According to national headlines, Detroit is in the midst of an unprecedented revitalization: The urban core is booming and property values have been increasing across the city. Not only that, but home prices are still incredibly cheap relative to other markets. If Detroit is an undervalued market on the rise, how could it not be a good time to buy a house?
The situation, however, is more complicated. For one, Detroit’s supposed revitalization is overblown; gains have been isolated to a handful of neighborhoods in the urban core or stable historic districts. More importantly, intentions matter in the housing market. Are you buying a house to live in? Are you buying because it’s cheaper to pay a mortgage than rent? Or is this a long-term investment that will (hopefully) pay for your retirement? Then there are other crucial decision-making factors, like which neighborhoods work best for you, whether or not you have kids, your personal finances, and timing.
Should you buy a house in Detroit right now? We surveyed a broad group of housing experts—realtors, developers, urban planners, and housing activists—to hash out this surprisingly complex question.
We collected the responses below before the outbreak of novel coronavirus in the U.S. How might its spread impact the housing market this year? Read this.
Ryan Cooley
Founder, O’Connor Real Estate
Whether or not to buy in 2020 really depends on the buyer’s intentions. If you want a home that you plan to live in for a while, then yes, it’s a great time to buy—interest rates are still low, and it’s often less expensive to own than to rent in many parts of the city. If you’re hoping to flip a house or buy one strictly as an investment, you might want to wait for a downshift.
Detroit prices are at their highest in 15 years. Investors come in anyway, looking for a discount block in an up-and-coming neighborhood—everybody still thinks there’s some magic opportunity to make money. But it can be tricky to predict: How much higher will prices go? When will the bubble burst? What will this neighborhood look like in five to 10 years?
The scenario that’s easier to forecast is that of the potential homebuyer. Of course the homebuyer doesn’t want to lose money, but they’re asking a completely different set of questions: Can I afford this? Will I be happy here?
“If you are investing with the expectation that you will be able to sell your asset at a profit no matter what, you may be just the person who’s inflating the prices to begin with. Detroit doesn’t want your bubble and you don’t want the risk.”
—Michele Oberholtzer
Michele Oberholtzer
Director of tax foreclosure prevention, United Community Housing Coalition
2020 is not the year of the house; it’s the year of the home. We are way past the hubris of assuming that real estate will increase in value no matter what. We know that the knobs of the economy tune in both directions. So if you are investing with the expectation that you will be able to sell your asset at a profit no matter what, you may be just the person who’s inflating the prices to begin with. Detroit doesn’t want your bubble and you don’t want the risk.
If, however, you are planning to live in this house, and if buying means a long-term relationship, now we’re on to something. For those who can get a mortgage, you might find that your monthly payments are actually cheaper than rent for the same housing stock. For those who cannot, or for anyone who wants to purchase on the lower end of the spectrum, there are still tens of thousands of vacant homes in the Detroit Land Bank Authority, Wayne County Tax Foreclosure Auction, and, heck, even Facebook Marketplace. Restoring a vacant house to livable status is both a public service and a personal benefit, so I say go for it. And say “hi” to your neighbors—you’re going to be here a while.
Kimberly Faison
Director of community and economic development, Detroit Future City
Buying a home is generally considered a business proposition—build wealth, leverage equity, amass assets. However, buying a home in Detroit is actually a double bottom line, financial and experiential. Clearly, buyers should understand their own circ*mstances and goals and the market into which they want to enter. A buyer in Detroit can combine low interest rates, down payment assistance, and a plethora of homebuyer assistance programs to purchase within a huge spectrum of price points. Compared to the surrounding region’s markets, Detroit may fare modestly. But make no mistake, investments in neighborhoods are unprecedented, and Detroit is on the rise.
But buying in Detroit is a solid move only if you understand that returns vary greatly. Detroit’s neighborhoods are unique, and they’re experiencing social, economic, and physical change in different ways. We know all too well that Detroit residents don’t enjoy the perks of a growing central city or the pains of economic struggle equally. We also know that Detroit has a robust civic infrastructure, loads of culture, and an urban lifestyle that is unique in this great state. The city’s community development network is well organized and aiming to stabilize community living. City living offers nightlife, greenways and park systems, and regional attractions for the whole family. But diversity is Detroit’s superpower. Predominantly of color, Detroit is full of cultural events large and small, maker businesses, and an emerging artist network all influenced by rich heritage. Buying in Detroit means shaping its future.
Ishma Best
Managing broker, PREP Realty, director of sales and leasing, Century Partners
Now is a fantastic time to purchase a home in Detroit. But discernment is critical when selecting a home and neighborhood, particularly for first-time homebuyers. Currently, more than 84 percent of economists believe the economy will remain strong through 2020. While average rents in cities like Detroit have risen dramatically over the last five years—to the tune of 30 to 50 percent—mortgage rates are still the lowest they have been in decades.
Buying a home presents a best of both worlds scenario. First, you own an asset that serves as a bank account that’s yours for as little as 3 percent down. Second, with the growth of urban living, we know strong rental demand is here to stay. That means you’ll have the flexibility to rent and activate your asset if your living requirements change. Also, rental demand goes up when the economy weakens.
Rob Linn
Director of inventory, Detroit Land Bank Authority
Despite remarkable gains over the past five years, Detroit’s housing market continues to offer opportunity for residents, making 2020 a great time to buy a home in Detroit. Between 2014 and 2020, average home values in the city more than doubled—the most robust growth in the nation. At the same time, Detroit’s nation-leading 6.8 price-to-rent ratio suggests Detroit’s market still offers a wealth of opportunity and value for homebuyers.
This underlying strength suggests Detroit’s housing market has room to grow, and is likely to continue along a strong trajectory. With daily auction and “own-it-now” sales on buildingdetroit.org starting at just $1,000, and more traditional real estate options available through our Rehabbed & Ready and Marketed Properties, the Detroit Land Bank Authority offers potential buyers a wide variety of affordable and accessible pathways to homeownership.
“Right now, in our over 80 percent black city, I speak to the majority. 2020 is the time to become a landowner, homeowner, and/or building owner in Detroit. In 2020, buy something while planning and preparing for something more. It is a moral imperative.”
—Monique Becker
Monique Becker
Partner, Mona Lisa Development, manager of program implementation, Building Community Value
Homeownership has been the prevailing wealth-building tool utilized by Americans for generations. In fact, according to the U.S. census, homeowners’ median net worth is 80 times larger than renters’ median net worth. Yet, historically, most black people have not enjoyed these privileges. Redlining proved that where you let us live, you would not lend. Without your money, our pockets were too thin to participate in the prosperity of the country. Once we did get mortgages, it felt like those mortgages got us. Predatory lending, especially in economic downturns, disproportionately displaced us and replaced us as owners with us as renters. We were building someone else’s equity—again.
So, right now, in our over 80 percent black city, I speak to the majority. 2020 is the time to become a landowner, homeowner, and/or building owner in Detroit. In 2020, buy something while planning and preparing for something more. It is a moral imperative.
Meet bankers, pool resources, get a trade—there is a shortage of skilled labor, after all. Buy what you can, when you can, and with an understanding of the supports available to turn that purchase into a viable investment. Given the many incentives for homeowners, perhaps a house makes sense, perhaps it’s vacant land, or perhaps it’s taking on a small percentage of ownership in a larger deal that you have vetted. Regardless, remember the words of Reverend Garrison Frazier when discussing the needs of black people post–Civil War: “The way we can best take care of ourselves is to have land and turn it and till it by our own labor.” Only increased ownership by black Detroiters can counter gentrification with self-determination. In 2020 we will build up our city while building wealth for generations.
Nika Jusufi
Associate broker, Max Broock Realtors
When I am asked this question—“Should I buy a house?”—by clients, what immediately comes to my mind is a series of questions, which often leads to a personal discussion and usually a very interesting story! Buying a home to live in is often an emotional decision, and it can be a life-changing experience for most. I’m always curious to know: Is there a life change that prompts one’s decision to buy? What do they know about Detroit? Where would they be moving from?
It may be a matter of affordability—they may be displaced by their current city (NYC, SF, LA, etc) and wanting a better quality of life. Others want to leave the suburbs and live a more urban lifestyle, experiencing the culture and diversity Detroit has to offer. Some have equity in their home, and they’d like to upsize. Then there are those that have that deep-rooted connection to Detroit, whether they were born here and want to come back, or their parents once lived in the city and they want to reestablish those roots. Whether one should buy a home in Detroit is not a straight yes or no answer, but I ultimately believe, if one is excited about living in Detroit and can afford making this decision, then why not? Rents are high and mortgage rates are the lowest they’ve been in eight years.
Alissa Shelton
Executive director, Brick + Beam Detroit
To answer this, you’ve got to weigh your personal skills, finances, and opportunities. I try to avoid the panic of a “buyers market,” and focus on assessing a more nuanced, personal answer. I always recommend folks buy one of the many existing homes in Detroit: We have amazing housing stock, 95 percent of which is over 50 years old. Fixer-uppers often seem like the perfect opportunity—we’re drawn to the before-and-afters of the derelict fixer-upper turned Dwell magazine cover story, and the mythology of the $500 house. I don’t want to discourage you from seeing potential, but instead encourage you to take a realistic inventory of repairs that a house needs, the skills you’ve got, the time you can commit to repairs (and learning on the job), the funds you have available, the home price, and your ability to live in an unfinished home.
Sarah Alvarez
Founder, Outlier Media
If, like most Detroiters, you’re buying a house in cash, the answer is: Buy a house with caution. The number of people buying Detroit houses with mortgages is rising, but the city is still a cash market, especially for non-white homebuyers. There are advantages to buying a house in cash: It can be cheaper than renting, faster than buying with a mortgage and, particularly for African Americans, is sometimes the only option as most mortgages in Detroit are still going to white borrowers.
But buying in cash means there is no bank in the mix looking to manage the risks that can come along with a home purchase. For example, banks require the property to be inspected and take care of sending property taxes to the city. Buying in cash or with a “rent-to-own” land contract moves all the risks of homeownership onto the buyer. Anybody thinking about buying in cash can lower their risk by doing the following: Check for back taxes and utility bills on the property (text Detroit to 73224 to do that), ensure that the purchase contract is in writing and fair, and consider paying for a title search and title insurance.
Interview responses have been lightly edited for length and clarity.
