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Rochester's Housing Market: Getting Back On Track

Here is a look at what the real estate market is doing today and how it compares to what we thought was normal.

In this day and age we have countless tools to make things easier.  There is an app for just about every possible problem, an algorithm for every trend and if we don’t know the answer we search for it on the Internet. 

We have certainly come a long way, but despite all of these technological advances we have experienced, some things have remained.  In this case there is no app to fix what the real estate market has left us with and algorithms cannot predict the future to increase your odds of getting it right.  The real estate market has left so many with an uncertainty and even a slight fear of what the market will do next. 

There is no arguing that these last few years have been a nightmare for many homeowners but no matter how dark is has been, there is a glimpse of light at the end of the tunnel. 

Here in Michigan we have been part of just a few markets that have experienced positive gains in the housing market recently.  More specifically prices of homes for sale in Rochester have increased around 1 percent from last year. 

If your first reaction is "Who cares about 1 percent?" take a moment and hear me out. 

According to U. S. Census data, up until 2008 the annual new home price increase was 5.4 percent but this statistic does not take into account the size of these new homes.  Annually, up until 2004 the size of new homes built increased 1.6 percent and we all know an increase in square footage will also mean an increase in price.

So thinking about it from that perspective, this 5.4 percent we were all told about would actually be an inflated percentage as it relates to existing homes. 

Even though math won’t allow this, just for the sake of my point if you subtracted 1.6 percent from the 5.4 percent we would be left with 3.8 percent.  Now in reality that 3.8 pecent is not accurate at all, yet it could very well be closer to the actual average existing home price increase than the 5.4 percent of new houses.

With that explained, 1 percent compared to the theoretical 3.8 percent is closer then to the 5.4 percent we were told. 

The important point to think about is this means we do not have as far to go as many might think for Michigan’s housing market to get back on track. 

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Rochester Hills Resident March 29, 2012 at 05:05 PM
Hi - I appreciate this information that you have been able to share. I had recently been told that banks are holding on to a decent amount of foreclosed properties that they have yet to put on the market for sale. When these properties do hit the market, they are likely to be sold at lower prices thus bringing down home values again. Do you know if there are a large amount of foreclosed homes in this situation in the Rochester/Rochester Hills area? There seems to be very little for sale these days and I was wondering if this could be one of the reasons why. Thank you in advance for any information you may able to provide!!
Kristin Drummelsmith March 29, 2012 at 09:08 PM
Our realtor also told us the same thing - there is a huge shadow inventory that has not yet been released. Wonder what it will do to the market. Assuming it depends on the timing of the release of the homes.
Michael T. Fleck March 30, 2012 at 02:07 AM
If I’m not mistaken I believe your referring to the houses whose foreclosures were put on hold during the case involving banks and electronic foreclosure. There is some truth to there being inventory out there that has yet to hit market but there are variables that have changed over that time. Banks realize that flooding the market would hurt the recovery and in turn their ability to sell these assets to get them off their books. Recently I tuned in to a webinar put on by Bank of America about their new goals of working more with homeowners and their option of short selling in hopes of increasing those numbers rather then just foreclosing. I don’t have an answer on the situation of foreclosures like that in the Rochester area. What I can add though is that’s a desirable area and there are more buyers out there then people willing to sell.

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