Average Home Price in Detroit Falls to $11,533; Monthly House Payment Would Be Less Than $50
According to the Michigan Association of Realtors and Detroit Board of Realtors (data here), the average sales price of a Detroit home fell to $11,533 in April (Year-to-Date), a -43.8% decline from the $20,514 average home price during the same period last year (see chart above). 2009 year-to-date unit sales increased by 23.1% to 4,139 homes, compared to 3,360 Detroit homes sold last year over the same period. From the $97,850 peak Detroit home price in 2003, prices have fallen by an amazing 88%.With a 20% down payment on a $11,533 average priced home in Detroit, the monthly payments on a 30-year fixed-rate mortgage at 5% would be only $49.53.
For the entire state of Michigan, the average YTD home sales price has fallen by -28% to $87,033 through April 2009, compared to last year's average price of $120,481 for the same period.
14 Comments:
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Let's get real here, Mark! In THIS economy, who could POSSIBLY afford to put $2,300 down AND pay $50 a month to OWN a home?!? Not when they can RENT an apartment for $500 a month!
Sure this unprecedented housing affordability will allow those new Detroit homeowners to spend, save, and invest more of what they earn. But come on! When those ARMs reset, that could cause the value of those $11,500 homes to drop all the way down to $10,000! We're talking economic annihilation and collapse here! Game over, man! Game over!
P.S. For a well-thought-out perspective on ARM resets that will hopefully bring some of you off the ledge, check out Mike Shedlock's 5/1/09 article at Minyanville.com entitled, "The ARMs Reset Crisis Revisited."
P.P.S. Another perspective-bringer...Brian Wesbury over at First Trust pointed out in his 4/16/09 report on housing starts that, "...the stage is now set for a major turnaround in home building that will begin late this year and contribute substantially to the economy in 2010-11. Once the excess inventory is worked off completely, population growth and knock-downs will require about 1.6 million starts per year, WHICH IS MORE THAN TRIPLE THE CURRENT RATE. IN OTHER WORDS, STARTS MUST CLIMB 200% IN THE NEXT FEW YEARS JUST TO GET BACK TO NORMAL!" (Caps added for emphasis)
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As someone born, raised, and currently residing in Michigan, I know firsthand that Detroit has been a basket case since the days that Coleman Young ran the city. Talk about corruption. It carries on to the present day with our ex-mayer Kwame Kilpatrick (ousted from office and served jailtime). Having Jennifer Granholm as governor for the last few years has not helped given the fact that she is and was beholden to unions, minorities, and all the usual constituencies of the left. Her answer to our state's decline (and decline it has under her watch) has been an almost instinctive raising of taxes. She does not understand how to keep existing businesses in the state nor draw new businesses because she cannot and will not see above her divisive politics...policies that are anti-business, thus anti-growth, anti-jobs. All she wants is to promote a social agenda akin to Obama's. God help us all if she is nominated by Obama to the Supreme Court (which is the rumor). Glad to be rid of her, but unfortunately, Michigan has become so unionized and Democratic, that even if she leaves this state, we are still doomed.
"With a 20% down payment on a $11,533 average priced home in Detroit, the monthly payments on a 30-year fixed-rate mortgage at 5% would be only $49.53"...
Hmmm, then one could use the left over money (ha! ha!) to buy more self defence items from this country's #1 Firearms salesman of the year...
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Anonymous, did you bother to read page 2 of Mike Shedlock's article and all his caveats or did you just stop reading at "The answer is:..."?
I'm referring to the big red rectangle that states "This problem didn't vanish nor is it likely to".
Do you really think banks allowed people to have low interest rates for 5 years, paying interest-only or negative amortizing payments without floors and other "gotcha" clauses?
With loan to value ratios exceeding 110%, rising unemployment, and tighter lending standards, do you really think many people will be able to "roll over into affordable fixed rate mortgages"?
With huge growth in money supply and more to come do you really think the Fed can hold interest rates low for the next two years? Are we going to fight the consequences of a housing bubble with another housing bubble?
These loans are not going to reset to lower interest rates (and lower payments). Payments will be going up by a large amount and more people will enter foreclosure in the coming two years.
Anon.,
You still have the Detroit Red Wings. It doesn't get much better than that.
Robert,
There are lots of people who do not require a job...they call them senior citizens.
"With a 20% down payment on a $11,533 average priced home in Detroit, the monthly payments on a 30-year fixed-rate mortgage at 5% would be only $49.53"...
...or you could just buy the house and avoid 30 years of payments. Even the land is worth that. The house is likely a shell that has been stripped of all copper piping & wiring and anything else of value. Cost of renovation is practically the same as building new so one may as well demolish and start fresh.
Detroit is the armpit of America. No jobs and a bunch of scumbag thugs runnning around. No thanks.
Home sales in Michigan have been basically rising since second quarter 2008. I think the drop in prices is finally working.
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Intellectually this conversation is over my head. I'm smart, but not in economics, and I'm totally humble enough to wear that out front.
But I will say this, for what it's worth: my husband and I are professionals (communications writers) and artists (meaning we write our own work on the side). We are urbanites--although we currently live in rural upstate New York for one reason: because it's cheap.
My husband is from Detroit, and we'd move there in a heartbeat if it had certain things. Obviously we don't like poverty and crime, but are content to live with them to an extent if there's a public transit system, a cafe, a bookstore, a gallery, a soup kitchen, a nonprofit--a neighborhood, in other words.
Think Harlem, or lots of Chicago, and you get the idea.
I don't think it's impossible for Detroit (well, except perhaps for the public transit system), and I'm rooting for you. We're pretty much settled where we are for now, but I hope those house prices will help attract some hip young entrepreneurs...
I'm curious to know what the impact of property (and other taxes) are on the monthly payment in Detroit. My understanding is that the population is dropping, thus increasing the tax burden on those who remain. Cities and states that do not live within their means face a death spiral as taxpayers leave (see California for example).
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