08/11/2010

Detroit 3rd biggest projected increase in prices

A promising outlook in real estate trends has given home owners and home buyers hope for a lucrative tomorrow.

A housing market rebound seems tenuous following the expiration of the home buyer tax credit, and consumer confidence remains weak due to lackluster employment, but David Stiff, chief economist at Fiserv, says the bottom is near. Home prices in the U.S. have declined 29.5 percent over the past four years, according to the Fiserv Case-Shiller Indexes. Stiff says prices should form a trough early next year, when median prices will be down an estimated 32.9 percent from the 2006 peak.

It has been estimated by early 2014, levels will have climbed about 7.2 perc Bremerton-Silverdale area in Washington State had the highest four-year growth forecast, with prices expected to increase 44.7 percent from 2010 to 2014. Other leading growth markets: Bend, Ore., where prices are expected to jump 33.6 percent by 2014, and Detroit, with a 33.1 percent forecast. Markets with the weakest projections: Miami and Naples in Florida and Atlantic City, N.J., where prices are expected to continue to fall over the next four years.

Top 10 Housing Markets That Will Be Strongest by 2014

3. Michigan

Biggest home price increase projected in 2014: Detroit-Livonia-Dearborn metro

Forecast 4-year price increase: 33.1 percent
Current median price: $51,000
Prices to reach trough in: 2011 Q2
Median family income: $54,400
Population: 1,925,850

Since reaching a peak in 2006, home prices in the Detroit area have fallen 60.5 percent, according to the Fiserv Case-Shiller Indexes. As homes have become more affordable—the median home price in Detroit is lower than median family income—demand is expected to pick up. Prices are forecast to jump 33.1 percent over the next four years. George Moma, a broker with Century 21 Dupont Realtors, says the growing prevalence of short sales over foreclosures will help drive up the median price in the Detroit metro area. He adds that the area is attracting interest among international investors from the U.K., Dubai, Moscow, India, Ireland, and France.

Index used to calculate historical home price changes: Case-Shiller

P4P Comment

As booms go too high, so do slumps. Prices in Detroit have fallen well under longer term affordability. In other words, at bottom and set to rise.

Add to this, the decline in supply of foreclosures of the type we consider the best bargains (good homes in good but not too pricey areas) and you have a recipe for sharply rising capital values.