Home / News / Market Studies / Home Price Forecast: Fear and Greed Are Detroit’s 10-4
Print This Post Print This Post

Home Price Forecast: Fear and Greed Are Detroit’s 10-4

In its home price forecast released last week, ""University Financial Associates"":http://www.ufanet.com (UFA) put things into perspective for Detroit, a city besieged by unemployment and plummeting property values, and riddled with foreclosed homes.

[IMAGE]

""It is often stated that prices decline faster than they rise because fear is a stronger emotion than greed. This certainly proved to be the case in Detroit where 10 years of real price gains were erased in just 4 years,"" UFA, which is based in Ann Arbor, Michigan, said in its report.

UFA has developed an index that uses a baseline of 100 to equal home prices levels during the year 1987. The firm's chart for Detroit shows that by 1999, prices had reached a reading 50 points higher than the 100 baseline mark.

Based on UFA's analysis, home prices in the Motor City reached their peak between 2003 and 2004, with an index measurement of 171, and held relatively steady until 2006.

[COLUMN_BREAK]

At that point, it was all downhill, literally. The index plunges, and by the latter half of 2009, UFA pinpoints home prices in Detroit at an index reading of 105 â€" just barely above the 1987 start of the firm's price analysis.

""Detroit metro was the canary in the coal mine this cycle, with falling house prices arriving earlier than in other metros,"" said Dennis Capozza, who is the Dykema Professor of Business Administration in the Ross School of Business at the University of Michigan, and a founding principal of UFA.

A separate ""study by First American CoreLogic"":http://dsnews.comarticles/how-long-will-negative-equity-last-2010-03-29 last week took a close look at negative equity to assess when certain markets would begin to surface from the price dives that have put so many homeowners underwater. The company said Detroit is not projected to recover until after 2020, because of its depressed economy.

Capozza went on to say, ""Other metros that have already or will soon converge to pre-bubble real prices include Las Vegas, Phoenix, the inland California metros, and many south Florida metros.""

UFA continues to forecast falling prices for most metro areas nationally, predicting that stabilization will eventually occur at real prices below the lowest levels of the last 20 years in many metro areas.

UFA has been providing research and housing market forecasts for 20 years. The firm says its analysis successfully predicted such developments as the increase in defaults in Southern California in the mid-90s, as well as the most recent housing crisis.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
x

Check Also

Dip in Rates Brings Resurgence in Bidding Wars

Redfin’s latest analysis of homebuyer trends has found that bidding wars are heating up as mortgage rates have dipped and the nation’s housing supply remains strained.