With the real estate market down around the country, we are being asked these questions. When will it turn around? When will the prices come back to where they were? I am going to give you the Southeastern Michigan real estate market and Metro Detroit real estate market update.
You are thinking of retiring, relocating, or moving in 1 - 5 years. How soon will home values get back to 2003, 2004 or 2005 prices? Let's look at much have they dropped. Home prices in Metro Detroit and Southeastern Michigan have dropped from 20 -35% depending on the city, neighborhood, and area. In some sections even more. I was looking at an area in Detroit last night on the MLS. The lady bought the house for $142,000. There were 5 foreclosures on her street that sold for $40-50,000 for the exact house. The non foreclosure homes were in the $70,000 range. I predict that you will be able to buy a home in many Detroit suburbs for less than $100,000 a square foot. I am already seeing that in Canton, MI and Dearborn, MI.
Many economist's are predicting that home prices will continue to fall this year and may not stop falling until mid 2009. So there is a 1 1/2 years gone out of your 5 year time table. If the average area has lost 30% then that is what we need to gain back. If you believe that the housing market would come back strong and appreciate in the double digit range, it would take 3 years to get back to where it was. That is a big IF.
If you want to move, the questions you have to ask yourself are: Can I afford to wait 5+ years? Can I afford to take the loss? Is it a paper loss or do I have to come to the table with money to sell my home? Do I want to become a landlord and rent the house with all the headaches? Do I realize that that cost of heating, insuring, and paying the taxes is the cost of carrying it. (for example if it costs you $9000 a year to take care of the home, that is a $45,000 loss) Would I be better to sell it now? What if something major goes wrong in the next 5 years, like the furnace goes? Am I willing to put my dream of living in Florida, or Arizona, or up north on hold for 5 years? Will my health or the opportunity be there to move? Am I willing to put up with another Michigan winter?
Bottom line is that I believe this is going to be a long haul. I don't believe it is going to be a two year turnaround. It may be a 5-10 year time period before Michigan home prices get back to where they were. I hope I am wrong, but there is too much wrong with the Michigan economy and the US Economy. Banks have tightened up the credit guidelines tremendously taking many buyers out of the housing market. Too much inventory and too few qualified buyers.