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

[Bham1982]

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.

Schools, taxes, and reputation, mostly.

Madison Heights has two school districts, both relatively low performing, has high taxes, and an overall less than stellar reputation.

[SteveJ]

Sterling Hts. You have all the requirements. Its clean, they have tons of brick ranches, low taxes, low water rates, Utica Schools.

[BrushStart]

I've been looking to buy in a few specific areas for a several months now. My search has concentrated on the city and a few of the inner ring burbs. The options are fairly wide open for anyone who is modestly employed. What I find intimidating, however, is the number of foreclosures and short sales on the market in Metro Detroit. They actually make up the majority of all the listings. These folks are all under water and are going to take bath on their homes [[pun intended).

I mean, I've toured beautiful, fully updated homes that sold for more than double just a few years ago from what they're currently asking. If values haven't yet reached the bottom, [[and I believe they haven't) we are in store for another major decline in prices. A recent court case involving mortgage lenders is going to result in another 1 million foreclosures being dumped on the market in 2012. Another 6 million foreclosures is expected to hit the market over the next 5 years. This is going to cause property values to stay very low, if not tumble further.

In 2-3 years, I expect you will be able to live virtually anywhere in Metro Detroit on the amount of money you are talking about. The entire region is really open to anyone these days, with the exception of a few small enclaves.

[SteveJ]

The neighborhoods on the woodward corridor in Oakland County have actually gone up in price lately. The pickings are slim. The real fun was a couple years ago where their were some nice homes and deals to be had and thats when I bought my home. Check this out..

http://www.realestateone.com/homes/2...l_Oak-MI-48073

$180k asking price for a 1000 sq ft house.

I was looking at homes in the 190-230k range and you could find much better deals than the above. I also noticed that homes in my neighborhood are sold within 30 days. Now if you are talking the east side inner ring suburbs like eastpointe etc.. then you are correct.

[Wolverine607]

The neighborhoods on the woodward corridor in Oakland County have actually gone up in price lately. The pickings are slim. The real fun was a couple years ago where their were some nice homes and deals to be had and thats when I bought my home. Check this out..

http://www.realestateone.com/homes/2...l_Oak-MI-48073

$180k asking price for a 1000 sq ft house.

I was looking at homes in the 190-230k range and you could find much better deals than the above. I also noticed that homes in my neighborhood are sold within 30 days. Now if you are talking the east side inner ring suburbs like eastpointe etc.. then you are correct.

When you say they have gone up in price on the Woodward corridor of Oakland county, has it been a significant increase, or just a little bit of an increase? And is the Woodward corridor of Oakland County a prestigious area with lots of fancy prestigious neighborhoods that has always been much more expensive than most other areas?

If prices have gone up significantly in that area, what is the reason in your opinion and could your foresee it spreading throughout Oakland County?

[Wolverine607]

I have done some more research on the Metro Detroit housing market and I have a few more questions.

Did the housing bubble in Metro Detroit begin much earlier than it did in most other areas? The reason I ask is based on my research on realtor.com, it seems selling home prices back in 2000 were much higher than in most other Metro areas. And in most Metro area,s home prices are back at 2000-2001 levels, where as in Metro Detroit, I heard they are way below 2000 levels.

That concern worries me that maybe prices in the area could be more ripe for a fast rebound because could they be significantly undervalued? Or is that not the case. Like I think that when starter homes in good shape from 1000-1400 square feet in a decent neighborhood on a small lot were going for $170K or more, that was out of control high prices IMHO. Such homes should be worth $100 to $140K IMHO, unless such homes are in a very prestigious or very upper class neighborhood.

And is it true that back from like 1999-2005, it would have been extremely hard to find a decent starter home in good shape from 1000-1400 square feet for much less than $170K back even in 2000 here in Metro Detroit? Where as in areas like Phoenix, Cleveland, Pittsburgh, Syracuse, Buffalo, and many areas in the Northern part of Michigan back in 2000-2001, you could get a nice starter home for around $100K and sometimes for even less based on research I have done.

I have only really been following the housing market for the last 3 years.

SO does anyone who probably;y is much older than me and has followed real estate in this area, know much about our housinmg market for the last 20 years. Like what happened to prices from 1995-2000 and from 2000-2006. And how was it compared to most other metro areas.


I also remember reading that home prices here fell to 1994-1995 levels where as in most other metro areas home prices are back to 2001 levels. Does that mean they are significantly undervalued here based on market fundamentals, or was it that they were just so overvalued in the mid to late 1990s and early to mid 2000s and are now at fair market value unless someone gets a nice home short sale/foreclosure in a good area in good condition for like $50k to $60K which I have seen listed on realtor.com. And the reason I am asking if our market was much more expensive and had a bubble much earlier is because when I look at homes, on a few of them [[although not many) they list the sales history and the price in almost all cases was for $160K or more for starter homes in the year 2000 and one I think even in 1999.

[Don K]

My impression is that [[in general, with exceptions in certain areas) we never had much of a bubble in the Detroit area [[at least not since the late 70's). We did, however, have one hell of a collapse in the 00's because people were taking buyouts or early retirements or getting laid off, and way more people were moving out of the area than were moving in. Now that people have gotten past the absolute panic [["OMG, I might be next"), prices seem to have recovered somewhat, but [[with exceptions such as Birmingham or Huntington Woods) aren't unreasonable for what you get. Having said that, I'm not seeing anything fundamental that would drive prices dramatically higher in the near future, outside of certain fashionable areas.

But then, if I could forecast these things I'd probably be living on an estate someplace in the Caribbean or South Pacific, so take this for what it's worth

[Wolverine607]

My impression is that [[in general, with exceptions in certain areas) we never had much of a bubble in the Detroit area [[at least not since the late 70's). We did, however, have one hell of a collapse in the 00's because people were taking buyouts or early retirements or getting laid off, and way more people were moving out of the area than were moving in. Now that people have gotten past the absolute panic [["OMG, I might be next"), prices seem to have recovered somewhat, but [[with exceptions such as Birmingham or Huntington Woods) aren't unreasonable for what you get. Having said that, I'm not seeing anything fundamental that would drive prices dramatically higher in the near future, outside of certain fashionable areas.

But then, if I could forecast these things I'd probably be living on an estate someplace in the Caribbean or South Pacific, so take this for what it's worth

You do not think we ever had much of a bubble. How come home prices even if they have recovered somewhat are still so much lower than they were in 2004-2005 and even in 2000.

And also, would it have been possible to buy good starter home say 900-1100 SQ FT with a garage in move in or close to move in condition in an ok/decent neighborhood back in the year 2000-2001 in the Metro Detroit area for $100K to $115K. And would it have been possible top find a home meeting the criteria in that price range in the Metro Detroit area in 2004-2005 when home prices nationally at least seemed to peak?

[mwilbert]

You do not think we ever had much of a bubble. How come home prices even if they have recovered somewhat are still so much lower than they were in 2004-2005 and even in 2000.

Because you can have a collapse without having had a bubble. Detroit had a fairly gradual rise [[certainly by US standards) and then a pretty severe drop:

http://www.wolframalpha.com/input/?i...+index+detroit

[Bham1982]

The neighborhoods on the woodward corridor in Oakland County have actually gone up in price lately. The pickings are slim. The real fun was a couple years ago where their were some nice homes and deals to be had and thats when I bought my home.

I live along the Woodward Corridor, and regularly watch home sales trends. I don't see any local improvement.

Yes, prices have stabilized, but prices are no higher than a year ago and a bit lower than two years ago.

And asking prices are useless. Check actual closings, and you'll see prices haven't budged.

[DetroitPlanner]

My impression is that [[in general, with exceptions in certain areas) we never had much of a bubble in the Detroit area [[at least not since the late 70's). We did, however, have one hell of a collapse in the 00's because people were taking buyouts or early retirements or getting laid off, and way more people were moving out of the area than were moving in. Now that people have gotten past the absolute panic [["OMG, I might be next"), prices seem to have recovered somewhat, but [[with exceptions such as Birmingham or Huntington Woods) aren't unreasonable for what you get. Having said that, I'm not seeing anything fundamental that would drive prices dramatically higher in the near future, outside of certain fashionable areas.

But then, if I could forecast these things I'd probably be living on an estate someplace in the Caribbean or South Pacific, so take this for what it's worth

Excellent point. In order for us to see big increases supply must be closer to demand. The issue with our market is too much supply, not much demand.

[Wolverine607]

And also, would it have been possible to buy good starter home say 900-1100 SQ FT with a garage in move in or close to move in condition in an ok/decent neighborhood back in the year 2000-2001 in the Metro Detroit area for $100K to $115K. And would it have been possible top find a home meeting the criteria in that price range in the Metro Detroit area in 2004-2005 when home prices nationally at least seemed to peak?

Does anyone have an answer to this particular question above. I know it has no relevance to today's market, but as a reference point, I would ;like to know how the housing market was here back then. Because if prices are as low as they were much longer ago than most other areas, that makes me more worried we could be do for a rebound compared to other areas.

I have read things that prices are like 30% below 2000 levels where as in other metro areas, the worst is only like 5% or so below 2000 levels which would be Cleveland and Las Vegas. And yet, prices in Metro Detroit are similar now to how they are in Cleveland Metro area. So they must have been much higher in the year 2000 than they were in Cleveland if news reports are true.

If prices were reasonable in 2000 in Metro Detroit meaning it would not have been hard to find a starter home in good shape in an ok/decent neighborhood for $115K, that makes me feel much more comfortable than where as if they were much higher than that in 2000 and prices are back to mid 1990s levels. Because it would make sense that the further back price level year we are, the sooner or faster the recovery would become in an area such as Metro Detroit especially as the dollar supposedly loses value over time.

It may not matter either way what year price levels are at, but just wanted to know how the housing market was in those years for the price range of $100K to $130K as a reference point from anyone very experienced with real estate for a long time in this area.

[Packman41]

At Wolverine:

Your research would not be complete without studying the Case Shiller Housing Index. Or search on DYes and see some fo my prior comments about Case Shiller.

The six county metro area has the worst appreciation in home values in the study. Actually, since 2000 our home prices have DECLINED 28% since 2000. Meanwhile, the Washington DC area is UP about 78% and the average of the 20 largest metro areas is UP 40%.

IMHO housing will be flat for 5 to 7 years. There won't be enough appreciation to pay the closing cost and broker fees. Your future net sales price will be less than the current purchase price.

One word: RENT

[Wolverine607]

At Wolverine:

Your research would not be complete without studying the Case Shiller Housing Index. Or search on DYes and see some fo my prior comments about Case Shiller.

The six county metro area has the worst appreciation in home values in the study. Actually, since 2000 our home prices have DECLINED 28% since 2000. Meanwhile, the Washington DC area is UP about 78% and the average of the 20 largest metro areas is UP 40%.

IMHO housing will be flat for 5 to 7 years. There won't be enough appreciation to pay the closing cost and broker fees. Your future net sales price will be less than the current purchase price.

One word: RENT

I am intending to pay cash for the house, so I am not worried about closing costs and plan to have plenty of money left over when I am done.

Your honest opinion is one I hope comes true as I want housing to be flat for 5-7 years and in fact, I think it may very well be true. I just am paranoid and when I here any talk of prices going up, I get a little nervous.

Now I come back o this thread, because today, I read some articles that said prices went up like 18% or something in the Metro Detroit area from March 2011 to March 2012. Now 18% is a big number and makes me a bit nervous that it could become a trend of them increasing that much per year?

http://www.freep.com/article/2012041...me-sales-March

http://www.mlive.com/business/detroi...ices_jump.html

What is your opinion on these articles. Do you think prices are starting to skyrocket back to 2004-2005 levels, or is the info misleading and prices will only gradually rise or even be dead flat the next couple of years?

And also, I know no one knows for sure, but if you had to take a guess, when do you think home prices will be back at 2000 levels in the region in general and how about 2004-2005 close to peak prices? I ask not because I want it to happen, in act if I had my way, I would hope never in my lifetime, but so I can get a general sense to how far we are from prices being back to what they were.

If I had to take a guess, I would say we will be back at 2000 level prices in 2020 and 2004-2005 level prices in 2024-2025 in nominal dollar terms. I would hope it would take at least that long if not even longer. What do you think

And also, I know someone said that some more desirable neighborhoods have shown slight recovery. Well how would you define slight recovery. Well, when I think of slight, it means very little. So technically, wouldn't slight recovery mean just like 1-3% appreciation per year which would take at least 10 years to get back to where we were. I am not worried at all about a slight up tick in prices such as 1-3%.

I would only worry about big increases in the next couple of years and was not worried until I read those 2 articles. Let me know what you think of those 2 articles and if there is an legitimate reason to be concerned. Because if there is, I will seriously consider buying a house and renting it out to lock in today's price and then move into it when the time comes I am ready.

[Bham1982]

II would only worry about big increases in the next couple of years and was not worried until I read those 2 articles. Let me know what you think of those 2 articles and if there is an legitimate reason to be concerned. Because if there is, I will seriously consider buying a house and renting it out to lock in today's price and then move into it when the time comes I am ready.

Home prices aren't increasing, at least not in Metro Detroit.

The reason you have those wacky swings in monthly comparisons is because of the foreclosed homes. Various changes in HUD policy have led to high variability of foreclosures, so you will see some some wild swings [[basically, the higher the proportion of sold foreclosed homes, the lower the median price).

So, I'm guessing that something happened last year where there was a spike in foreclosure sales in the comparison month.

If you compare the same data apples-to-apples, I think you'll see that home prices are basically the same as last year, or a little lower.

And if you want to wait a bit to buy, you should be fine. Home prices aren't going to rapidly increase anytime soon in Metro Detroit. There may be a small increase if the economy continues to recover, but nothing that would compel someone to buy in order to save. Keep in mind that interest rates won't rise anytime soon.

[DetroitPlanner]

The reason you have those wacky swings in monthly comparisons is because of the foreclosed homes. Various changes in HUD policy have led to high variability of foreclosures, so you will see some some wild swings [[basically, the higher the proportion of sold foreclosed homes, the lower the median price).

So, I'm guessing that something happened last year where there was a spike in foreclosure sales in the comparison month.

I would agree with this. There are a ton of houses that were foreclosed on, it are these homes that are getting active. After all, these were way underproced even for the market for several years, they are still not to market. Based upon your previous posts you ae okay unless you think you should be able to get a 2,500 square foot house that needs no work for $120k. $120k homes in good condition and in good neighborhoods are not seeing these kinds of increases and it is doubtful that they will until supply is reduced closer to demand.

Unless there is some sort of wholesale change in the regional economy about to happen that floods metro Detroit with new jobs, I don't see it being an issue.

Incidentally if you are sitting on as much cash as you seem to indicate, why not buy now, take out a 5 to 10 year mortgage or make extra payments and pay off a 15 year early? That way you can lock in, however if you lock in and the price goes down you seem to be the type that would freak out about that too.

[EASTSIDE CAT 67-83]

"Schools do not matter at all as I never intend to get married nor have children".[/QUOTE]

Brother
Unless you know something we don't know...you just jinxed yourself...jus sayin

I might add I applaude you and wish I had your vision when I was a strapping young single lad ready to take on the world. Although I left home at 17 my first digs were provided by Uncle Sam [[3 hots and a cot kinda gig) and I was a ripe old 34 when I finally took the plunge into home ownership. Everyone has provided some great advice here, take it all in and give it time to digest. Good luck with that 130k cash bag goal your working on.

[Parkguy]

First, everyone, let Wolverine decide if he likes a neighborhood, or whether a house exists for him in an area he likes. A real estate agent can tell him if there is a house available in his price range.

A mortgage interest deduction is great for income tax purposes, and the same goes for a property tax deduction. Everyone who listed extra costs for insurance and upkeep are absolutely right. My mortgages are paid off, so it is nice not having a monthly payment, but I still have to plan for twice-yearly property tax bills. That adds up to several hundred dollars per month. If you buy a house for $100,000 [[for example), it would be taxed at $50,000. If the place you pick has a millage rate of 40 mils, that would mean taxes of $40 per $1000 in taxed value, or $2000 per year, or $166 per month. If the rate is 50 mils, then it would be $2500 per year, and so on. Millage rates are different from town to town. Your real estate agent will tell you about the rates for each house-- but the tax value of the house is reset when it sells, usually based on the selling price. Sometimes you have to fight with the city about where the value is set.

Since you are young, what are the chances that you will want to leave the region in a few years? A mortgage might limit your ability to move. If you do an analysis of your finances and find that your monthly out-of-pocket costs are roughly the same renting vs. buying, then you'll have to weigh all of the other factors. Talk to relatives, get advice from financial advisers, and read.

As for rising prices, that is anyone's guess. Experts predict slow growth in this region for the next decade, but that is still a guess. One thing that I wonder about: with thousands of homes taken out of commission by abandonment and destruction in the city and some suburbs-- what will happen when the economy improves and there is demand for homes? And the economy will improve. It always improves after a crash, even after the fall of the Roman Empire. It improved after the Great Depression. It improved after the Long Recession in the 19th Century.

As to location, my only advice would be to settle close to where you work and in an area that will continue to give you proximity to jobs. Expensive gas will be the rule in the future, with lots of spikes and dips in price. Closer will be better.

[Chinman]

All good advice from the group.

my two cents is to talk to two[[2) people.
1. a financial advisor
2. realitor

let professionals advise you.

a financial advisor will inform you that paying cash for a house at your age is not very smart and a realitor will know the housing markets and ammenities of the areas you are interested in.

let the professionals with experience help you.

[Detroitnerd]

Don't forget the shadow inventory of homes that the banks are keeping off the market. Just when you think your prices might go up, they'll let those houses appear on the market and drive prices down.

Why did we give them trillions of our dollars again?

[Bham1982]

a financial advisor will inform you that paying cash for a house at your age is not very smart...

I'd second this. If I were your age with your money, I'd put a big chunk of it into a balanced portfolio of equities.

You would have made a bundle this year already.

Mortgage rates are so low, and tax benefits so high, that it probably makes more sense to park that money in investments, and then you can make a big down payment and take out a mortgage.

[Packman41]

At Wolverine:

Your quote:
“What is your opinion on these articles. Do you think prices are starting to skyrocket back to 2004-2005 levels, or is the info misleading and prices will only gradually rise or even be dead flat the next couple of years?”

As was said by Bham1982 and Detroit Planner the month to month study you cited is of too short a time period and too small a sample to be reliable. Additionally, they compare the sales of a group of homes in one month to the sales of a group of home a second month. Each month may be comprised of two, entirely different housing samples. Month A could have a high ratio of foreclosed homes and month B have a high ratio of market rate homes. Not apples-to-apples.

I would turn you back again to the Case Shiller web site:
http://www.standardandpoors.com/indi...idff--p-us----

These guys use a must larger sales samples, over the six counties in SE Michigan and used matched sales pairs of home sales to make an “apples-to-apples comparison.

Let’s look at the data. The Detroit Metro Index for December 2011 is 69.59 and January 2012 is 68.81 – a DECREASE of -1.12%. Looking at January 2011 – the one year price change is UP by 1.74 %.

At 1.75% it will take Detroit 22 years [[2034) to get back to the home prices of the year 2000.

At 1.75% it will take Detroit 36 years [[2048) to get back to the home prices of our highest point, December 2005 when our CS Index was 127.05.

To put things in perspective, the 20 City CS Index today is at 135.46. For Detroit to get back to the national average it will take 40 years or 2052.

Now, some questions for you.

What is up with the deal that you are hoping that home prices will stay flat and NOT increase?

Don’t take this the wrong way, but some of your earlier posts have some [[how shall I say it?) “naïve” comments and I am trying to understand your line of reasoning.

When home prices are stagnant [[and worse, falling) it is a big sign that the area is having economic problems and is an undesirable place to live. But aside from that, what is accomplished if housing prices fail to keep pace with inflation? Why is that desirable to you?

[hybridy]

wolverine, since you have 110k saved, you should've moved out long ago. no parents want a 30+ yr old hanging around for so long. god bless them...lol IM KIDDING. anyway a 900-1300 SF >30 yr brick home describes the majority of houses in macomb county east of 75, north of 696, and south of metro parkway. roseville, sterling heights, warren, fraser, clinton twp, and st clair shores are all packed with these kind of tract homes so you'll not have a hard time finding something.

the great recession corrected inflated real estate values, and as soon as we bottom out, prices will beign to rise, though not as fast as before. with the restart of foreclosures, inventory back log will increase additional months, so it will remain a buyers market for some time even with increased sales.

with regard to resale, no matter what your plans, you should care about school districts, so buy near a good one [[aka nice private school). make sure to buy min. 3 bedrooms. if u only want 2-beds, buy a condo.

when inspecting homes concentrate on roof, foundation, windows, & systems. on a 30-yr home these will have all been updated, not the foundation though. fancy light fixtures, stainless appliances, new paint carpet, granite counters are easy cosmetic changes which you can change later. don't pay more for them. i don't doubt you'd find a nice updated home with a little uptick in your price range.

i took the liberty with starting your search. happy hunting!

http://www.zillow.com/homedetails/23...83485785_zpid/

http://www.zillow.com/homedetails/22...83517256_zpid/

http://www.zillow.com/homedetails/16486-Vernetta-Fraser-MI-
48026/83651929_zpid/

http://www.zillow.com/homedetails/26...83425218_zpid/

http://www.zillow.com/homedetails/38...83685153_zpid/

[Wolverine607]

Don’t take this the wrong way, but some of your earlier posts have some [[how shall I say it?) “naïve” comments and I am trying to understand your line of reasoning.

When home prices are stagnant [[and worse, falling) it is a big sign that the area is having economic problems and is an undesirable place to live. But aside from that, what is accomplished if housing prices fail to keep pace with inflation? Why is that desirable to you?

Well, I certainly do not want them to go up between now and when I am ready to buy. Even though it will only be a couple of years most likely before I buy, I still do not desire rising home prices. Now I won't lose sleep over it once I own a home because it will not affect me one way or another unless my property taxes skyrocket or something.

I do not desire falling values once I own my own home. I would rather have them be flat. Now as for why, I am simply not a selfish person and feel other future home buyers should not be burdened with significant amounts of mortgage debt that often takes 30 years to pay off which is super long. I also think it would be better if more people had the opportunity to live longer with their parents and save to pay cash or a house [[yes I know, that is not the majority even though it is me), or live extremely frugal on their own and save to pay cash.

I also feel that it would be helpful to future buyers even those who get a mortgage [[which I know is the majority) because they would have a lot less debt and a more realistic chance of paying it off much sooner.

I think it is much better for high interest rates and lower home prices. I think the 30 year mortage should be eliminated and the 15 year mortgage with high interest rates with a minimum of 20% down payment and home prices being flat at today's levels should be the new norm for a long time once the economy gets good again.

As for keeping up with inflation, let me just say, I would rather have no inflation to begin with. Price stability is the best. We do not need rising or falling prices with homes or other things for that matter.

[Wolverine607]

Now another question even though it probably has little relevance on where pries are going to go. Someone correct me if I am wrong, but I believe the Case Shiller Index is based on the values of January 2000 with a base of 100 and above 100 being higher than January 2000 and below 100 being below January 2000 prices.

Now our prices are around 30% below year 2000 levels, yet Metro Cleveland for instance are only like 5% below. However, prices in both the Detroit Metro area and Cleveland Metro area are similar. That means that in January 2000, home prices in Metro Detroit were much higher than they were in Metro Cleveland and most other metro areas in the midwest. Why was that. I mean Metro Deroit and Metro Cleveland are both more blue collar areas, so why would home prices in our regional area have been much higher in 2000-2002 than most other areas in the midwest. Someone said we did not have a bubble, but we most certainly did IMHO if it is indeed true that prices were much higher in our region in the year 2000 than in most other Midwest metropolitan areas? Or were are prices not really that much higher than other Midwest areas in the year 2000?

And also, just for curiosity sake [[even though I know it has no relevance to prices right now or in the next 2 years), in the year 2000 [[first year of the new millennium) were there good starter homes in the $100K to $130K price range in decnet or better neighborhoods that would have been easy to find. Or were prices on those homes well above my price rnage even in the first year of the new millennium as well and not just sky high in 2003-2006 even though I of course know they were higher in 2003-2006 time frame?