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

[Detroitnerd]

Sure prices are rising a bit. The banks are deliberately dragging their feet on foreclosures, as well as keeping a massive shadow inventory off the market. They want you to feel secure that the bottom has finally dropped out of the market, so they are rigging the system so that prices don't tank and they get top dollar for the 30-odd months' worth of supply they have, instead of dumping them on the market and letting that magical "free market" do its work.

See http://www.counterpunch.org/2012/07/...rket-in-ruins/

"The decrease in nationwide inventory is an ongoing trend. Keeping supply constricted has clearly helped with pushing prices higher as demand is now competing for a smaller number of homes. … The recent moves in the housing market are spurred on by record low interest rates and constrained inventory. Yet this should not be mistaken with an improving economy that is pushing prices higher which would be healthier."Inventory is back to levels last seen in 2005. The strategy of leaking out inventory in a controlled fashion while leveraging low mortgage rates seems to be the ongoing plan….the market is like a Hollywood set and is fake."

[Detroitnerd]

http://www.freep.com/article/2012071...text|FRONTPAGE

“We have more demand than inventory in Oakland County,” said Darralyn Bowers, owner of Bowers & Associates in Southfield. “We have only good things to report this month.”

This is the kind of happy-talk cheerleading-style business reporting that does nobody any good. It's basically an ad urging people to please buy homes [[even down to the photo, and, frankly, are things so bad that people without a sense of photo composition are snapping "photos" on cell phones?). Really? You're telling me that Oakland County has more demand than homes on the market? That is patently absurd on its face! This is just a freakin' press release for the banks, brokers and Realtors, and nothing more. Not that you're going to have anybody in Oakland County finding fault with it. It's what they want to believe! This isn't journalism. It's not even blogging. It's a con artist's pitch. ...

[pseudo]

I plan on paying cash for it as I hate any form of debt.

I don't understand this. Debt is a tool. If you borrow from someone at 5% and lend to me at 10%, would you still hate debt? Because more or less what will happen if you take out a mortgage and put your money in a mutual fund. As others have mentioned, mortgage rate are at record low, and your return will almost certainly FAR exceed whatever you might save in financing and interest costs on your mortgage as well as any appreciation in the price of your house. And you'll be liquid.

But all that is assuming you even buy a house. If you are young enough to be comfortable living with your parents and are sitting on over $100k, do yourself two favors: rent a small apartment and start investing your money. Right now.

But don't just follow my advice. Look at some mutual funds and their rate of returns. Find out what kind of interest rate you'll qualify for. I am sure you'll conclude that using your money to make you more money makes more fiscal sense than locking it all into a house.

[Wolverine607]

Certainly reaidng the article in the Detroit FreePress and News where there are statements of 25% increase makes me shake a bit.

Although how accurate is RealComp? Is the data in these transactions just a small sample size where probably much nicer homes in much nicer areas were included in the transactions? Or are prices really starting to run away? The increase in numbers for Oakland County id frightening because the median is already above my price range according to the report?

Is the report just something to shrug off as nothing, or is there any significant merit to it about the overall market direction and the speed of it, even if it may be off quite a bit?

I know there were similar reports like this the last few months from RealComp for year over year sales price increases being double digits, but this one seems a little scarier?

[Wolverine607]

I don't understand this. Debt is a tool. If you borrow from someone at 5% and lend to me at 10%, would you still hate debt? Because more or less what will happen if you take out a mortgage and put your money in a mutual fund. As others have mentioned, mortgage rate are at record low, and your return will almost certainly FAR exceed whatever you might save in financing and interest costs on your mortgage as well as any appreciation in the price of your house. And you'll be liquid.

But all that is assuming you even buy a house. If you are young enough to be comfortable living with your parents and are sitting on over $100k, do yourself two favors: rent a small apartment and start investing your money. Right now.

But don't just follow my advice. Look at some mutual funds and their rate of returns. Find out what kind of interest rate you'll qualify for. I am sure you'll conclude that using your money to make you more money makes more fiscal sense than locking it all into a house.

I will manage my money how I want. I hate debt period. No ifs and or buts about it. I wnat to own my home free and clear right when I move into it. Also mutual funds can be very dangerous. The stock market is high right now and there is no guarantee of making a good ROI in it. If it goes down, you will get crushed.

[pseudo]

I will manage my money how I want. I hate debt period. No ifs and or buts about it. I wnat to own my home free and clear right when I move into it. Also mutual funds can be very dangerous. The stock market is high right now and there is no guarantee of making a good ROI in it. If it goes down, you will get crushed.

No disrespect intended; I didn't mean to come off like I was telling you what to do. I just wanted to emphasize that if your goal is to maximize your $, debt is sometimes a reasonable option. You're right there there are risks in mutual funds, but some are more risky than others. With mortgage rates so low, I would imagine that even funds that are very bond heavy and therefore very low risk would out put you in a better financial position than paying cash for the house.

If your ultimate goal is to completely eliminate debt irrespective of the likely financial benefit of other options, then it sounds like you have your plan. Best of luck.

[Bham1982]

Certainly reaidng the article in the Detroit FreePress and News where there are statements of 25% increase makes me shake a bit.

The real estate sections in the local papers are just broker advertising. The articles can't be taken at face value.

The reality is that median prices have dropped this year. The best tracker of local conditions is Case-Shiller.

[Cincinnati_Kid]

And I don't know where they think the supply is low and demand high. I see empty homes everywhere in the metro area.

[Detroitnerd]

And I don't know where they think the supply is low and demand high. I see empty homes everywhere in the metro area.

Nobody should believe an article like that, least of all an editor ...

[DetroiterOnTheWestCoast]

My only suggestion would be to actively look at properties, and get a really good feel of what you want and where you want it, even if you are not totally ready to buy. Otherwise you won't have done enough searching when you decide you want to buy. However, you might find "the" house you want before you are ready, and then you will be faced with whether or not to proceed. That happened to me, but it just meant I bought sooner than I had planned and was happy with it.

These days, timing the real estate market is like timing the stock market when its rocky and falling. You're not very likely to buy right at the bottom. While not an expert, I can't imagine prices falling much further, although I could see them bumping along without rising. Everything is already so low. I'd be afraid of the herd mentality with real estate, and a lot of people deciding to jump into the market if they perceive that the bottom has been hit.
I understand your distain for debt, but rather than buying outright why not compromise - make a big down payment and get a small mortgage rather than none?

[Wolverine607]

And I don't know where they think the supply is low and demand high. I see empty homes everywhere in the metro area.

Are you talking Metro Detroit area? I only ask because of your username which leads me to believe you are in Cincinnati? Or were you just originally from there and moved here?

And are these empty homes in decent reasonably safe [[not high end upper areas like Troy and Rochester Hills) areas like Sterling Heights, Madison Heights, Auburn Hills, Waterford, and Clawson?

[Bham1982]

And are these empty homes in decent reasonably safe [[not high end upper areas like Troy and Rochester Hills) areas like Sterling Heights, Madison Heights, Auburn Hills, Waterford, and Clawson?

Yes, of course there are tons of empty houses.

But you don't have to go to Waterford. You can find tons of empty homes in Bloomfield. You can buy a big four bedroom colonial in decent shape in parts of Bloomfield Township for 250k. That's pretty damn cheap compared to 10 years ago.

[Hermod]

Nobody should believe an article like that, least of all an editor ...

Ever since the 1960s, I never met a real estate agent who didn't insist that "NOW" was the perfect time to buy a house and that "LATER" was a terrible time to buy a house.

[Cincinnati_Kid]

Ever since the 1960s, I never met a real estate agent who didn't insist that "NOW" was the perfect time to buy a house and that "LATER" was a terrible time to buy a house.

Right, just like a car salesman.

[Cincinnati_Kid]

Are you talking Metro Detroit area? I only ask because of your username which leads me to believe you are in Cincinnati? Or were you just originally from there and moved here?

And are these empty homes in decent reasonably safe [[not high end upper areas like Troy and Rochester Hills) areas like Sterling Heights, Madison Heights, Auburn Hills, Waterford, and Clawson?

They're everywhere in metro Detroit. Or haven't you noticed? Some look to be inhabited, well maintained, grass cut, lights on, a few have no real estate signs, but they're empty. I suppose it's up to the realtor who has the listing as far as maintenance is concerned. And no, I'm not from Cincy, just my handle.

[Király]

Ever since the 1960s, I never met a real estate agent who didn't insist that "NOW" was the perfect time to buy a house and that "LATER" was a terrible time to buy a house.

Exactly. Asking a banker or real estate agent if it's a good idea to buy a house is like asking a Ford dealer if it's a good idea to buy a Ford.

[Wolverine607]

The FED is printing more money with QE3: http://www.cnbc.com/id/49018964

Is this something I need to be concerned with and could this cause home prices to rise really fast in the next year?

Bernanke is a scumbag and dangerous FED chairman man who needs to be evicted ASAP!! He seems bent on destroying the value of the dollar until hyper inflation takes off!! This news makes me sweat a bit.

Back on topic though. Will this have any significant impact on home prices in the area in just 1 year?

[Bham1982]

Back on topic though. Will this have any significant impact on home prices in the area in just 1 year?

No one can predict future home prices with certainty.

That said, it's highly unlikely home prices will significantly increase in the near term, at least locally. Don't rush to buy unless you have to.

[Wolverine607]

Case Shiller according to many replies is supposed to be the most reliable source for home prices.

Well the month over month for the Detroit area is a bit frightening. If it was year over year, it wouldn't be concerning, but month over month for both the seasonally adjusted and non-seasonally adjusted are a bit scary.

Its already past the low 70s!!! And someone had mentioned that it only hit the low 70s recently in the Summer of 2010 or so.

http://www.standardandpoors.com/indi...idff--p-us----

Click on the link for July 2012 for both seasonally adjusted and non-seasonally adjusted. The non-seasonal adjusted jump in just 2 months [[May to July 2012) is scary. If it continued, that would be a massive year over yra increase, and I still have 11 months to go.

@BHAM1982:

Being a serial RE lurker, you study the case shiller closely and stated that the reality is prices were down Y0Y in the region. I know that was older data a few months ago, but what is your opinion of the most recent Case Shiller data through July 2012?

I mean month over month, that is a scary jump!! And you believe it is highly unlikely that prices will rise much if at all in the near term [[and I would think 11 months qualifies as short term in regards to real estate)? What is your opinion now after seeing the latest Case Shiller data, especially month over month.

Do you still feel it is highly unlikely that home prices will go up much if at all in the next year? Or is the recent data showing an alarming uptick that I need to watch out for?

Other opinions greatly appreciated as well.

[Bham1982]

@BHAM1982:

Being a serial RE lurker, you study the case shiller closely and stated that the reality is prices were down Y0Y in the region. I know that was older data a few months ago, but what is your opinion of the most recent Case Shiller data through July 2012?

Prices are still down this year. If you bought at the beginning of the year, you would be in the hole.

I wouldn't get so hung up on the month-to-month trends [[which are highly influenced by seasonality and the % of sales which are foreclosures) and maybe concentrate on the longer term data.

If you want to buy, then buy. Prices are indeed low, and probably won't get much lower. But don't buy because you think there's going to be some giant spike in real estate prices. Isn't gonna happen, given declining local population, tight credit, middling economy, and rising interest rates.

[mwilbert]

1) Don't worry about monthly fluctuations.

2) If you aren't planning to wait more than a couple of years to buy, I don't think you are likely to see serious price increases.

3) You probably won't see any for a long time after that either, but the further out you go, the more uncertain things get.

[Johnnny5]

Wolverine, I have not read this entire thread, but from your initial post you stated that you were still living at home. If you're comfortable with your living situation you need to balance the amount you are currently saving against any short term appreciation in housing prices.

If you had purchased a 100K home one year ago today and it had miraculously appreciated in value by 10% you most likely would still not be ahead. That 10K would probably not cover the property taxes, repairs, utilities, lost interest/gains that you would have incurred by keeping your money invested elsewhere and other expenses of being a homeowner. And given the more likely scenarios that the home may not have gained any value, only slightly appreciated or even depreciated it looks even worse on a strictly dollar and cents basis. Of course it would be your home and there are many advantages of living on your own instead of with mom and dad, but honestly financial gains is not one of them.

Personally, I don't see any risk of major appreciation in real estate prices unless it's tied to major increases in inflation and if that occurs you are really going to be missing out by paying cash for a home as opposed to financing it.
You'll be losing the tax deduction for the interest, losing the chance of inflation erasing your debt while at the same time it increases the value of your investments and you'll be losing the advantages of having easily accessible funds to draw on if necessary. IMO given your age and savings it's a great time to be going into debt on a home that you will be living in! Save the cash and use it to max out your 401k every year and you'll be way further ahead in the long run.

[mwilbert]

Wolverine, I have not read this entire thread, but from your initial post you stated that you were still living at home. If you're comfortable with your living situation you need to balance the amount you are currently saving against any short term appreciation in housing prices.

If you had purchased a 100K home one year ago today and it had miraculously appreciated in value by 10% you most likely would still not be ahead. That 10K would probably not cover the property taxes, repairs, utilities, lost interest/gains that you would have incurred by keeping your money invested elsewhere and other expenses of being a homeowner. And given the more likely scenarios that the home may not have gained any value, only slightly appreciated or even depreciated it looks even worse on a strictly dollar and cents basis. Of course it would be your home and there are many advantages of living on your own instead of with mom and dad, but honestly financial gains is not one of them.

Personally, I don't see any risk of major appreciation in real estate prices unless it's tied to major increases in inflation and if that occurs you are really going to be missing out by paying cash for a home as opposed to financing it.
You'll be losing the tax deduction for the interest, losing the chance of inflation erasing your debt while at the same time it increases the value of your investments and you'll be losing the advantages of having easily accessible funds to draw on if necessary. IMO given your age and savings it's a great time to be going into debt on a home that you will be living in! Save the cash and use it to max out your 401k every year and you'll be way further ahead in the long run.

Economically, you are right, especially for someone who believes [[almost certainly incorrectly) that current Fed policy is going to trigger high inflation. However, it is clear from his previous posts that he expects to get a psychological benefit from being debt-free. I can't argue against that--I like owning free and clear too.

[Wolverine607]

Economically, you are right, especially for someone who believes [[almost certainly incorrectly) that current Fed policy is going to trigger high inflation. However, it is clear from his previous posts that he expects to get a psychological benefit from being debt-free. I can't argue against that--I like owning free and clear too.

Who is that someone you are referring to? Is that yourself or me?

When you say someone who believes [[almost certainly incorrectly) that the FED's policy is going to trigger high inflation, are you saying you feel that way or you think I feel that way.

And what is your opinion? Do you feel that the FED's current policy will cause runaway inflation? And why do you put almost certainly incorrectly in parenthesis? What does that mean?


I certainly worry about the Fed's current policy, and feel it could trigger runaway inflation, but it seems unlikely to happen in the next year or 2 anyways, but I still do worry about it What do you think?

[mwilbert]

Who is that someone you are referring to? Is that yourself or me?

When you say someone who believes [[almost certainly incorrectly) that the FED's policy is going to trigger high inflation, are you saying you feel that way or you think I feel that way.

And what is your opinion? Do you feel that the FED's current policy will cause runaway inflation? And why do you put almost certainly incorrectly in parenthesis? What does that mean?


I certainly worry about the Fed's current policy, and feel it could trigger runaway inflation, but it seems unlikely to happen in the next year or 2 anyways, but I still do worry about it What do you think?

I can clarify what I meant. It appeared to me from your previous comments that you thought that current Fed policies were likely to lead to high inflation. I don't think that is at all likely, although I hope they will cause inflation to rise a bit, as that would be highly desirable in the current economic situation.

However, if you think inflation is likely to be substantially higher than it is now, financially speaking you should definitely borrow the money to buy your house, as a previous commenter suggested. I also have the impression that you have non-economic reasons for not wanting a mortgage, and I can understand that.