Will home prices go up much in the next 2-3 years in the Metro Detroit area?

I currently live with my parents and plan on buying a house in the Metro Detroit area sometime in the next 2-3 years when I am ready to move out. I am currently not quite ready to move out yet as I do not have enough savings and do not have a good enough job to support myself yet, but will likely be ready in 2-3 years. This will be a house to live in that I can call my own place that I plan to have paid for when I move into it. I have no interest in buying and flipping properties to make money, but rather as a place I can call my own without having to pay rent or mortgage. In fact I hate rising home prices and believe it punishes people who want to save to pay cash for a house. My target price range is from $100K to $130K. I plan on paying cash for it as I hate any form of debt. The type of home I am looking to purchase is a small starter brick home from 900-1400 square feet in good condition in an ok to decent neighborhood built within the last 30 years. It does not have to be a great area, but cannot be a bad area either. Schools will not matter as I intend to live on my own and will not have children. Now I ask this question because I want to plan my finances to ensure my existing savings [[about $110K) do not lose any purchasing power in relation to home prices between now and when I am ready to buy a house in 2-3 years. So do you foresee significant price increases in the next 2-3 years in the Metro Detroit area. Or is it only very small increases like 1-3% per year or flat or even falling prices? And I guess the most important part is being able to buy the kind of house I am looking for based on my description above for somewhere between $100K and $130K in 2-3 years from now. If home prices rise a little, but as long as they do not rise enough to prevent me from getting the type of home I want in the price range of $100K to $130K, I will be ok.

I think prices will increase 1-3 % overall on average like you mentioned the next 2-3 years...but it can vary by neighborhood depending on demand and if you want move-in ready condition.

Looking into the future for a definite answer is impossible. To many things can happen, good or bad. If you could focus on just today's market you could with the help of a realtor find a nice home for less than what your projecting to spend in 2-3 years. Just a thought.

You already asked this same exact question on city data and got tons of answers. It seems like you'd be overpaying for a house if you are willing to spend 100,000 for that type of square footage in the Detroit area.

Homeownership involves paying more than a mortgage. Your costs are going to include utilities, taxes and insurance on your house. You'll have regular and unexpected maintenance costs. Over time, you'll have to replace the roof, hot water heater, etc. It goes with the territory of owning a house.

I understand that some people hate debt. But to pay cash for a house at this point in your life doesn't make any sense at all. Interest rates are at historical lows. Putting all of your savings into an asset that isn't appreciating or may even be depreciating isn't financially smart.

I'm assuming that you're a relatively young person. If so, the best thing you could do is put a significant portion of those savings into a tax-free retirement account. Your generation isn't going to have guaranteed pensions and Social Security may not exist as a guaranteed income stream as it does today. You'll also likely live longer than current retirees. That means that you'll need more money for your future retirement. The best and easiest way to do that is to be putting money away for retirement when you're young. Those funds will compound over time and even if you save less for retirement later, you'll still be ahead of people who waited.

Personally, if I was young and without a family, I would be renting. There's plenty of rental homes that would give you a chance to experience owning a home without tying up all of your financial assets into a house. Keep your savings invested for the long-term and and you'll have enough money for a home when you really understand what you are getting into with buying a house.

Novine speaks with wisdom. I couldn't have said it any better.

There are not alot of houses built in this area within the last 30 years, per your parameters, that would fall into your price range. Most were bigger than the 900-1400'sq, substantially. That being said, there are probably only a handful in the inner ring suburbs, most built in the last ten years. I'm not including Highland Park, where there are hundreds you could buy right now for less than 5k, and are all 8 yrs old, but all require you to purchase back the contents from the various "operations" surrounding the neighborhood. At least the roofs are brand new.

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Originally Posted by Wolverine607

I currently live with my parents and plan on buying a house in the Metro Detroit area sometime in the next 2-3 years when I am ready to move out. I am currently not quite ready to move out yet as I do not have enough savings and do not have a good enough job to support myself yet, but will likely be ready in 2-3 years. This will be a house to live in that I can call my own place that I plan to have paid for when I move into it. I have no interest in buying and flipping properties to make money, but rather as a place I can call my own without having to pay rent or mortgage. In fact I hate rising home prices and believe it punishes people who want to save to pay cash for a house. My target price range is from $100K to $130K. I plan on paying cash for it as I hate any form of debt. The type of home I am looking to purchase is a small starter brick home from 900-1400 square feet in good condition in an ok to decent neighborhood built within the last 30 years. It does not have to be a great area, but cannot be a bad area either. Schools will not matter as I intend to live on my own and will not have children. Now I ask this question because I want to plan my finances to ensure my existing savings [[about $110K) do not lose any purchasing power in relation to home prices between now and when I am ready to buy a house in 2-3 years. So do you foresee significant price increases in the next 2-3 years in the Metro Detroit area. Or is it only very small increases like 1-3% per year or flat or even falling prices? And I guess the most important part is being able to buy the kind of house I am looking for based on my description above for somewhere between $100K and $130K in 2-3 years from now. If home prices rise a little, but as long as they do not rise enough to prevent me from getting the type of home I want in the price range of $100K to $130K, I will be ok.

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My advice: you have to crawl before you can walk. Rent first. You can rent a whole house. Right now if you don't have a job to support yourself it is premature to do much other than daydream about home ownership, in my opinion. I'm not really clear on your parameters, either...you expect to have $130k saved up in three years, which you don't have right now??? It would take me decades to save up that much money in cash, and I have a job to support myself.

I don't agree with Novak. Renting is a suckers bet in Michigan. For example, you can buy a decent home in Ferndale for 75k. You rent the same house, the landlord wants 1000 a month and after 6 years, you're almost even.

You take the 100,000, invest it in a retirement plan, you end up with $115k if you're lucky and with inflation, you're at below $100k. I know plenty of people that got burned with their 401k. The sure bet is a roof of your head that is paid for. Even if you were to lose your job, you can survive and get by. The worst thing is having a mortgage every month. The psychological benefits are enormous.

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Originally Posted by poobert

My advice: you have to crawl before you can walk. Rent first. You can rent a whole house. Right now if you don't have a job to support yourself it is premature to do much other than daydream about home ownership, in my opinion. I'm not really clear on your parameters, either...you expect to have $130k saved up in three years, which you don't have right now??? It would take me decades to save up that much money in cash, and I have a job to support myself.

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He said he's up to 110k saved so far. So he's close.

From parents home to home ownership requires transitional experience, especially during these times.

Yep, rent a house or a flat in order to get aquainted with all that renting entails in that context where you will have to purchase furniture, pay utilities, yet not be saddled with the heavy stuff like roofs, furnaces, water heaters etc. You may have to shovel or mow lawns in a house or flat rental, but again that is preparing you to decide if that is really the life you want long term of if ultimately apartment or condo is better where lawn and snow maintenance is a non issue.

Also, renting allow more 'portability' should the area take a bad turn. You can get out. If you buy and the neighborhood deteriorates, you're stuck.

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Originally Posted by SteveJ

I don't agree with Novak. Renting is a suckers bet in Michigan. For example, you can buy a decent home in Ferndale for 75k. You rent the same house, the landlord wants 1000 a month and after 6 years, you're almost even.

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That $1,000 a month is taxable income. You're gonna lose a big chunk every April 15. And there are tons of expenses associated with being a landlord, many of which aren't tax deductible.

Most small-time landlords I know are in pretty bad shape. I think Novine has the best advice. Since no one knows where real estate will be a few years from now, don't buy unless you need to, and invest in your retirement. Most companies match, which is essentially free [[and tax free) money.

I think you mis-read it. If you were to be a renter that you can almost buy a lot of these outright after 5 years. I never told him to be a landlord... Plus you're also drifting off. This guy saved his money in the bank. He's not taking his 401k etc.. and that money isn't tax free. Try withdrawing it when you get 60. You still have to pay taxes on it.

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I understand that some people hate debt. But to pay cash for a house at this point in your life doesn't make any sense at all. Interest rates are at historical lows. Putting all of your savings into an asset that isn't appreciating or may even be depreciating isn't financially smart.

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I would not be putting all of my savings into the house. I plan to pay cash for the house and have at least $30K left over after the purchase that I can store in the bank in case of emergency or unforeseen expense.

And I am totally aware that owning a home involves more expenses even without a mortgage. I live with my parents and am totally aware and will not move out until I am ready. I am also able to save almost 100% of my paycheck as I live with my parents and they do not charge me for really anything. I also did not get all of my current $112K from a job. Much of it I got from the sale of my grandmother's house because she wanted the money to go to me and my brother to split when she passed on and the house was sold. So because I am also able to save almost all of my paycheck, I plan to have at least $150K by the4 time I am ready to move out.

900 sq ft homes for $130k equate to a much much nicer [[stable high income) neighborhood in the reqion. You may have a hard time finding these however unless they come up under forecloseure then you may need to sink lots of additional dollars into them.

In general the region has leveled off. This does not mean that the rise in values will be across the board. More desirable neighborhoods are starting to show recovery but others are still falling.

Should you choose to buy pick wisely. Its still very much a crap shoot.

Speaking as someone who historically has eschewed mortgages to the extent possible, in the current interest rate environment, you should consider getting a mortgage if you can. On an historic basis, mortgages have rarely been as cheap, and it would give you a lot more flexibility. Generally speaking, mortgage debt is the best debt a consumer can get, but it works best if you take it out when you buy the house.

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Originally Posted by DetroitPlanner

900 sq ft homes for $130k equate to a much much nicer [[stable high income) neighborhood in the reqion. You may have a hard time finding these however unless they come up under forecloseure then you may need to sink lots of additional dollars into them.

In general the region has leveled off. This does not mean that the rise in values will be across the board. More desirable neighborhoods are starting to show recovery but others are still falling.

Should you choose to buy pick wisely. Its still very much a crap shoot.

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$130K for only 900 SQ FT would seem very expensive to me so of course it would be in a very high end neighborhood. However, I highly doubt such a home that small would be in such a neighborhood. However, I do not need to live in a really nice area. But at the same time, it has to be a reasonably safe and ok area. Like, what is the definition of more desirable neighborhoods. Are those any neighborhoods any neighborhood that is relatively safe and reasonable regardless of the working class income and schools? Or are the more desirable neighborhoods only the ones with great schools, higher income earners, and beautiful views? Like for instrance, are there neighborhoods that are less desirable, but still have safe air to breathe and relatively low crime rate, but maybe they are less desirable only because of the schools and working class?

And also, when you say that the more desirable neighborhoods are starting to show recovery, does that mean prices are going to start rising fast and those neighborhoods will be back to 2004-2005 level prices within only a couple of years. Or is it just that they are stabilizing and prices are starting to rise, but only very slowly [[like 1-3% per year) and it will still take at least 15 years to get back to 2004-2005 prices in those neighborhoods in nominal dollar terms?

What is your opinion on all of that?

Tell us what cities you're interested in and we can give some more detailed information. For all we know, you may be looking at Commerce.

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Originally Posted by Wolverine607

$130K for only 900 SQ FT would seem very expensive to me so of course it would be in a very high end neighborhood. However, I highly doubt such a home that small would be in such a neighborhood. However, I do not need to live in a really nice area. But at the same time, it has to be a reasonably safe and ok area. Like, what is the definition of more desirable neighborhoods. Are those any neighborhoods any neighborhood that is relatively safe and reasonable regardless of the working class income and schools? Or are the more desirable neighborhoods only the ones with great schools, higher income earners, and beautiful views? Like for instrance, are there neighborhoods that are less desirable, but still have safe air to breathe and relatively low crime rate, but maybe they are less desirable only because of the schools and working class?

And also, when you say that the more desirable neighborhoods are starting to show recovery, does that mean prices are going to start rising fast and those neighborhoods will be back to 2004-2005 level prices within only a couple of years. Or is it just that they are stabilizing and prices are starting to rise, but only very slowly [[like 1-3% per year) and it will still take at least 15 years to get back to 2004-2005 prices in those neighborhoods in nominal dollar terms?

What is your opinion on all of that?

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You're correct, to a large part there are not many 900 sq ft single family homes in places like Grosse Pointe or Birmingham. However there are condos in that size and there are areas quite close where you can find them.

It is up to you to determine what is a desirable neighborhood. Therefore some desirable neighborhoods are already shown slight recoveries.

1-3% a year is not a bad return rate on something you are going to be in for 10-20 years and that will reduce what you have to outlay and increase your schedule A deductions. However there is still a risk.


For example, 12 years ago I bought a vacation home near a lake in Northern Michigan figuring that I could hold onto it, and sell it when all the boomers started to retire for a tidy profit. Many variables changed over that time period that changed the desirability have having the home. These include the cost of gasoline, the large reduction in workforces down in industrial Michigan, the realization that many boomers acted like they had money but really did not so when they lost work, they lost thier primary residences. Now I am stuck with a home I use probably 10 nights a year that I can't sell even if I dropped it to half of what I paid for it.

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Originally Posted by DetroitPlanner

You're correct, to a large part there are not many 900 sq ft single family homes in places like Grosse Pointe or Birmingham. However there are condos in that size and there are areas quite close where you can find them.

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Not sure about the Pointes, but 900 square foot bungalows definitely exist in that price range in Birmingham. If they do exist in the Pointes, I bet you they’re even cheaper.
In Birmingham, the only way such a home would be out of that range is if it’s an obvious teardown on a street of bigfoot homes [[so west of Woodward and walking distance to downtown).

Glad to see you use "Metro-Detroit" because there are not many single family brick bungalow homes built in Detroit in the last 30 years.

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Originally Posted by SteveJ

I don't agree with Novak. Renting is a suckers bet in Michigan. For example, you can buy a decent home in Ferndale for 75k. You rent the same house, the landlord wants 1000 a month and after 6 years, you're almost even.

You take the 100,000, invest it in a retirement plan, you end up with $115k if you're lucky and with inflation, you're at below $100k. I know plenty of people that got burned with their 401k. The sure bet is a roof of your head that is paid for. Even if you were to lose your job, you can survive and get by. The worst thing is having a mortgage every month. The psychological benefits are enormous.

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What he said.

If you don't have a house payment retirement is 10x easier.

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Originally Posted by SteveJ

Tell us what cities you're interested in and we can give some more detailed information. For all we know, you may be looking at Commerce.

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The cities I am interested in are Madison Heights, Clawson Troy, Rochester Hills, Sterling Heights, Shelby Township, Auburn Hills, Lake Orion, Royal Oak, Ferndale, Clinton Township. Frazier, Clarkston, Oxford. There may be more, but basiclaly any area within 15 miles of Auburn Road and South BLVD where the bridge over M59 goes because that is where my parents live and I currently live right now. And I think all of those areas lie within 15 miles of my said location.

I scratched Pontiac, Lincoln Park, and Hazel Park off the list because I heard those are bad areas with lots of crime and severely run down neighborhoods. I also scratched Bloomfield, West Bloomfield and Birmingham off the list because homes are much more expensive in those areas because they are so luxurious from what I have heard.

My definition of a desirable neighborhood is one in which there is relatively low crime, air is clean meaning it is not near an oil refinery nor any radon gas. Neighbors do not have to be perfect, but they cannot be undesirable. Schools do not matter at all as I never intend to get married nor have children.

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Originally Posted by Wolverine607

. I also scratched Bloomfield, West Bloomfield and Birmingham off the list because homes are much more expensive in those areas because they are so luxurious from what I have heard.

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These communities are hardly uniformly "luxurious". There are 40k condos in Bloomfield Township and rundown bungalows in Birmingham [[east of Woodward) for not a ton more.

There are, of course, fancy neighborhoods, but they aren't the bulk of the area. I don't think you'll be buying on Vaughn Rd.

BTW, the cities you list are wildly disparate. Madison Heights, for example, is dirt-cheap, and you're price range is well above the market.

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Originally Posted by Bham1982

These communities are hardly uniformly "luxurious". There are 40k condos in Bloomfield Township and rundown bungalows in Birmingham [[east of Woodward) for not a ton more.

There are, of course, fancy neighborhoods, but they aren't the bulk of the area. I don't think you'll be buying on Vaughn Rd.

BTW, the cities you list are wildly disparate. Madison Heights, for example, is dirt-cheap, and you're price range is well above the market.

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Thanks for your advice. Just a quick question. My grandma had lived in Madison Heights before she passed on and it seems like a fine area. How come a home of the same size and same condition in Madison Heights costs much less than a comparable home in Troy or Rochester Hills. I know school systems are much better in Troy and Rochester Hills. But are there any other reasons as well that I should be aware of?