Detroit is a city that's famous for a variety of reasons; including their notoriously low housing market values. The recent recession and the fall of the auto industry have dragged housing values down even further.
Detroit is a city that's famous for a variety of reasons; including their notoriously low housing market values. The recent recession and the fall of the auto industry have dragged housing values down even further.
When the period of October to December of 2012 is compared to the same period in 2011, there is a significant decrease of over sixteen percent in median home values. While the home values combined with a large number of foreclosures may seem like the perfect formula for a never-ending housing recession in Detroit, investors and the recent auto bailout may be the saving grace for the former booming housing market.
Cheap Prices, Plenty of Investors
A large amount of foreclosures in the Detroit housing market have attracted real estate investors.
When investors see thousands of foreclosed homes being sold for less than $10,000 they become enticed to purchase real estate in bulk. In Detroit's case, many investors have done so. Some investors have come to Detroit from as far away as Australia and Europe to purchase homes in mass numbers.
New investors may be the key to bringing Detroit out of its housing funk. The recession left much of Detroit's neighborhoods abandoned. Abandoned homes means little to no upkeep on the property and the possibility of squatters taking over parts of the neighborhood.
The influx of investors that are buying up abandoned and foreclosed properties will help the overall market value of homes in the area. Houses will be renovated and maintained, tenants will begin to move in and the market value will increase. Many investors are even offering rent-to-own or lease-to-own programs that offer new tenants with poor credit a chance at home ownership.
Younger Buyers in Masses
Due to the large number of cheap homes on the market in Detroit, younger buyers are more able and willing to purchase a home instead of rent one. Like investors, young buyers are turning up in large numbers to purchase homes that are in the foreclosure or short-sale process.
Rent-versus-own ratio is an important factor that will lift Detroit's housing market out of the dumps. Home owners are more likely to take better care of their homes and will live longer in their respective neighborhoods. While tenants that rent homes are important for short-term stability, home owners will bring long-term growth to the community.
The Auto Bailout
The collapse of the large auto makers is a large reason why the Detroit area is so depressed. Twenty percent of their workforce was laid off and hundreds of manufacturing partners in the area went bankrupt.
Within a few years, the auto industry has recovered with the help of a government-backed bailout. Employees have returned to work and all of the major auto companies have turned a profit.
Because the bailout allowed auto companies to hire more workers and turn a profit, people have begun to move back into the city and purchase properties. While the housing market in Detroit may take years to recover, the recent re-structuring of the auto industry and the positive outlook for jobs within the city suggest that the city's housing market is on the right track to an increase in home-ownership and overall value.
Raymond Liebowitz is a freelance writer who focuses on real estate, capital investment, international trade and commerce, finance, and current events. If you’re interested in real estate click TheRichlandapts.com to learn more.
