As anyone who’s looking to buy a house knows, the metro Detroit real estate market is on fire, with inventory low, demand high, and prices through the roof. We asked Jeff Tucker, senior economist at Zillow, for answers to some of the most pressing questions about this boom.
Hour Detroit: How is this housing boom different than the bubble that burst so disastrously in the early 2000s?
Jeff Tucker: Both today’s market and the market in the early 2000s saw extreme price growth, but that’s where the similarities end. Today’s market is built on strong fundamentals, with well-qualified buyers locking in traditional, fixed-rate mortgages. Price growth is being driven largely by a simple supply and demand imbalance. The historically big millennial generation is reaching prime home-buying age, and low mortgage rates and remote work options are supercharging demand. Home shoppers are fired up to buy now, but are encountering historically low inventory, thanks in part to a deficit of new home construction ever since the Great Recession.
What should people be wary of as they consider buying right now?
Buyers should focus on finding a home where they know they can afford the monthly payments and the cost of upkeep and a place they plan to live for at least a few years — ideally five or more. They should enlist a trusted agent to advise on local trends and be sure to inspect homes before committing to buy one. Mortgage rates are low, which helps keep monthly payments very affordable, and expectations for continued home value growth should mean those who are able to get into the market now will see a return on their investment. But buyers should be realistic about the market they’re walking into. Buyers outnumber sellers and the market is very competitive in much of the country. Half of U.S. homes are selling within a week, and home sellers are typically accepting an offer after just five days in Detroit, Flint, and Saginaw. Agents Zillow surveyed this spring said they submit an average of four offers per client before one is accepted. With the market this competitive, buyers should be prepared for a bidding war and perhaps look for homes with list prices below their max budget to provide some breathing room to offer above list if needed. It’s also helpful to be pre-approved for a mortgage so you can move quickly when you find a home you like.
Will the end of COVID-era eviction moratoriums and enhanced unemployment payments set off a wave of evictions and home foreclosures?
There is still a lot of uncertainty about what the eventual level of evictions will be, as some local moratoriums remain in place. Many landlords are likely to work with tenants on mutually beneficial repayment plans rather than evicting, and the pace of the economic recovery remains unclear. There will likely be an uptick in the number of evictions for
renters after the national moratorium ends because of the backlog that has built up over the past several months. We know that many renters were impacted financially during the pandemic, but it’s too soon to say how many people that could affect. For homeowners, something like the foreclosure crisis seen in 2008 is extremely unlikely today. The rapid rise in home values even in just the past few years means most homeowners who can’t afford their mortgage payment could sell in a traditional sale at a profit and pay off the loan without entering foreclosure.
Is the surge in prices we’re seeing in Michigan bigger or smaller than elsewhere
Michigan is right in the middle of the U.S. when it comes to home value growth. Home values across the state are up 11.5 percent, which is almost exactly the national average and ranks 24th out of the 50 states.