The signs are clear. Michigan ranks high among states in the percentage of home owners “under water” with their mortgages and continues to rank in the top 10 states for foreclosures. 2010 Census figures showed the share of metro Detroiters who own their residence decreased in every county, with a resultant increase in renters. Increased renters did not result from a plethora of new apartment complexes, but rather from single-family homeowners who moved but could not afford to sell their homes at such large losses and turned to renting it out instead.
The Standard & Poor’s Case–Shiller Home Price Indices are constant-quality house price indices for the United States, that are calculated from data on repeat sales of single-family homes. There are multiple Case–Shiller home price indices: A national home price index, a 20-city composite index, a 10-city composite index, and twenty individual metro area indices (with metro-Detroit being one of the 20). The index is published monthly and uses a method that is able to adjust for the quality of the homes sold. The composite, city and metro indices were normalized to have a value of 100 in January 2000.
The following chart tracks the annual index average from January 2000 through May 2011.
Table 1. Home Price Index for Metro Detroit, 2000 – 2011
One can see that housing values in 2005 had increased by 25 percent over their 2000 starting value. However, the bubble burst in 2005 and the values began to plummet. As we look at the latest index report for May 2011, we find that metro Detroit housing values stand at their lowest level since September 1993, just 63 percent of where they were on January 2000 and just half of the value at their peak in February 2006. Among the 20 metropolitan areas tracked, only Cleveland and Las Vegas have lost value since 2000, with Cleveland at 99 percent and Las Vegas at 97 percent (Detroit is at 64 percent).
The headlines read, “Troubled home market creates generation of renters.” My headline reads, “The metro Detroit housing market is open for business.” Though many current owners cannot afford to sell, their still is a glut of good housing stock vacant and on the market. All signs point to a market bottom. It is time to get in while the getting is good.