Michigan Housing Market Report: Detroit Home Prices Plummet
There are problems in the most populated Michigan housing market.
Detroit, which has lost more than half its population in the past 30 years and struggled with rising crime, failing schools and other social problems, largely missed out on the housing boom that swept much of the country in recent years.
Home prices have gained less than 2 percent per year in the five years since 2001, when the auto industry entered a renewed slump.
Real estate auction examples
Steve Izairi, 32, who conducted a mortgage refinance on his own house in suburban Dearborn and sold his restaurant to begin buying rental properties in Detroit two years, was concerned that houses he thought were bargains at $70,000 two years ago were now selling for just $35,000.
At least 16 Detroit houses up for sale on Sunday at an auction sold for $30,000 or less.
A boarded-up bungalow on the city’s west side brought $1,300. A four-bedroom house near the original Motown recording studio sold for $7,000.
“You can’t buy a used car for that,” said Izairi. “It’s a gamble, and you have to wonder how low it’s going to get.”
Detroit, where unemployment runs near 14 percent and a third of the population lives in poverty, leads the nation in new foreclosure filings, according to tracking service RealtyTrac.
With large swaths of the city now abandoned, banks are reclaiming and reselling Detroit homes from buyers who can no longer afford payments at seven times the national rate.
Michigan was the only state to see home prices fall in 2006. The national average price rose almost 6 percent but prices slipped 0.4 percent here, according to a federal study. The state’s jobless rate of 7.1 percent in January was also the second highest in the nation, behind only Mississippi.
How much can you buy for $1 million?
Mayor Kwame Kilpatrick was greeted with applause when he announced last week that two condominiums in the city’s revitalizing downtown sold for over $1 million each.
But investors, including some from out of state, proved far more cautious at Sunday’s auction.
Dave Webb, principal at Hudson & Marshall, said Michigan had become a “heavy volume” market for his auction firm in recent years, although bigger-money deals were waiting in the California housing market, a region he said was ready for the first such auctions of repossessed property in years.
“These people that are buying have got to look at holding on for five to seven years,” he said. “The key is holding power.”
Even with the steep discounts on Detroit-area properties, some buyers handed over their deposits with a wince.
“I’m not sure it’s congratulations,” said Kirk Neal, a 55-year-old auto body shop worker who bought a ranch in the suburb of Oak Park for $34,000. “My wife is going to kill me.”
Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield Hills that had listed for $525,000 sell for just $130,000 at the auction. The Michigan mortgage borrowers simply were not active.
“Once we’ve seen the last person leave Michigan, then I think we’ll be able to say we’ve seen the bottom,” he said