Since the city filed for bankruptcy in July, Detroit’s housing market has garnered international attention, with Chinese investors betting on a comeback and economists evaluating whether recovery is in sight. We talked to Zillow Senior Economist Dr. Svenja Gudell to get a pulse on Detroit real estate now and in the months to come.
“There’s no doubt Detroit is already an ailing city, and the population decline that is both a symptom and a cause of economic problems there is a troubling trend for the housing market, which had recently seen signs of life,” she said. “If the city continues to hollow out, it’s unlikely the housing market will continue to recover.”
Historically, the Detroit metro began its turnaround in November 2011, after home values fell 52 percent from their peak. In June, the median home value increased 14.3 percent year-over-year to $89,600, with 72 percent of homes on the Detroit market sold for a gain. In the second quarter, values were up 3.3 percent from the first quarter and are expected to rise 4.3 percent over the next 12 months.
But is an uptick in home values enough to galvanize demand after Detroit’s economy hit bottom?
“Roughly 30 percent of Detroit’s housing units already lie vacant, and without job growth and a healthy economy to attract new workers, what demand there is will inevitably dry up,” Gudell explained. “And when demand goes slack, home values will most likely fall further. Those homes currently vacant will remain so, blighting the cityscape and creating a double whammy of downward price pressure in the city’s neighborhoods.”
Today on Zillow, more than 400 homes are for sale in Detroit for less than $5,000. Of those, more than 75 are listed for less than $1,000.
Not all of the low-priced homes hit the market in the past couple months, though. The Detroit home with the lowest asking price currently on Zillow has been on the market for 785 days. It’s asking $70 after a $30 price cut in May.
At the other end of the spectrum, only one for-sale listing currently on Zillow is asking more than $1 million. Meanwhile, more than 1,600 3-bedroom homes are on the market for $200,000 or less.
“Restarting the Motor City’s economic engine, and soon, will be critical if Detroit is to have any hope of attracting the kinds of workers and home buyers necessary to jump-start demand,” Gudell said.
- Real Estate