Metro Detroit’s home price recovery was extended to 15 straight months in September with another increase above the inflation rate, helping to lead a national housing recovery in a weak economy.
The Detroit area’s 7.6 percent price growth from September 2011 was the third highest in the nation behind Phoenix’s 20.4 percent gain and Minneapolis’ 8.8 percent rise, according to Standard & Poor’s/Case-Shiller index. Prices rose 3 percent overall in 20 metropolitan areas. The September result marked the sixth consecutive month of a nationwide year-over-year increase in prices.
Detroit has been the second-hottest housing market in the nation over the first 9 months of 2012, according to Case-Shiller data that cover about half of the homes in the U.S. The Metro area has seen 13.3-percent price growth through September, behind Phoenix’s 18.4 percent. Since the housing market hit bottom, Detroit has had the best price rebound in the country with a 23.8-percent gain.
As was the case with the strong income gains reported earlier in the week, Detroit’s strong percentage growth is assisted by the fact that we are starting from such a low base. The region hit a low of $64,470 in April 2011, according to Case-Shiller, compared to a January 2000 benchmark of $100,000 [1]. In September 2012 that home now goes for $79,820.
A big factor behind the rebound is the thinning of excess home supply that built up before the housing crisis. The number of previously occupied homes for sale nationwide has fallen to a 10-year low — and is at a record low in Metro Detroit. The inventory of new homes nationwide also is near its lowest level since 1963.
While there is a great deal of disagreement as to how long it will take to get back to January 2000 levels, much less the high point reached in 2005, let us just revel that our direction is up!
Table 1. Case Schiller Index - Home Values - for Metropolitan Detroit, 1995 - 2012
[1] As is the case with the Consumer Price Index, Case Shiller set January 2000 as a benchmark date when every area, regardless of median value, was set at a value of 100. This allows accurate comparison across areas as to growth or decline. Needless to say, the base rate at which Detroit stood at that time was lower than many of the areas used for comparison.