Home prices in the next 1-2 years? Do I need to worry?

Asked by Wolverine, Troy, MI Mon Jul 2, 2012

I am looking to buy my first house sometime in the next 1-2 years. I am hoping and plan to buy sometime in the August to November 2013 time frame.

I am looking to buy a starter brick home somewhere in the 900-1400 square feet range with a 1-2 car garage and a small basement on a very small lot

My price range is at maximum $120K for a finished product. Whether that is buying a fixer upper for much less and spending the rest to make it in good , safe livable condition for a price that will not exceed $120K, or buying a house already in move in condition reasonably up to date for no more than $120K total is fine.

I will be paying cash as I hate debt so interest rates are of no concern.

Areas I will most likely be buying in: Sterling heights, Madison Heights, Clawson, Royal Oak, Auburn Hills, Waterford, Lake Orion.

Now do I need t be worried about about prices going up significantly enough that would jeopardize my maximum price in those areas listed above? I have worried a lot.

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Edith Karoline Jasser’s answer
Edith Karoli…, Agent, Winnetka, IL
Tue Jul 3, 2012
You know I wish we would all have a crystal bowl to predict the future, not so of course :)

Therefore do not try to predict the market or the future market when it comes to buying your first home.
Connect with a really good area Realtor, someone you trust, you have a good relationship with and
when you think that you have accumulated the cash purchase price you need, have this Realtor search
for the right home for you.....

As a first time home buyer you may need all the guidance you can find, which includes making sure that the home you are buying is a good purchase when it comes to construction, upgrades and updates etc. Do not buy when you think oh it is ok I can fix this that and something else, may be you can but may be once you start you will realize that you got yourself into a situation that you did not really want to be in.

Sometimes unless you are in the construction business, it is better to wait one more year and
buy a home that has been very very well maintained by the former owner/owners.

Just get some professional advice and make sure you do work with a buyers agent, if you need
recommendations get back to me. Remember a buyers agent is free to you, works in your best
interest is committed and loyal to YOU and expect the same from you, but is paid at the end at the
closing table by the sellers side.....

Good Luck to you, any more questions keep them coming.... :)

Well there is actually a very very long list.

So staging to make the home appear up to date (and sometimes it just means removing or moving furniture around), bigger and inviting is no. 1, No. 2 unclutter all your memories, photos and other,
everyone should have and enjoy in their home, when it comes to selling your home, all of those have to go, i.e. they will distract the buyers eyes, and instead of seeing the flow of floor plan and the space
they see photos, and items from trips etc. etc.

A nicely set dining room table and even breakfast table with fresh flowers, makes the buyers see
how they could live in the home.

Oh yeah, the smell of the home, believe it or not, a nice smell in a home, makes people feeeeeeel
goooooood, so they like the home. Many ways to achieve that.....
a) pop popcorn and offer it with water to the viewing public
b) vanilla candles in the bathrooms nice nice nice
c) if you do not want to do the popcorn, then warm up some cinnamon buns in the micro the house
smells like someone just baked a cake.....

And when it comes to staging DO NOT FORGET TH CURB APPEAL AND THE FRONT DOOR, this is the very first impression of the home.... clean, neat, and beautiful plantings or flowers and the
lawn meticulously maintained....

And what turns buyers off Clutter, too much furniture, dirty floors or carpeting, dirty kitchen
stoves and sinks, smell of any kind even if it is just cooking...... darkness, i.e. no light or brightness
in the home (so you may have to removed old curtains !!!) and replace light bulbs make the house
look bright and inviting.....

if for any reason the home has not been painted in several years, and the paint is either old and
somewhat dirty, it needs painting, if it is all in one color, it may need to have several single walls painted in an en vogue color, one wall in the dining room deep red, one wall in the hallways
deep brown or dark gray, one wall in the bedroom a beautiful blue (blue is calming perfect for
bedrooms)...

Hope this helps~

Sincerely yours,
Edith YourRealtor4Life & Chicago and Northern Illinois Expert
Working always in the very BEST interest of her clients, Buyers, Sellers and Investors alike....
Covering for @Properties the city of Chicago, all N and NW suburbs, the fine homes on the
North Shore, and many of the W and SW suburbs, and with her trusted Partner Agents all of
the US and worldwide properties. Edith speaks French, German, some Spanish and other.....
@Properties, 30 Green Bay Rd, Winnetka, Illinois 60093 ---- EdithDoesItRight@yahoo.com or EdithSellsHomes@gmail.com Check out my website at htttp://www.tinyurl.com/MeetEdithHere
get to know me better and learn about my experience, expertise, services available and letters of recommendation of former clients..... Also you can sign up on my site to search for properties in my expanded service area. HAVE THE MOST WONDERFUL DAY :)
0 votes
Wolverine, Home Buyer, Troy, MI
Mon Jul 2, 2012
@Haig

It seems most publications say bottom was hit in the first quarter of 2011. Prices were actually lower in 2010 than they were in 2009 and lower from December 2010 to March 2011 than they ever were. That is according to much of the research I have done.

You said Oakland County had a 5.3% increase and Macomb a 3% increase. That is hardly double digit and all the areas I am interested in are in those counties.

I would put Troy and Rochester Hills on the list as well, but excluded them as those areas are much more expensive than what I have on my list which would give me less or almost no choices in my price ranges now and even 1-2 years ago. I also noticed an increase in Troy and Rochester Hills that seemed far more than those other areas.

Also, forgot Lake Orion for a moment. Madison Heights is really cheap and well below my price range per the data on Trulia. And also Auburn Hills is very cheap and also below $100K per Trulia data for median sales price.

And if the recnet data indicates a strong outlook, is consisetnt 3-5.5% appreciation a strong outlook longterm? If so, I probbably do not have to be worried as that type of increase is not enough to put me in danger of my maximum price range in only somewhat over 1 year before I buy.

I am no worried if I have to settle for only 1000-1200 SF instead of 1300-1400 SF to not put me over my maximum $120K price. However, I would be terrified if I could not find even 900-1000 SF for less than $150K.

And I have not only looked on realtor.com. I have also looked on zillow and on Real Estate One and I know Real Estate One specializes in Michigan, so they must be pretty accurate I would assume for listings of homes and the prices of them.
0 votes
Haig Istambo…, Agent, Rochester, MI
Mon Jul 2, 2012
Hello again Chris,

Would I have the same answer 1 year ago as I do now? Well that is a great question. The interest rate part of my answer, yes I would answer the same. Home prices? I am not so sure, because in hindsight, I think we hit bottom within the past 2 - 2-1/2 years. Looking back now, prices were as low as they are going to be within the past 4 years maximum. Many believe the peak for prices was in the 2006 - 2008 period.

Again, none of us has a crystal ball, so it was tough to say where the bottom was a few years ago. But looking back at the last 2 years, prices are definitely increasing. Where do I get those numbers from? I prepared information for the entire Metro Detroit area, for an article in the Wall Street Journal a few months ago. The numbers were provided by both MLS systems in the Metro Detroit area (Realcomp and MiRealsource). I will quote the year over year increases in the entire MLS system; number of units sold in the first quarter of 2012 vs the first quarter of 2011 - 10.4% increase, Average Days on Market decreased from last year by 7 days from 96 to 89 days, Approximately 50.2% of all sales were identified as Cash Sales, inventory declined by 19.8% year over year for the first quarter and I can go on and on. So the numbers for the areas you are looking in, are looking stronger for prices, worse for inventory, better for days on the market, which all equates to strong long term outlook.

Macomb had a 3% increase in prices year over year and Oakland had a 5.3% increase in price year over year for the first quarter. Those numbers are only going to come in stronger for the 2nd quarter, there is no doubt in my mind. The weak numbers you may hear about are for areas like Detroit (-2.4% year over year) or Genesee County (-17.2% year over year), and a few other counties also had decreases. So yes, if you average certain areas of Metro Detroit in with other stronger areas, the net effect is down. But unless you are buying a home in Detroit and moving it to Lake Orion, it won't matter what you can get a 1,000 square foot house in Detroit for. (I recently sold a beautiful home in Detroit for just over $4,000.00, so yes the numbers are skewed there).

One last thing, don't put too much emphasis on what you see on Realtor.com, a lot of that information is dated, they don't update their site as often as needed. I believe in the numbers, they never lie, the numbers are getting stronger, and momentum is slowly building, builders are building again, people are working again, it's slowly happening. Ask any good Realtor if they are busy and the answer you should hear is "Overwhelmed".

You should do what you are comfortable with, that is the bottom line. You ask the questions, we provide the answers, you make good decisions based on those answers and your financial status. You have the best of all worlds right now, saving a lot of money, seriously beginning to eyeball the housing market, and have access to historically low interest rates. What more could you ask for?

Let me know if I can be of any more help.

Thanks again,

HAIG
Elias Realty
(248) 379-6547
realtorhaig@aol.com
0 votes
Wolverine, Home Buyer, Troy, MI
Mon Jul 2, 2012
Why has supply diminished?

Also, I have heard stories about how nationally, housing is still flat at best and still falling. I mean why in the heck would prices start going up in Metro Detroit area, when nationally, it seems they have not been?

I mean WTF? Our economy is still worse than the national average with a higher unemployment rate (and the national unemployment rate is still very high and ours quite a bit higher), so WTF would be causing supply to go down here and prices to start going up at all?

And also, if prices go up even a little, won't more people put their homes on the market increasing supply? And also, what about the shadow inventory and foreclosure backlogs and short sales that are still pending. Won't that increase the supply in the future?

And what about the banks? I have heard that they will not appraise homes for that much regardless of the offers it receives because right now, they are careful and do not want to get in the same mess that happened before during the bubble. How could that change that much in just a little over 1 year?
0 votes
Wolverine, Home Buyer, Troy, MI
Mon Jul 2, 2012
And also, another thing, if I were to ask this exact same question exacttly 1 year ago Haig, would you have said that I would be kicking myself 1 year later which would equate to now?

I have looked right now and still see tons oh homes at or even below my price range. I even see a decent amount on realtor.com still listed modestly below $100K in those areas that look to be in livable or close to livable condition that even have some new updates.
0 votes
Karen Paytas, Agent, Clinton Twp, MI
Mon Jul 2, 2012
Chris,

Good Evening!! I tend to agree with Haig. Real Estate tends to run on a supply and demand basis. As has been apparent within the last 6 months or so the supply has diminished so the demand has caused an increase in home prices. Most decent homes going on the market today are receiving multiple offers and selling well above listed prices. I also agree with Haig in saying that waiting a year or 2 to purchase could very well jeopardize the amount of home you'll be able to get.

If it's possible for you to buy now, even with a mortgage there is nothing saying you cannot pay that mortgage off early without penalty.

Good Luck,

Karen Paytas, GRI, CMS
Realtor
Real Living Kee Realty
586-709-8465
kpaytas@mirealsource.com
0 votes
Wolverine, Home Buyer, Troy, MI
Mon Jul 2, 2012
Well actually, I still live with my parents. I am right around having enough to pay cash. I had a plan to have some extra money left over though after all is said and done.

I do have a job, but it is only a contract position. It could turn into a permanent position though. I also am not quite making enough to support myself comfortably yet to move out. That is why I am waiting. I am also able to save almost all of my paycheck as I still live with my parents which has helped put me on track?



I feel I am working towards getting there and will be there though by the later part of 2013.

Double digit increases year over year? Where did that come from? I have not heard that at all. I have heard that they have gone up little over the past year, but they were no higher than 2-3 years ago. I am just worried when I read stories about the lack of inventory and some areas homes are receiving multiple offers?

I also have heard of their being move in ready homes in good safe neighborhoods way below my price range? I have heard many foreclosures were priced so dirt cheap and in lose to move in condition that many buyers bought them above asking price, but still way under $100K and did not have to do much wok on them to make them in good livable condition.

I view my price range as being fair market value for what I am looking for and if homes were priced way above that for just a starter home, then home prices are in bubble territory like they were in 2004-2005 IMHO. My gosh I hope we do not return to those days anytime in the near future!!!

I will admit and have no problem saying that $75K for 900 to 1400 square feet (maybe not for 800 SF and below, but for 1100 SF and above) is dirt cheap. But it would disgust me for anyone to say that $100K for a 1000-1100 square foot home in good condition in a decent neighborhood is cheap because it IS NOT! That is fair market value IMHO. In the days where 1000 SF homes were going for $160K or more, those prices were so outrageous high and unaffordable, it made my head spin.

I am pretty worked up about this as I am sure you can tell. Its pretty important to me to be able to buy what I am looking for in my price range when the time comes. Rising prices is disgusting and a symptom of greed on sellers and rich speculators which is disgusting IMHO. Interest rates should be a lot higher and the 30 year mortgage should be scrapped and the only thing available should be the 15 year mortgage with today's home prices and extremely high interest rates and no possible way to buy a house without at lest minimum 20% down. That would not allow prices to go up at all IMHO.
0 votes
Haig Istambo…, Agent, Rochester, MI
Mon Jul 2, 2012
Hello,

The first thing that pops into my head after reading your question/statement is; Why wait? The market is all ready rebounding with year over years increases in the double digits, almost across the board in most cities.

If that trend continues, which seems likely, but one never has a crystal ball, then waiting to pay cash in 1 - 2 years probably is not the best approach. With interest rates so ridiculously low, there really is no reason to wait. I equate the interest you will pay for 1 or 2 years, will be equal to the "likely" price increases. (Did you get that?) Waiting up to 2 years at this point, when you can have a house now, and lock in the lower price, will not put you any further ahead when you pay cash. At the 3.50 - 4.50 percent interest rates today, the double digit price increases in homes the next 1 - 2 years, will put you behind in my opinion. Sit down and do the math, double digit price increases or single digit interest rates, it's a no brainer to me.

Unless there is a reason that you can't move right now, besides not having all of the cash, then your timeline may make sense. But if you have the funds, have a steady income and a job, there really is no reason to wait that long. You don't know where interest rates will be in a year or two and you don't know if the double digit increases will continue in home prices, if they do then you worries will come true.

My advice, go and get a preapproval for a mortgage, find the house you like, put as much down as is needed to make you comfortable, fix up the home as you wish with the extra funds and when you have the remaining funds, pay off the home. As you stated, the interest rates are of no concern, I feel the same way with the rates where they are. The interest rate is the last thing you should worry about. When I purchased my first home, rates where around 18%, so 4% is peanuts.

Let me know if you need more help or advice. I live on the east side and know the areas that you may look in very well. Don't wait, I think you will be kicking yourself in 1 year. Just my thoughts.

Thank you,

HAIG
Elias Realty
(248) 379-6547
realtorhaig@aol.com
0 votes
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