BUTAnyone looking to buy a house knows Detroit metro real estate market is on firewith low inventory levels, high demand and sky-high prices. We asked Jeff Tucker, a senior economist at Zillow, to answer some of the most pressing questions about this boom.
Hour Detroit: How is this housing boom different from the bubble that burst so disastrously in the early 2000s?
Jeff Tucker: Both the market today and the market in the early 2000s saw a sharp rise in prices, but that is where the similarities end. Today’s market is based on strong principles with well-qualified buyers using traditional fixed rate mortgages. The rise in prices is largely due to a simple imbalance in supply and demand. Historically, millennials are approaching the age of a homebuyer, and low mortgage rates and remote work opportunities are driving demand. Home buyers are on the hunt for purchases now but are facing historically low inventory levels, thanks in part to a shortfall in new home construction since the Great Recession.
What should people be wary of when considering buying right now?
Buyers should focus on finding a home where they know they can afford the monthly bills and maintenance costs, and where they plan to live for at least a few years – ideally five or more. They should hire a reliable agent to advise you on local trends, and be sure to inspect homes before making a purchase. Mortgage rates are low, which helps keep monthly payments affordable, and expectations for further increases in home values should mean that those who can enter the market now will see a return on their investment. But buyers need to be realistic about the market they are entering. There are more buyers than sellers and the market is very competitive in most of the country. Half of US homes are sold within a week, and home sellers typically accept an offer after just five days in Detroit, Flint and Saginaw. Zillow agents interviewed this spring said they submit an average of four offers per customer before one is accepted. In such a competitive marketplace, buyers should be prepared for a bidding war and perhaps look for homes with list prices below their maximum budget to provide some breathing room to offer if needed. It’s also helpful to get pre-approved for your mortgage so you can move quickly when you find a home you like.
Will ending the COVID eviction moratorium and increasing unemployment benefits trigger a wave of evictions and foreclosures?
There is still a great deal of uncertainty about what the final eviction rate will be, as some local moratoriums remain in place. Many homeowners are more likely to work with tenants on mutually beneficial repayment plans rather than evict them, and the pace of economic recovery remains unclear. There will likely be an increase in the number of evictions for
tenants after the end of the national moratorium due to the accumulated debt over the past few months. We know that many tenants were affected during the pandemic, but it is too early to say how many people it may have affected. It is highly unlikely for homeowners today to have anything like the foreclosure crisis of 2008. The rapid rise in home values even over the past few years means that most homeowners who cannot afford to pay off their mortgage can sell at a profit in a traditional sale and pay off the loan without entering into foreclosures.
Is the price increase we are seeing in Michigan more or less than anywhere else?
Michigan is right in the middle of the US when it comes to rising home values. Statewide home values are up 11.5%, almost exactly in line with the national average and ranked 24th out of 50 states.