Buyers not taking plunge Tittabawassee River properties not selling at as fast a clip since dioxin warning

Sunday, March 19, 2006

Once a draw for home buyers, the Tittabawassee River has left neighborhoods awash in uncertainty as to whether this contaminated waterway will keep them from selling their homes.

The 22-mile stretch of river, meandering through picturesque woodlands from Dow Chemical Co. in Midland to the Green Point Environmental Learning Center in Saginaw, now divides a community that must decide whether an industrial pollutant known as dioxin really will do harm -- if not to health, to real estate.

It is a question that has led a Freeland couple to file a class action lawsuit against Dow, claiming that historic dioxin releases from the chemical giant's Midland plant have spoiled property values.

It has prompted a prominent Saginaw developer, outraged by what he dubbed environmental extremism, to buy up six properties along the Tittabawassee River to prove the riverfront homes really do sell.

It has sparked political battle at the state Capitol to change a law that allowed some properties, even without specific testing, to fall within a "hazardous waste facility" -- a label legislators feared would hurt property values.

All revolve around a tiny toxin, too small to see, that is linked to reproductive problems, birth defects, diabetes and increased cancer rates in laboratory animals.

A Saginaw News investigation has found that home sales have slowed along the Tittabawassee River since 2003, when the state announced that properties along the river may lie within a dioxin-contaminated "facility."

Sales dropped to an average of 7.3 homes a year, compared to 9.4 homes between 1995 and 2002, an analysis of more than 230 residential property records shows.

The gap widens when the purchases of developer Dr. Samuel H. Shaheen, who bought six of the nine properties in 2005, are omitted. The average then drops to 5.3 homes per year after 2003.

But the decline may have more to do with the economy than dioxin, real estate experts say.

"If you look at the overall economy, every single solitary house is selling slower, river or no river," said Barbara Muessig, broker-owner of Barbara Muessig & Co. in Freeland.

The Michigan Association of Realtors reports that home sales have declined countywide for the past three years, falling 14.8 percent. Buyers snatched up 2,479 homes in 2002, compared to 2,113 in 2005.

Foreclosures also are on the rise in Saginaw County. Register of Deeds records show 521 foreclosures last year, compared to 345 in 2001.

Reason for reluctance?

Roger Elbers moved his family to the riverfront two years ago, trading a suburban Saginaw Township home for a spacious two-acre lot overlooking the water.

The location was supreme, he said.

From his backyard, his sons could plop a fishing line into the water or shove away from shore in a paddle boat. From his living room, he could see eagles perched along the river bank.

Elbers, 40, said he knew about the dioxin controversy when he bought the property in October 2004, but it didn't dissuade him.

He figured dioxin levels were too low to pose a health threat to him, his wife and his three sons. Besides, much of his property was outside the contaminated floodplain.

Elbers said the river is a draw, not a disadvantage.

"There is a lot more positive about living on the river than negative," he said.

The housing market along the Tittabawassee River isn't as troubled as some people believe it is, real estate experts say. Dioxin is a factor, but not a fatal one.

"It has had an impact on making people think twice, but it hasn't stopped them from buying," said Gerald E. Meyers, president of the Saginaw Board of Realtors and owner of CMW Realty in Saginaw Township. "People are just a little more cautious."

Home buyers worry more about the future of bankrupt auto supplier Delphi Corp., the surge in inner-city crime, the cost of flood insurance and rising mortgage rates, brokers say.

Dioxin may ward off some potential buyers, they say, but not enough to cause a slump in riverside sales.

"We really haven't found that the market has reacted to the dioxin contamination in the Tittabawassee River," said Heidi Martinus, an appraiser for DLJ Appraisal Services in Saginaw Township. "We still are finding sales. It doesn't seem that people are staying away from buying homes along the river."

Troubled waters

While homes may sell along the river, at least 170 riverside residents believe their lives' largest investments are in peril because of dioxin. Those residents have signed onto a class action lawsuit that claims Dow damaged their properties by releasing dioxin, a byproduct of chlorine manufacturing and other industrial processes, into the river.

A Freeland couple, Gary and Kathy Henry, who say the toxin lingers like a black cloud over their property, are leading the litigants. Even if they could sell, the Henrys believe dioxin would adversely affect the value.

"I don't think it could sell for what it is worth," Kathy Henry said. "Anybody who had the slightest doubt that the state was telling the truth wouldn't want to put their children at risk. It would be a bad investment to buy a house with that stigma."

Saginaw County Chief Circuit Judge Leopold P. Borrello has agreed to let the lawsuit proceed as a class action, expanding it to nearly 2,000 property owners within the Tittabawassee River floodplain.

Data the Saginaw News compiled show that riverfront properties continue to sell at prices above the assessed value.

The average home sold 2.3 percent above the assessed value in 2005, 9.5 percent below in 2004 and 2.1 percent above in 2003. Combined, the properties sold 0.8 percent above the value county assessors set.

Henry said she would expect riverfront properties to sell much higher, were it not for dioxin.

Nancy Carey isn't part of the lawsuit -- she said she honestly doesn't see dioxin as a grave concern -- but she, too, said dioxin likely would count against her if she put her Saginaw Township property on the real estate market.

"I'm afraid is has affected our value," said Carey, 71. "I'm hoping not. But being realistic, it probably has."

Proof in the pocketbook

A prominent Saginaw developer wants to prove otherwise -- with his pocketbook.

Dr. Samuel H. Shaheen announced last April that he and unnamed business associates were prepared to buy any property along the river at "double (state equalized value), plus $25,000 to $50,000 depending on condition."

The Saginaw News confirmed through property records that he indeed purchased at least six properties adjacent to the river -- a combined investment of more than $800,000.

Shaheen said the actual investment is higher, but he declined to elaborate on how many homes he has purchased or the dollar amount of those sales. They are a "private" matter, he said.

However, the developer said he has resold at least one home along the river at a profit.

"I said I was going to buy them because I believe they will sell," Shaheen said.

Shaheen's optimism is shared by at least one member of a dioxin-related lawsuit against Dow -- a litigant who found a buyer for his lot after 2 1/2 months on the market.

James David, a Thomas Township resident, says real estate is hottest on the river side of Adams Street. Had he wanted to, he said he could have sold his house three weeks after posting it.

"The houses across the road aren't selling as well," said David, 46. "They don't have the draw of the river."

David bought his home in 2002 before residents discovered the extent of dioxin contamination downstream of Dow. He bought it as a money-maker, hoping to fix it up and sell it at a higher price.

Since then, he has built a boat ramp along the Tittabawassee, fished for walleye from the shore and created a volleyball court in the backyard.

Even with dioxin on the property, David believes he can make money on the deal.

"It is a money-making venture to sell this house," he said. "It is going to sell, no doubt about it."

As for the dioxin contamination? It may frighten some buyers, but it certainly hasn't spoiled the market, he said.

"Dioxin has some effect," David said. "It scares some people away. Instead of having 100 people come look at (a house), you have 35. But those 35 are willing to spend the money."

A state affair

If home sales have slowed or property values declined, the blame should fall in part on a state law that enables regulators to blanket a region as a "hazardous waste facility" without testing each property to prove the pollution, a Midland legislator says.

Rep. John A. Moolenaar, a Midland Republican, championed a bill in the state House last year that would have prohibited the state Department of Environmental Quality from dubbing any property contaminated without testing it.

The bill passed the Republican-dominated House and Senate, but failed when it reached the desk of Democratic Gov. Jennifer M. Granholm.

Moolenaar believes the "hazardous waste facility" law is harming properties along the river, causing prospective home buyers to pause even when considering properties the state hasn't tested.

"The attempt by the DEQ to use a widespread facility label has cast a cloud across our region and created uncertainty among people who might be willing to invest in the region, either as a job provider or home buyer," he said.

"It is important that we work with the governor to resolve this promptly before our entire region suffers."

DEQ spokesman Robert McCann said the decline in home sales along the river is a reflection of a depressed housing market statewide, not a product of dioxin or the state's rules on what to call a contaminated property.

"It is indicative of a trend throughout the state that doesn't have anything to do with contamination at all," he said.

And even if it were related, McCann said, it only would "reinforce our position that we need to take action and get this (dioxin contamination) resolved."

The market today

Owners have listed six homes along the Tittabawassee River today with sale prices ranging from $115,000 to almost $600,000.

Shaheen owns two of those properties, which have tarried on the market for 139 days. The other four homes have awaited buyers 77 days to 3 1/2 years.

With the state of the economy, that's not too uncommon, said Randall R. Davis, owner of Davis Appraisal Co. in Saginaw Township.

But Davis said sellers along the Tittabawassee River face a "double whammy" -- a bad economy and uncertainty about dioxin -- that could keep real estate from moving as quickly. He said he hasn't appraised a home on the river for at least a year.

"Nobody wants to take the plunge at this point," Davis said. "In the Saginaw area, you take enough of a risk buying in a normal area, let alone in an area that may have contamination."

He believes home buyers are sitting back and waiting for the waters to settle before investing in riverfront real estate. As to the long-term effect of dioxin on the market?

"Time is going to be the teller of all tales," he said. "We don't know at this point." v

Jeremiah Stettler is a staff writer for The Saginaw News. You may reach him at 776-9685.

İ2006 Saginaw News
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