The Top 10 Reasons

  • Home
  • Contact
  • Privacy
  • Sitemap

The Top 10 Reasons To Not Buy A Home In Michigan Until 2010

October 23, 2008 by Brad G

1. First off, I really do not think anybody should be buying a home for any reason until 2010. There is nothing stopping home values dropping around the country. What needs to happen first is we need to have a leveling out period.

2. Home prices are expected to drop in the greater Detroit, MI area another 8% by May 2009. CNN wrote an article analyzing data and what home prices should be doing. In there you will see Detroit, MI going down 8.6% and Farmington Hills going down 5.9%. This is one of the first charts I have seen that I agree with. Its probably because it was not written by the National Realtors Association. Realtors will always tell you its a great time to buy…mainly because its how they get paid.

3. Shouldn’t this be the time that you want to buy? Prices are dropping at a alarming rate and you have endless choices of where to live. This is the time that you really need to think about why you want to move or buy a house instead of “I can get a great deal.”

4. So why would you want to buy a home in Michigan in 2008 or 2009? There are only a couple instances where it makes sense. Let’s say you just got married and you need a place together now. You need to live somewhere. If both of you were living in a 1 bedroom apartment then you need more space. Another reason would be that you plan on living in this next home for the rest of your life. When you commit to this then it does not matter what is happening in the economy. That house is now your home. Maybe you want to make a lateral move. This is one where you are buying a home worth the same as your current but maybe its in a better school district or nicer community.

5. What about the people who want to upgrade their style of living and already own a home? This is what you have to ask yourself. If you plan on living in that home for the next 15 years (everybody does) then buy it. Do you really need the bigger or newer home? If you have the money, then do it. I have told friends of mine that if they are happy knowing the house they are going to buy is going to de-value by 20% over the next 2 years then it does not matter, i.e pay $300k and in 2010 its now worth $240k. As long as you are comfortable with losing $60k in equity in your home then go for it. Just do not complain in 2 years if you lose your job and cannot sell your home or your neighbors bought the same exact home for $230k. Remember, nobody pays full price for real estate anymore.

6. First time home buyers really need to take a look into their future if they plan on buying in Michigan. Let’s say that right now you currently rent a 2 bedroom apartment for $900 a month. In the same city you live in you could get a 3 bedroom home for $120k. Lets assume you have money for a 20% down payment which would give you a loan for $96k. Assuming 30 year fixed mortgage rates are around 7% you can get a monthly payment for about $640 a month. With property taxes and home owners insurance your probably looking at $900 a month. Not bad. You get another bedroom and a tax write off now. What if you could wait another year. That same house or one just like it is now worth $108k. This is $12k off the asking price now. Lets say you put down the same 20%. You get a mortgage of $86,400. Monthly principal and interest payments are $575. This saves you $65 a month in interest over the life of the loan. Over 30 years it comes out to $23,400 + $12k in down payment you saved by waiting a year = $35,400. To somebody buying a $108k home, I know that is a lot of money. It would make more sense to just rent for another year while home prices keep on dropping. This way you can save more money and not have to worry about things like the furnace blowing, replacing a roof, mowing the grass, and any other things that can go wrong with a house. If you rent, all of those are included in your rent payment. When you own they are additional payments on top of your mortgage payment.

7. Renting is the way to go in Michigan and let me tell you why. Landlords cannot raise rents on their properties because there are not enough people to rent to. Even the people buying homes for rentals are feeling the pinch. Here is a great example. My family owns a rental property in Eastpointe, MI. We bought the home in 2005. Fixed it up and have been renting in since. Since 2007 there have been a number of homes on the street which have been foreclosed on. Speculators have came in and bought those homes for $30k (we paid $60k plus upgrades to make the house pretty). The mortgage payment on those houses are now half of ours. They charge $200 less a month for rent than we can because our mortgage payment is higher. Its basically the same house. Ours is just a little nicer, but why would somebody pay $200 more in rent just because it has newer appliances? You wouldn’t. So now we are on the outside looking in. We need the money to cover the mortgage payment. We had to lower our rent by $30 a month so now we just break even. Hopefully, you see where I am going with this. This is happening in every city including Royal Oak, Ferndale, Warren, Detroit, Farmington Hills, etc. The renter can now negotiate because there are so many homes and apartments available. Before, it was never like this. Remember, if something goes wrong with the house its not your responsibility to fix it, its the landlords.

8. The economy in Michigan sucks. What makes you think your job is not replaceable? It is. What makes you think you will not be laid off? You could be. Why tie yourself into a bigger mortgage payment or take on the responsibility of being a first time home buyer in a dying economy? It would be smarter to stay what your doing until outside economic forces cool down. I read this article from the Detroit News and it blew me away. It talks about the possible sale of Chrysler to General Motors. About 37k Chrysler workers live in the State of Michigan. If GM were to buy Chrylser, some 21k hourly workers and 15k salaried workers could lose their jobs throughout North America. Of the 36k that could lose their jobs half of those are in Michigan. Some 18k people could be unemployed because of the sale. Now you need to think about all of those people who do not have jobs anymore and how their lifestyles are going to change. These are good paying jobs (a little too good paying). You will see even more homes go into foreclosure in Michigan because nobody can make the payments on their home loans. This will cause home prices to drop even more.

9. The 18k number is probably on the small side. Take into consideration all of the suppliers Chrysler has. All of those places would not be needed anymore. More small businesses would close in result of the Chrysler sale. Lets add another 6k in job losses just from the suppliers. Now we have 24k unemployed people. Now you need to take into account where those 24k spend their money at. Places like restaurants, movie theaters, car dealerships, lawyers, Dr’s offices, and shopping malls. All of those places will be hurt too because nobody is spending money. The cities of Sterling Heights and Auburn Hills would be hit hardest. The Chrysler World Headquarters (a 1 million square foot building) in Auburn Hills would be of no use, and the plant on 17 Mile Road and Van Dyke would be obsolete. Auburn Hills collects $3 MILLION in taxes and Sterling Heights $2 MILLION in taxes every year just from Chrylser. Let alone all of the people that own homes in those cities who work for Chrysler. All of the tax revenue they collect from property taxes is gone. Do you think those two cities might go bankrupt without the revenue? I wonder who is going to pay for the police and fire departments. Lets add another 500 city and county workers on top of that. We now get about 24,500 more unemployed people JUST IN THE STATE OF MICHIGAN if this sale of Chrylser to GM goes through.

10. Figuring out real estate prices is all about supply and demand. The supply of homes is getting larger and the demand for them is getting smaller. If 24,500 people are given pink slips over the next 2 years just from Chrysler it will cause home prices to drop even more. Do not think you are getting a deal because the home you want to buy is worth half of what it was in 2004. The market is telling you what its worth. If you are comfortable where you live in Michigan right now then you need to stay put. It will save you thousands of dollars on the price of a home over the next two years. Stay posted on the sale of Chrysler. If it goes through then you may need to wait longer than 2010.

Filed Under: Real Estate

Comments

  1. Stacey Derbinshire says

    October 23, 2008 at 3:45 pm

    Hello. I was reading someone elses blog and saw you on their blogroll. Would you be interested in exchanging blog roll links? If so, feel free to email me.

    Thanks.

  2. Andrea says

    October 23, 2008 at 6:01 pm

    Chrysler has already cut 1,825 jobs. Check out this article:

    http://www.usatoday.com/money/autos/2008-10-23-chrysler-layoffs_N.htm?loc=interstitialskip

    The worst is yet to come.

  3. Spanish Property for Sale says

    October 24, 2008 at 11:39 am

    useful information nice to read it.

  4. Alan says

    November 11, 2008 at 7:49 pm

    Its all about timing and desire. With the homes going in foreclosure and mortgage companies dumbing these REOs this can be a great time for many people who have the money and planning on making Michigan or any place their home. Three months ago I bought a 7 bedroom home on an acre lot in Michigan for only $45,000 (very minor work need to be done). Several real estate agents in the area have already told me with the litle TLC I have done they could list this home for $130,000 to $150,000 if I wait till spring. They also have told me that this home had been apraised for $217,000 pior to the housing market bust. I work here in Michigan even if I sell this home for the same or little more than I paid it like living here rent FREE.

    Your cold statement about a whole state is what has and is killing all the markets. If no one buys an American car or thier parts for 1 year all American car manufactures could be out of business too.

    To get the economy growing is by spending (money not Credit) not stop spending as many people have out of FEAR.

    *”So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.”

    *Source: Franklin D. Roosevelt, Inaugural Address, March 4, 1933, as published in Samuel Rosenman, ed., The Public Papers of Franklin D. Roosevelt, Volume Two: The Year of Crisis, 1933 (New York: Random House, 1938), 11–16.

  5. Brad G says

    November 11, 2008 at 11:17 pm

    @ Alan

    I agree about the timing and desire. If you want it, now is a great time to buy. If you wait another year its going to be an ever better time to buy financially speaking.

    A 7 bedroom home on an acre lot for $45k is a real find. If it only needed minor work why didn’t it sell for $75k when you have been told its worth $130k? Is it because there were no buyers.

    It does not matter what the home was worth prior to the housing market bust. You need to look at what it was worth around 2001 to get a true value of it. If you plan on staying in the home forever or more than 10 years then your not buying it to make money off of it and that’s fine. Its a place to live.

    I was not trying to be cold but just stating the facts. I live in Michigan and grew up in a house where my dad was a Pipefitter for Ford’s for 38 years. I buy Ford cars and will continue to do so.

    What do you think is going to happen to Michigan property values when Mt. GM and Mt. Chrysler blow their tops. Can you see 20k people out of work all trying to sell their homes against each other on top of the people already trying to sell their homes? Do you think prices are going to drop more? Economics would say so.

Top Posts

  • The Top 10 Reasons Why Ron Paul's Foreign Policy Stances Are NOT SCARY
  • The Top 10 Reasons Why Ron Paul Is The Rational Choice For President
  • The Top 10 Reasons Why Ben Bernake Should NOT Be Time Magazines 2009 Person Of The Year
  • The Top 10 Reasons Why The eBay Partner Networks PPC Affiliate Program is No Good
  • The Top 10 Reasons To Join The Build A Niche Store Guide Contest
  • The Top 10 Reasons Why Sirius Satellite Radios Auto Renew/Cancellation Policy Is Bad
  • The Top 10 Reasons To Lease Over Buying A Car
  • The Top 10 Reasons To Use A RSS Feed On Your Website
  • The Top 10 Reasons To Close The IRS
  • The Top 10 Reasons To Be Happy With The Detroit Lions Going 0-16

Copyright © 2021 · eleven40 Pro Theme on Genesis Framework · WordPress · Log in