I’m going to cheat tonight and tag team off another blog I read and explain where I think the Metro Detroit real estate bottom will be. All these people that say the bottom is coming I think are wrong. And I don’t think whether it is Metro Detroit real estate, California, Texas, or the Carolinas. I think we are a ways away from the real estate bottom.
Here are my reasons:
It is simply about supply and demand we have too many homes for sale for the amount of qualified home buyers. This is my thinking.
- When you have had a foreclosure you can not buy for 3 years at the minimum because of bank rules. You have to be out of a foreclosure for 3 years before you can buy again. That is for a FHA Loan for conventional loans it is longer. So all these people in foreclosure can’t buy. That is a large amount of potential home buyers that can’t buy.
- What we need to fill those homes with an equal amount of people. That has to be new immigrants from other countries, kids growing up and being able to afford a home (they have to have a job), investors, foreign investors. The number of foreclosed homes has to equal the number of new buyers.
- Many of these foreclosed people will never be able to buy a Metro Detroit home again because the loan rules have changed. There are no more stated loans, there are very few 100% loans, there are no more sub-prime loans. Will they ever be able to qualify with the new bank rules? Many of them will never be able to buy a home.
- Some of the people will never buy again because they are too old. It’s not because of the banks won’t let them buy because of their age, it’s will be their choice. Some of these foreclosed people are in their 50’s and 60’s. They may decide not to buy so close to retirement.
- Some of these people that were foreclosed never saved for a down payment. Now you have to because of the stiffer bank rules. So some of these people will never buy again because they don’t have the saving habits.
The economy and confidence has to come back for people to afford the higher priced homes. The younger new buyers need jobs. All of us need jobs. Plus mortgage interest rates have to stay low in order for people to afford the higher priced homes. Salaries will have to go up to make all the large homes that have been built in the last 10 years to be affordable.
My opinion the rash of foreclosures will slow down this year because 2006 was close to the end of subprime mortgages. Now I am saying the majority of foreclosures will slow down, not all of them. We will still be seeing more foreclosures because there are people that have struggled for years and still letting them go. Some people just can’t hang on because of the economy.
BUT WE NEED THE ECONOMY to turn so people can stay in, and afford their homes. Otherwise the home foreclosures will continue. Where the bottom is or when it will happen nobody knows. Not I or any of the self proclaimed “experts” know.
If you are a real estate agent the key is to work hard and don’t worry about where or when the bottom is. If you are a seller don’t bank on when the market will turn. Make a decision each year whether it is a good time for you to sell in the current market. If you are a buyer buy for the long term. Buy for 10 years or more. Don’t wait for the bottom, because by the time everybody realize it is the bottom prices will be rising.
Just my thoughts about the real estate bottom
Russ Ravary your Metro Detroit Real estate agent
Foreclosed homes near Detroit MI