worse is over? Probably not, but it is moving in a better direction. But with the collapse it could send things into a tailspin that would be difficult to pull out of.

We also have to look at state as a whole and not just focus on the auto-centric cities mentioned above. Take a look at a city like Ann Arbor, home of the University of Michigan for instance. This college town carries one of the top research universities in the country and will probably see a smaller impact of a GM collapse but will still see an impact. I don’t think any city will be totally immune.

My overall assessment is it won’t be good for real estate from boarder to boarder if GM goes under but it’s all speculation until it actually happens. What’s your opinion?

Comments Tagged in: Homes-MI, Michigan Real Estate

Christa N. Caulk

I live and work in the Ann Arbor area. Our team has sold homes here for 14 years, myself personally for the last 7 years.

1 in 10 people in the state of Michigan is directly related and linked to the automotive industry. With the "Big 3" struggling the way they have been it has been a trickle down effect to everyone. Currently we do lead the country at a 12% unemployment rate and have lost 400, 000 plus jobs here.

Now, being in Ann Arbor we have the University of Michigan and the Michigan Hospital here which is one of the largest teaching hospitals in the country. Every March residence from all of the country receive their match letters and we get a solid influx of folks moving into the area. I have been working with 9 solid, qualified, active buyers in just the last 2 weeks alone. Our inventory has dropped and as of 9 months ago we were taken off of the "declining market" list. In fact, at this point when I have a purchaser that is interested in a foreclosed home or the beloved "Short Sale" I tell them that we MUST treat it as if we are in a seller's market. I called on 10 foreclosed properties yesterday, of those 10-7 had multiple offers and the bank was not accepting anymore. I have always stated that we are blessed to live in Ann Arbor as our area is not solely based upon the automotive industry.

Now, in the surrounding area's and the closer you get to Detroit, you are right in stating it is nothing short of a mess. There are actually homes listed in downtown Detroit for $1000.00! Yes, you read that right!! With so many folks out of work its impossible to qualify them to buy these homes so its a never-ending battle. And to be frank, many people have left the state altogether.

Michigan hit this recession 5 years ago. We were the first in it, and I beleive we'll be the last out. Unless the automotive companies restructure and start building affordable eco-friendly, hybrid cars. (or should I say, start simply putting out better products) I don't see it turning around. In my opinion, the government needs to stay out of it and let GM file bankruptcy. Its a ship that's going to crash and they keep doing is prolonging the inevitable. It may come to Michigan becoming more of a pharmaceutical/medical state in the end in order to survive.

Being a resident here...it is very very scary. I can only pray that the "powers that be" can come up with a solution.

roostblog

Christa,
I love the insight you bring to this post. I know how hard you and your Mom work at what you do and I wish nothing but the best for you both. I wish this story had a silver lining and maybe it still does but it is a giant hole that will not be easy to get out of. Thanks again for your comment.

Derek