Housing bubble 2 in Metro Detroit or even worse coming in the future? (Dearborn: 2015, foreclosures)

[Wolverine607]

I already got a my house and paid for it in cash and am all set. Thank god. The fear of rising prices no longer applies to me. I plan to stay at my place for the rest of my life while being reent and mortgage free! Thank god I achieved that and no longer have to worry about it.

However, my brother will be in the market to purchase a house or condo probably in 2014-2015. He most likely will not be paying full cash, but will have a big down payment of at least 50%.

Now I have fear things could get so bad that my brother will be priced out of the market. With the supposedly (depending on the areas and who you ask) dramatic increase in home prices in the last 1 or 2 years continue not only rapidly, but so bad that prices skyrocket not just $15K to $30K per year, but $80K to $100K per year for starter homes which would make it even worse than the our bubble peak prices of 2004-2005? Or is that not something that is going to happen?

I mean just look at the Department of Numbers:

Asking Prices and Inventory for Homes in Detroit Michigan | Department of Numbers

The median asking price according to them has skyrockets dramatically in just 7 months in Metro Detroit. to $144K when it was only like $92K 6 short months ago. Remarkable and literally shocking!! And the inventory continues to decline and decline with no let up in sight.

And an area like Metro Cleveland had declining inventory for a while, but it stabilized recently around 17K some listings and the median listing prices are flat there where as Detroit has 13K and that is only down from prior months and years and a median asking price that is up more than $50K in 6 months. And it is quite a shocking event given that the Cleveland area not only has a lower unemployment rate than we do, but also a lower unemployment rate than the national average.

What I am talking about is could things get so bad that even decent starter homes in mediocre neighborhoods skyrockets to the point where there is nothing decent for even less than $215K. Even during the bubble days of 2000-2006 for us, it was not quite that bad as decent starter homes (say 900-1200 square feet) where around the $160K to $180K range in mediocre neighborhoods.

Or even worse, could you foresee a situation where it gets as bad as the areas more expensive than 95% of the United States (Seattle, LA, Boston, NYC, Washington DC) where you cannot get even a decent starter home in even a mediocre neighborhood for less than $300K which is just beyond insane or even close to it where no decent starter home in a mediocre neighborhood for less than $250K. I though the $160s for starter homes in mediocre neighborhood was too high and a bit bubbleish, but that does not compare to how bad those other areas are.

But the mid to high 100K range for a decent starter home in a mediocre neighborhood would be tolerable to my brother, but I do not think the prices of those other areas would be and inf act, I do not think they would be tolerable to anybody except rich people.

I thought our bubble prices were bad, but the prices in those areas are so beyond overvalued that it would be a massive understatement to say those markets are just overvalued.

So what do you think? Are we in a housing bubble part 2. And are we likely in for a shock that could be even far worse than our first bubble in just 1-2 years of time? Or is the worse case scenario a return to or close to our peak prices of 2004-2005 and a level off from there for a long long time?

And this question is not about a specific area of Metro Detroit, it is about the region as a whole, particularly Oakland, Macomb, and Wayne counties.

It seems as if some of the same greed is at work that was in place in 1998-2002 that caused home prices in Michigan to run-up a lot and become much more expensive relative to most other pockets of the Midwest when there were no demographics reasons for it.

The worry and fear is over for me as I now own, but I still despise rising prices because I worry about my brother getting priced out of the market. My brother was not going to be paying cash regardless of what happened with the market, but he was going to be able to put at least 50% down. I now fear things could get so out of control that even with him having a big down payment, he could be forced to have a mortgage of more than $100K (which is a big mortgage whether you believe it or not) for a starter home in a decent area?

[LeavingDetroit]

Hi Wolverine607,

I replied to another threat where you had posted similar thoughts, but I just saw this thread which is more on point.

I agree that the metro-Detroit housing market is relatively expensive to other mid-West cities. It makes no sense why Cleveland is so much less expensive, comparing nice neighborhoods. I don't understand why though? Detroit salaries are not better than Cleveland and as you mention the unemployment rate in metro-Detroit is higher.

Any thoughts out there on the reason for this?

[Arthur Digby Sellers]

Inventory will increase if the prices stay on their current trend. That will then stabilize the prices.

[animatedmartian]

Originally Posted by LeavingDetroit

Hi Wolverine607,

I replied to another threat where you had posted similar thoughts, but I just saw this thread which is more on point.

I agree that the metro-Detroit housing market is relatively expensive to other mid-West cities. It makes no sense why Cleveland is so much less expensive, comparing nice neighborhoods. I don't understand why though? Detroit salaries are not better than Cleveland and as you mention the unemployment rate in metro-Detroit is higher.

Any thoughts out there on the reason for this?

Metro Detroit is a larger city. Pretty much twice the population of Metro Cleveland.

[us66]

There's also the possibility that interest rates may rise, also stabilizing or even lowering prices.

[MS313]

Originally Posted by LeavingDetroit

Hi Wolverine607,

I replied to another threat where you had posted similar thoughts, but I just saw this thread which is more on point.

I agree that the metro-Detroit housing market is relatively expensive to other mid-West cities. It makes no sense why Cleveland is so much less expensive, comparing nice neighborhoods. I don't understand why though? Detroit salaries are not better than Cleveland and as you mention the unemployment rate in metro-Detroit is higher.

Any thoughts out there on the reason for this?

Detroit is much larger and yes the unemployment rate may be higher but the salaries are better than Cleveland. Going by median household income MSA, Detroit ranks 16th highest in America while Cleveland ranks 85th. Not to mention the latest census estimates show Metro Detroit growing in population again.

[leroythelion]

Originally Posted by LeavingDetroit

Hi Wolverine607,

I replied to another threat where you had posted similar thoughts, but I just saw this thread which is more on point.

I agree that the metro-Detroit housing market is relatively expensive to other mid-West cities. It makes no sense why Cleveland is so much less expensive, comparing nice neighborhoods. I don't understand why though? Detroit salaries are not better than Cleveland and as you mention the unemployment rate in metro-Detroit is higher.

Any thoughts out there on the reason for this?

Probably because there is a very large area, called the "City of Detroit", that is completely undesirable. Those willing to put up with economic disaster, corrupt and un-repentant politicians, pedophile city councilors (just one), and no street lights will find a great bargain in Detroit. Everybody else is looking to live in "the rest" thus driving up prices. I don't think Cleveland has the same issue. Eventually, the rise in prices in the outer suburbs will drive up prices in the inner suburbs (Downriver, Garden City, Dearborn, etc). In an ideal world, economics will make land within the City of Detroit borders "desirable" at some point.

[Irapuato100]

You're getting everything mixed up.

Median price is based on the type of housing being sold. Before, it was mostly foreclosures. Now that has dried up and it is mostly normal arms length transactions. That accounts for the massive increase in median price.

Long story short, metro area property prices have increased, but not by that much. For most people, they're still well below property values from six years ago. Metro Detroit is still very affordable. I'm middle class and bought in one of the nicest suburbs.

[Coldjensens]

Originally Posted by leroythelion

Probably because there is a very large area, called the "City of Detroit", that is completely undesirable. Those willing to put up with economic disaster, corrupt and un-repentant politicians, pedophile city councilors (just one), and no street lights will find a great bargain in Detroit. Everybody else is looking to live in "the rest" thus driving up prices. I don't think Cleveland has the same issue. Eventually, the rise in prices in the outer suburbs will drive up prices in the inner suburbs (Downriver, Garden City, Dearborn, etc). In an ideal world, economics will make land within the City of Detroit borders "desirable" at some point.

Wish it would hurry up.

[MS313]

Originally Posted by leroythelion

Probably because there is a very large area, called the "City of Detroit", that is completely undesirable. Those willing to put up with economic disaster, corrupt and un-repentant politicians, pedophile city councilors (just one), and no street lights will find a great bargain in Detroit. Everybody else is looking to live in "the rest" thus driving up prices. I don't think Cleveland has the same issue. Eventually, the rise in prices in the outer suburbs will drive up prices in the inner suburbs (Downriver, Garden City, Dearborn, etc). In an ideal world, economics will make land within the City of Detroit borders "desirable" at some point.

Completely undesirable? Not true. And there are plenty of street lights in Detroit. The entire city isn't living in complete darkness.