It’s starting to feel as if there are two housing markets: one for the rich — and international buyers — and one for everyone else. In foreclosure-ravaged Detroit’s 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. Multimillion-dollar mansions are selling quickly. Sales this August were up 21% from the previous year. The country club has ended its stealth discounts on new memberships, and Main Street’s retail storefronts are full. In the housing market inhabited by most Americans, prices have fallen 30% or more since the peak in 2007. Some people have had their homes on the market for a year without a single offer. About half of home owners couldn’t get a mortgage if they applied today, says Paul Dales, senior U.S. economist for Capital Economics. Then, there is the other housing market, occupied by 1.5% of the U.S. population, according to Zillow.com. Here, houses have outdoor kitchens and in-home spas, his-and-her boudoirs and closets the size of starter homes. This market is not local but global, with international buyers bidding in cash. In this land of luxury properties, the Great Recession seems over. Prices of $1 million-plus properties have risen 0.7% since February, according to Zillow. Prices of houses under $1 million have fallen more than 1.5%. “Luxury is the best performing segment of the housing market right now,” says Stan Humphries, the chief economist for Zillow.com. (www.usatoday.com)
USA Today (9/25/11); Michelle Conlin, Associated Press

A new study by mortgage and real estate data firm CoreLogic found that there are substantial reserves of positive equity across the country. CoreLogic maintains the largest database on home loans — 42 million active accounts, more than 80% of all existing mortgages — with information supplied regularly by lenders and servicers. The Federal Reserve estimated that at the end of June, Americans held $6.2 trillion in equity in their homes, down sharply from its high mark of $13.2 trillion in 2005. Roughly one of every three homes is mortgage-free, according to federal and industry estimates. Among owners who have mortgages, according to CoreLogic, 48.5% of them have at least 25% equity stakes in their properties. Roughly a quarter of owners with mortgages — 24.6% — have more than 50% equity. At the other end of the spectrum, 22.5% of owners are in negative equity positions. Among states with the highest equity holdings, two states with very different economic profiles top the list: New York, where 48.8% of owners have greater than 50% equity positions, and Hawaii, with 43.7%. Both states also have exceptionally low incidences of negative equity. Connecticut, Massachusetts, Pennsylvania, New Jersey and Washington, D.C., have equity positions far above the national average. In the District of Columbia, for example, 35.1% of all owners have 50% equity in their homes or more. In Connecticut, it’s 37%; Massachusetts, 36%; and New Jersey, 34.6%. (www.washingtonpost.com)
Washington Post (9/30/11) Kenneth R. Harney

Tropical storm Irene swept through Vermont, leaving in its wake three dead, 800 homes destroyed and nearly 200 major roads and historic covered bridges washed away. As residents gradually emerge from the mud and debris, the state has incurred public and private costs that will top $1 billion. But if there is any upside, it’s that the worst flooding there in 83 years is triggering massive reconstruction that will provide a significant bump for the state’s economy and construction industry. Industry experts emphasize that no one is suggesting disasters are welcome or a good way to boost an economy. And long term, there can be a negative impact. “The renovation is great for contractors who haven’t had the work,” says Stephen Melman, NAHB’s director of economic services. “But there are probably going to be some people who move out, and that will hurt those communities.” Amanda Ibey, spokesperson for the Vermont Home Builders Association, notes that while the circumstances aren’t desirable, the aftermath of Irene is an opportunity to improve many homes that aren’t energy-efficient. Vermont’s housing stock is among the oldest in the nation. Sixty-three percent of homes and 74% of rental units in Vermont date to 1979 or earlier, before advanced energy efficiency technology was available.  “There is the potential that when something like this happens, it wipes out the old infrastructure and hopefully we don’t just replace it, we build it better,” said Jamie Kruse, director at the Center for Natural Hazards Research at East Carolina University. “That has a positive effect on the productivity of the region.” (www.thefiscaltimes.com)
The Fiscal Times (9/30/11); Jennifer DePaul

When pondering how to construct smaller homes that young adults and renters could afford, home builder Tom Hignite turned his attention from the land to the sea, to cruise ships, to be exact. He studied how the cabins in cruise ships were able to shoehorn essentials of living into a small space, then figured out ways to incorporate some elements — such as built-in bunk beds and wooden lockers instead of closets — into a house containing a little more than 1,000 square feet. The result is what Hignite, owner of Milwaukee-based Miracle Homes, calls the Mi-Pad, a home with three bedrooms, 2-1/2 baths and a fireplace for as little as $89,000. “They’re contemporary in look,” Hignite said. “They are little bit more in size than a garage. But they’re extraordinarily compact, using cruise ship technology and cruise ship design architecture to create cabins instead of bedrooms. Some of the bedrooms are six feet by nine feet and they sleep two. “We kind of looked at repo prices and decided to create a product line that would compete with that sort of repo price area of $90,000 to $150,000, and get you a new home,” Hignite said. “These are targeted at renters. There’s a one-car attached garage,” he said. “They are meant for people who have a no-car garage right now. There’s a large marketplace in rentals that could segue into this for the same cost as rent.” (www.chicagotribune.com)
Chicago Tribune (9/30/11); Paul Gores, McClatchy/Tribune News

Despite a likely higher price tag, a home builder will say that you’re buying a better product when you buy new. For one, it’s a home designed for the way Americans live today, maximizing the usability of space and offering amenities that speak to modern needs, such as big closets. Plus, new homes are built to be more energy-efficient. “It’s appealing to people who are concerned about energy costs in the future and the longer-term efficiency of the home,” said John K. McIlwain, senior resident fellow for the Urban Land Institute. “There’s also the advantage that if you buy a home today that has energy features, that will be worth more down the road when the market recovers,” he said. When buying new, there aren’t the questions of deferred maintenance that can come along with existing — and especially distressed — properties that have lingered on the market for a long time, said Stephen Melman, NAHB’s director of economic services. “In general, anything that sits there has to be in worse shape,” he said. And some people covet new homes simply for their “newness.” Buying new “has become a deep part of American culture,” McIlwain said. “We built an economy around having to replace everything every two to three years. Think of Apple: It is built on the basis that they have a new toy out for us every year or two.” (www.marketwatch.com)
MarketWatch (9/26/11); Amy Hoak

Ambling into the warm embrace of Kukui’ula’s clubhouse on Kauai’s pristine south shore is to catch a fleeting glimpse into how the other half lives — or, more accurately, the other 0.1%. But with the global economy in turmoil and real-estate wounds still festering across the country, there’s trouble in paradise. “We broke ground on the club in 2008 and a month later, Lehman Brothers went down,” said Brent Herrington, Kukui’ula president. “There was a moment there when it felt like the world was going to end,” he said. “But we came together as a partnership and decided to push ahead.” Without a doubt, the expansive 1,000-acre development cutting a vast swath of land across Poipu is mesmerizing. “It’s one of the most unique and beautiful developments in all of Hawaii,” said Becky Suppon, Pacific Ocean Properties real estate agent and former saleswoman at Kukui’ula. “But it’s just tough to market it right now and banks aren’t really loaning on second homes.” “The most recent down cycle was one of the worst we’ve seen in Hawaii,” said Honolulu-based real estate analyst Ricky Cassiday. “Sales have since recovered somewhat, and we are two years out from the bottom, but it is still anemic by historical standards.” Recognizing the futility in pushing sales during times as ugly as the past few years, the developers behind Kukui’ula decided to circle the wagons and stop spending on marketing. Of course, while it appears to have been the right move, it also kept a lid on demand. Only one piece of land has sold in the past year-and-a-half after 80 “founder” lots were sold in 2006 for a total of $110 million. Eventually, the project plans to offer a series of price points. On the low end, condos will be available for under $1 million. On the high end, Herrington said he sees custom homes upwards of $20 million. Cassiday points out that some of Kukui’ula’s best lots have yet to be marketed, which will come in handy when things pick up. (www.marketwatch.com)
MarketWatch (9/27/11); Shawn Langlois