Detroit foreclosure homes for sale are still priced so low that renters can lower their monthly housing expenses by buying a home instead of renting, according to a study of rents and home prices by research company Reis and Business Week.
The two companies used rent and home price data in the second quarter of this year to compare rents and home prices in 20 metropolitan areas. The other city where one can save by buying a home instead of renting is Pittsburgh.
The researchers calculated home buying costs using a 30-year fixed-rate home loan to cover 100 percent of the sales price. They said they did not factor in the usual 20-percent down payment because they found that if they consider the down payment, home buying would be the cheaper option in ten of the metro areas in their list.
During the first months of 2009 when mass layoffs in the auto industry occurred and plenty of houses were foreclosed, Detroit foreclosure homes for sale were being given away for less than $10,000. In April, the average home price was only $20,514 and homes in higher-cost communities were being sold at around $40,000 to $50,000.
Based on data from the Detroit Board of Realtors and the Michigan Association of Realtors, the average price for a house in Detroit in July decreased to $11,596, a 40-percent drop from the average price in July last year. Compared to the peak home price of $97,850 in 2003, the July average price marked a staggering price drop of 88 percent.
With a 30-year fixed-rate home loan and a 20-percent down payment on a Detroit house priced at $11,596, the monthly payment at a 5.25-percent mortgage rate would only be $51.23, a staggeringly much lower amount than most rents across the city.
Across the state of Michigan, the average home price has dropped by nearly 24 percent to $93,648 in July compared to the $122,660 average price in July last year.
Mass layoffs in the auto industry and in other manufacturing sectors continue to batter the Detroit housing market. In July, almost 3 in 10 people in the city are jobless, with the unemployment rate rising to 28.9 percent, based on data from the Michigan Department of Energy, Labor and Economic Growth. A total of 113,008 residents have no jobs, many of them forced to leave their houses to foreclosures.
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