In our last post we wrote about the rising home prices in Detroit. The city led the nation in gains this summer, topping out at six percent in May and June. Some experts say that the modest increases in markets all over the country could be a signal that the residential real estate market is beginning a permanent upward climb out of the recession’s foreclosure cycle.
In a normal economic climate, housing prices often rise in the first part of the year and then remain steady during the second half. Over the past few years, home prices have gone up in the first half as usual, but have fallen in the second half, preventing meaningful gains.
One major factor in the falling prices in the second half of the year has been foreclosures, which are now happening at a lower rate. In July this year, there were about 58,000 foreclosures, compared with 69,000 the year before. Banks have started to work more closely with homeowners to avoid foreclosures because of the depressing effect it can have on home value, which means that it is unlikely that foreclosures will flood the market again the way that they did over the past few years.
Experts say that whether the improvement in the housing market will hold depends largely on individual buyers and investors balancing out demand.
Our Oakland County law firm helps individuals and investors with a variety of real estate related legal issues. More information is available on our residential real estate page.
Source: Businessweek, “Why Home Price Gains Might Even Stick This Time,” Karen Weise, August 28, 2012.