Remember that too-hot-to-handle housing market in metro Detroit? The one where a nice, well-priced home in Ferndale could get three offers on the table in one day?

Well, we're starting to see listing prices on some homes inch down enough to indicate that we're settling into a housing slowdown.

More likely than not, experts say, this isn't a temporary blip but a clear indicator that the days of name-your-price bidding wars are likely to be fading fast.

"You'll probably even get a little bit better of a deal in the spring than you would right now as a buyer," said Tim Gilson, associate broker for Keller Williams Domain and the Gilson Home Group in Birmingham.

The number of homes sold in southeastern Michigan was down 5.7 percent in September, according to data from RealComp, a Farmington Hills-based multiple listing service.

The expectation, according to some real estate agents, is that October will show a drop too, but not quite as severe.

Nationwide, new home sales proved to be disappointing in September, following the trend for existing home sales.

Higher mortgage rates hurt housing

"Housing tends to be the first sector to respond to higher interest rates, which raises a red flag on the longevity of this cycle," said Diane Swonk, chief economist for Grant Thornton in a report.

"The silver lining is that, after reaching a peak, housing can plateau for more than a year and a half before the overall economy slips into a recession," she said.

Rising incomes, for example, could give some hope that buyers would return to the market and give another leg to the housing market in 2019, she said.

Yet there are risks: Maybe, housing won't rebound as much as some expect. Maybe, mortgage rates climb much higher than expected. Maybe, stock prices on Wall Street continue to tumble and drive down consumer confidence.

A few things are happening now: Mortgage rates are going up, making monthly payments more costly, particularly for those who are stretching to buy the home of their dreams. Some buyers gave up shopping — driving down demand — when the market was so hot that they never felt they had a decent shot at a move-in ready home.

"Things are definitely cooling off," said Keith Gumbinger, vice president for HSH.com.

Rates for a 30-year mortgage, for example, peaked at an average of 4.9 percent this month — up nearly a full percentage point from 3.88 percent a year ago. And mortgage rates are expected to keep climbing.

By next year, the 30-year fixed mortgage rate could be at 5.55 percent in November 2019, according to Robert Dye, chief economist for Dallas-based Comerica.

Higher borrowing costs — and higher home values — only make it tougher for many to close a deal and buy a home.

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Unfortunately, a 5 percent rate sounds high to someone who saw rates below 4 percent just a year ago, Gumbinger said. But in reality, many people faced much higher rates in the past, such as 7 percent or 8 percent in the early 2000s. Rates were around 6 percent about 10 years ago.

Challenges build for buyers

Home sales aren't collapsing, given that mortgage rates remain relatively low and many people are working.

Affordability, though, is an issue that may hold back potential buyers.

"Higher existing house prices, higher land prices, higher materials prices, higher labor costs and higher mortgage rates are all working against entry-level buyers," Dye said.

Housing permits for single family home construction dropped 3.69 percent in Michigan in September, according to the Home Builders Association of Michigan.

Challenges hampering building, according to the association, include the lack of skilled workers to support construction jobs, a shortage of lots, rising building material costs and burdensome government regulations.

Will a cool down in housing drive the country into a recession? Right now, some economists say no.

"Given the strong conditions elsewhere in the U.S. economy, in my view, a cooler housing market is not sufficient to pull the rest of the U.S. economy into a recession," Dye said.

"But a cooler housing market could certainly add to other problems," he warned.

To be sure, the housing story isn't consistent across the country or even the same in a given state.

RealComp, for example, said "pockets of unprecedented price heights" remain in some areas. The September median sale price for the single-family market in the metro Detroit area was up 3 percent compared to a year ago.

The median sales price for September was $169,900 — up 42.18 percent from 2013.

Prices keep going up. But the Detroit area was growing at an overall pace of about 10 percent in the third quarter, similar to the growth rate a year ago, said Daren Blomquist, senior vice president at ATTOM Data Solutions, curator of a national property database.

Nationwide, U.S. single family homes and condos sold for a median price of $256,000 in the third quarter — up 1 percent from the previous quarter and 4.8 percent from a year ago — the slowest pace since the second quarter of 2016, according to ATTOM Data.

Overall, prices continue to go up but not as quickly as they did a year ago in many markets, such as Chicago.

Because metro Detroit tends to be a more affordable market, Blomquist said, fewer prospective home buyers could be pushed out of the market by higher rates.

Detroit is ranked No. 11 in terms of affordability in a ranking of top 50 metro markets, based on population, according to HSH.com.

While the Detroit market has gotten a little pricier over the past few years, Gumbinger said, the income needed in the Detroit area to purchase a median-priced home of $190,950 was roughly $46,000.

The calculation is based on taxes and insurance costs and a 20 percent down payment. A smaller down payment of 10 percent — which would require private mortgage insurance payments — would require an income of around $53,000 in order to be affordable.



For home owners, it may be better to see a measured, modest slowdown, which would prevent a housing bubble from taking place, Blomquist said.

Most homeowners, of course, would prefer that home prices not swing up and down dramatically like the stock market.

New buyers may find more room to shop, as the market cools down. Some may even feel more comfortable looking for a home if they quit in frustration a few months ago after some upsetting bidding wars.

"Buyers have the luxury of time today, more than they did six months ago," Gilson said.

Room to negotiate

And there may be more room to negotiate on price in some cases. Some of the more pie-in-the-sky asking prices are being trimmed back here.

Last week, for example, 17 homes listed for sale saw price reductions in the Woodward corridor on homes in a variety of price points, Gilson said.

A quick look on Zillow.com indicated price cuts of $5,000 to $20,000 on some homes in the past few weeks.

A small three-bedroom bungalow in Royal Oak was priced at $224,900 on Zillow last week — down $5,000 as of Oct. 11. Another, larger three-bedroom colonial in Royal Oak was priced at $299,900 — down $10,000 as of Oct. 15.

A three-bedroom colonial in Ferndale is priced at $299,000 — down $20,900 as of Oct. 10. Another colonial in Ferndale was priced at $278,900 — down $11,000 as of Oct. 24.

Of course, most sellers aren't willing to engage in fire-sale prices, either.

Jim Shaffer, operating partner for Keller Williams Domain and Keller Williams Metro Royal Oak, says he's concerned that some potential bargain shoppers may dwell on the headlines but make unrealistic bids, as a result.

Recently, he said, one seller in southern Oakland County dropped a home's asking price from $250,000 to $225,000.

A potential buyer countered at $200,000. After some negotiation, the seller agreed to drop the price by another $8,000 to take the home down to $217,000.

But the buyer walked away — unwilling to pay $217,000 for a home once priced at $250,000.

"Their judgement gets clouded by those news reports," Shaffer said.

Contact Susan Tompor: stompor@freepress.com or 313-222-8876. Follow Susan on Twitter @Tompor.