SOUTH LYON, Mich (WXYZ) — Developments are in the middle of construction. It’s happening throughout metro Detroit. It accelerated when the market was hot while mortgage rates dipped below 3%.
Those days are gone and the waiting list for homes, people are getting off them because they can't afford it.
So, what does that mean for neighborhoods?
Empty homes? Half-built homes?
How about property value?
We worked to find those answers.
“The housing market is too high right now. People like me can’t afford a house,” said Will Van Cleve from Brighton.
It’s a tale of the wrong time for Will Van Cleve.
“I’m in the market for a house right now. I’m living with my parents at the moment and it's so high right now it's hard to get a loan for money that much,” said Van Cleve.
We went to Realtor Michael Perna to confirm.
WXYZ’s Brian Abel asked, “How difficult is it now for somebody to just get a loan?”
“Well, the qualifications haven’t gotten harder, but it is harder to get a larger mortgage to get a property that you may want. So, like a lot of people are going into this looking like they may want to buy somewhere in that $350,000 range, and then they’re finding out that they can really only afford $275,000,” said Perna.
“That’s a very different kind of house Perna,” Perna added.
The reason for the disparity: inflation, and the federal government’s attempt to curtail it by continually raising interest rates until it’s under control.
“Do you see this Fed rate getting higher to a point?” asked Abel.
“I do see the Fed increasing the rate at least one more time before they put the kibosh on it,” said Perna.
That is having a cascade effect, impacting much of metro Detroit, including its expansion in areas like Southfield, Farmington Hills, and South Lyon, where developers have been working to keep up with the demand for new homes brought on by the under 3% mortgage rates as recently as the start of this year.
People are dropping off the waitlist for those homes, leaving them unspoken for and empty. There’s some silver lining in that according to Perna.
“Builders are not willing to let the homes just sit, they are willing to move the inventory because of all the dollars they have invested in that,” said Perna.
That means incentives for buyers: Premium appliances for example: as high as 50,000 worth to get those homes sold and lower sticker prices.
When homes go down in value, it usually brings surrounding home values down with it. That may only be short-term because builders are slowing down, and demand for homes still are high. Partly because of rent.
“Rents have gone up astronomically so it’s pushing a lot of first-time home buyers back into properties so that price range is actually still going up because of the number of people diving into the market,” said Perna.
People like Will, are hoping rates will drop again, sooner than later.
“It’s like you want to get into a house, but you can’t. It's really hard right now,” said Van Cleve.
There is concern that the high demand meeting these now high mortgage rates has created another housing bubble similar to 2008 but Perna says in metro Detroit that bubble is unlikely to burst because the area is still growing and demand for homes is still outpacing what’s available.
