DETROIT HOMEOWNERS OWE MORE THAN THEIR HOMES ARE WORTH

Detroit homeowners purchased homes before the recession and of course took out loans to finance based on the value of the home. As years and recession have gone by the homes values have dropped as much as 50% leaving those trying to relocate trapped. If the home does sell it may be for less than what the original homeowner has financed on it. This results in the homeowner coming up with a lump sum of money at closing, and they just don’t have that. Their options are to rent, which does not usually cover the mortgage, or stay where they are at and wait for home values to rise.
The last time home prices in metro Detroit were this low, it was the summer of 1994, and Wayne Fontes was the Detroit Lions coach.
Southeast Michigan is far from alone in having depressed home prices, but its descent has been more dramatic. Home prices in metro Detroit have dropped an average of 48% from their December 2005 peak. They're down 34% from 2000.
Those in the market to sell their homes know that all too well. Many realize they will have to take a loss on their home.
Home prices nationwide were down in January for the sixth consecutive month, according to the S&P/Case-Shiller Home Prices Indices released Tuesday.
Metro Detroit home prices remain the most depressed in America, according to data released Tuesday.
The S&P/Case-Shiller Home Prices Indices through January were down 3.1% compared with January 2010 in the nation's 20 largest cities, marking the sixth consecutive month of price declines. In metro Detroit, the drop was more substantial -- an 8.1% decline in home prices in the past year through January as the market weans itself off homebuyer tax incentives that ended last year.
In metro Detroit, the decline is 34% from its 2000 level, while the other cities' home prices are less than 1% below their 2000 levels. Detroit was joined by Atlanta, Cleveland and Las Vegas as markets where home prices are now below their January 2000 levels.
The weakened state of home prices could last for some time. The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery.
The bank foreclosure with attributes such as three bedrooms, 2.5 baths, two-car attached garage, hardwood floors, vaulted ceilings, a master suite with walk-in closet and 1,926 square feet once sold for $268,000. Now, it's listed for $124,900.
Foreclosures are appearing to be decreasing compared to 2009. Because sales are down, there are often times when a property won't sell for what a buyer wants to pay because there are no comparable sales available, and that further depresses prices.
Home prices won't rise until people who owe more on their mortgage than their home's market value are able to refinance. It is also noted that more job creation would boost demand.
The S&P/Case-Shiller composites of the top 10 and top 20 cities have posted monthly declines for the past six months. San Diego and Washington, D.C., are the only metro areas that have seen price appreciation in the past year.
A continuing supply of foreclosures, weak demand and an oversupply of homes for sale will likely mean another 5% drop in home prices before they start improving in the second half of the year, said Patrick Newport, U.S. economist with IHS Global Insight.
Metro Detroit had the second-largest drop in home prices in January behind Phoenix, where home prices fell by 9.1%.
Many residents in the Detroit area are putting up their homes on the market for the third time or more in hopes to sell for at least what they owe. Unfortunately, some will take substantial losses and be forced to owe a large sum of money at closing if their homes.