Detroit: A tale of two housing markets

CNBC
Updated
Detroit suburban housing is hot. Its downtown, however, is seeing no renaissance at all, at least not yet.

Bidding wars, more competition, better listings— Detroit housing is having a banner summer, Detroit suburban housing that is. Unlike so many other major metropolitan markets, Detroit's downtown is seeing no renaissance at all, at least not yet.

"There is still distress in the downtown market. It's not affecting the suburbs," said Jenilynn Estereicher, a Detroit-area real estate agent with Century 21 Town & Country. "The suburbs of Detroit are beautiful, very well maintained. The schools are fantastic, the whole environment."

The comparison is stark: The median home price in downtown is just $21,102 versus a median price of $162,900 in the suburbs, according to Realcomp, the area's multiple listing service. Sales in downtown Detroit were down 8 percent in June from a year ago but were up 13 percent in the suburbs.

Detroit's suburbs are benefiting from an influx of new jobs from companies like General Dynamics (GD), Delphi (DLPH) and BorgWarner (BWA). The state has added nearly half a million jobs since its economy bottomed in early 2010, according to Charles Ballard, Michigan State University professor of economics and director of MSU's quarterly State of the State Survey.

The latest survey, released this week, found 60 percent of residents rated their financial situation as good or excellent, the best since 2002 when the highest-ever mark of 66 percent was recorded. Sixty-nine percent said they believe they'll be better off a year from now—just off the high of 72 percent in 1999.

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After almost 1½ years in deep trouble, the city of Detroit emerged from bankruptcy at the end of last year. It was the largest municipal bankruptcy in U.S. history, but the financial reorganization plan gave the city considerable funds to spend on ailing city services.

"The macro trends are promising. A meaningful high-tech sector is developing in Detroit. Business leaders are investing private capital in Detroit, reversing a decades-long exodus," Ballard wrote in his report.

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That should help housing eventually in the downtown area, but it will likely be a long road to that end.

"I think we're going to be surprised at what Detroit will look like in the next 15 years," said Estereicher.