Detroit Welcome to Landlord Nation, where foreclosure notices are plentiful and for-sale signs offer at least 1,800 homes for under $10,000 that once were worth at least 10 times more.
In extreme cases, homes are on sale for $1 or less, which has enticed investors to Detroit from as far away as the United Kingdom and Australia.
“In the past few months, I’ve picked up 10 new clients from out of state that are buying in bulk,” said Mike Shannon, a suburban Detroit real estate agent. His office specializes in foreclosures in a city that’s among the national leaders.
“They’re coming to us, saying ‘Look, I want to buy 50, 100, 1,000.’ They want to own every decent and cheap house they can find.”
Despite a stagnant retail housing market, real estate sales of foreclosed homes are booming. Shannon regularly fields calls from eager prospects, and recently sold 30 homes in one day to one buyer. A trio of U.K. investors has bought a half-dozen and plans many more.
“I thought it would be quite good fun to have a look,” said Darren Veness, who lives near Brighton, England.
Outside buyers are the latest in a long line of landlords taking over the deteriorating housing stock of a city that because of its once mighty auto industry boasted one of the highest owner-occupied housing rates in the U.S. And unlike many large cities, Detroit’s single-family homes dominate its landscape, not high-rise apartment buildings.
The outside investors aren’t only interested in Detroit, but it’s been targeted because of the sheer volume of homes and the fact that values have fallen so much more than elsewhere.
Detroit now has the lowest ownership rate for single-family detached homes of the 20 largest cities in the country, according to data analyzed by longtime Detroit demographer Kurt Metzger.
Even the sale of U.S. Housing and Urban Development homes has been affected by the poor housing climate in Detroit. The average sales prices of such homes plunged from $46,702 in 2003 to $8,692 last year. Through the first month of 2009, average sales were $6,035.
Still, not all of Detroit’s real estate market has bottomed out. Listings include a seven-bedroom, 11,580 square-foot Tudor in Detroit’s historic Indian Village neighborhood for $849,900, and a $765,000 penthouse condo in the city’s Albert Kahn Building.
What’s the effect on a city whose population has plummeted to half its size since the 1950s with no sign of return? The winners might be the renters lucky enough to live in a home that’s been fixed up by a legitimate landlord. The losers might be those who end up in less reputable hands.
The stakes could go either way for the landlords arriving in a market that may not have found its bottom. Same for the dwindling number of neighbors who still own their homes — they could benefit from having the vacant home fixed up and occupied but likely will find theirs will fetch a fraction of what they paid or owe.
Novella Willis, a longtime resident of Cruse Street, soon will have her mortgage paid off but she is among those caught in the changing market.
“None of these houses are selling. None of them,” she said. “If you go down to the next block you’ll see a lot of foreclosures all around here.”
The once-stable neighborhood of well-tended brick homes on Detroit’s northwest side has some with brick paver driveways and front walks, trimmed bushes and new windows. But foreclosures are creating what Shannon calls “an investors’ dream.” These are not the infamous $1 homes, but well-built structures falling on hard times that are available for under $10,000.
Willis, a 70-year-old retired court worker, says renters have hurt the neighborhood.
“A couple of houses across the street, they are in-and-out renters,” she said. “They don’t stay long, maybe three or four months. The renters rarely cut the grass, rarely do the snow. You don’t see the owners until people leave the house.”
But out-of-town investors have rescued two homes from abandonment.
Anthony Pierson and Henry Suell of Oakland and Wayne counties bought their home for $8,500. It’s one of several they bought through HUD, and they expect to rent it within a month after they perform mainly cosmetic repairs.
Pierson, of West Bloomfield Township and Suell, of Harper Woods said the goal is to cover taxes and maintenance through the rent and maybe make some money if property values turn around.
“We just want to invest into it and bring the neighborhood back,” Suell said.