“Finally, we can put this rumor to rest,” said Lauren C. Rivers, the managing broker at Rivers Realty Group, in an email exchange with the Michigan Chronicle.
“The conditions that once were during the 2008 housing crash are vastly different and no longer remain. For years, yes, a $500 home, or a luxury $60,000 happened for many. Yet, despite global investors looking to jump on the bandwagon late today, this is no longer the case, For years now and in particular for the open market multiple listing service/ realtor network, a $500 home is no more.”
The $500 house that Rivers is referring to comes from Drew Philp’s “A $500 House: Rebuilding An Abandoned Home And An American City.” That book and the subsequent media narrative promoted homeownership for the taking to the mostly white creative class and other people who were getting priced out of the gentrifying East and West coasts and were “brave enough” to live in Detroit.
Alyssa Strickland-Knight, assistant director of public relations & strategic initiatives at the Detroit Land Bank Authority, pointed out another fact about the book.
“It is important to clarify that the author purchased about five years prior to publication, so really the sale was more indicative of a housing market circa 2012. By 2017, Detroit’s housing market was already beginning to turn around. Detroit’s housing market has grown tremendously since 2014.”
Philp also bought his house through the Wayne County Treasurer’s Tax Foreclosure Auction, according to Strickland-Knight.
In 2014, one of the main challenges that Detroit’s housing market faced was its high inventory of vacant and abandoned properties. According to a report by the Detroit Blight Removal Task Force that year, the city had an estimated 150,000 vacant and blighted properties, many of which were abandoned homes that have fallen into disrepair.
When the Detroit Land Bank Authority (DLBA) reorganized that year, they “accepted transfers of thousands of properties from the City, State and County inventories to consolidate ownership of primarily single-family houses and residentially zoned vacant lots.”
The DLBA acquired and managed vacant and abandoned properties with the goal of either demolishing or renovating them. The DLBA also launched a program called the “Neighborhood Home Auction,” which allows individuals and organizations to bid on properties that have been renovated or are in good condition.
Nowadays, the DLBA makes house sales affordable and accessible to Detroiters through its core online structure sale programs: Auction and Own It Now. For both programs the minimum bid (Auction) or offer (Own It Now) is $1,000. The final sale price is determined by the highest bid or offer.
Strickland-Knight said, “All the houses we sell through Auction and Own it Now are heavily blighted and in need of major repairs. All houses are sold as-is and the DLBA requires that buyers renovate the property through our compliance program.”
The average sale price for the Auction program is $5,700 and $2,900 for the Own It Now program, according to Strickland-Knight. The DLBA’s voluntary buyer surveys indicate that 72 percent of DLBA buyers are Detroiters and 76 percent of the buyers are Black.
Rivers said that, in her opinion, there really is no true average cost for a fixer-upper.
“There are many factors to be considered when averaging—largely the area of property, the condition and cost of repairs to be made. For instance, a fire-damaged home versus a home requiring only cosmetic upgrades will vary greatly, as will a well-cared-for historic community, in comparison to an area that may remain in blight or with a great number of vacancies. A fixer-upper can easily range from $35,000 to $350,000, and greater. I find that many investors now want to start at $100,000 plus.”
The range of buyers for fixer-uppers range from people overseas, who make up the majority of the purchasers, to a lower-income parent “looking to take on the challenges and rewards of renovations and home ownership.”
“I find that many owner/occupants looking for lower priced homes tend to find more success utilizing tax sales, auctions and property sold with the city,” such as what the DLBA offers, Rivers observed.
Strickland reported that, as of this writing, the DLBA has 2,988 available and 515 that are pending sale.
All of these are positive signs in this particular sector of housing in spite of Detroit’s continuing population decline.
The Detroit Free Press reported on April 15 that there are fewer houses on the market because homeowners—be they buyers or refinancers who did that back in 2020 or 2021—don’t want to let go of the cheap mortgages, with the 2.5 to 3 percent interest rates.
Another challenge that Detroit’s housing market faces is the lack of affordable housing. Although there has been an increase in the number of new developments and renovated properties, many of these homes are priced above what the average Detroit resident can afford. The city’s median household income is $32,498. This has led to a shortage of affordable housing, which has forced many residents to either rent, live in substandard housing or relocate elsewhere.
Realizing this, the city stepped up its downpayment program, which the Michigan Chronicle recently reported on.
”With a plethora of new down payment programs, some offering as much as $25,000 to buyers, make home ownership now attainable where it otherwise may not have been,” Rivers stated. “Quite frequently, a good number of people have the income, the credit, but the down payment and closing cost have traditionally been real and systematic barriers. Yet, thankfully through these initiatives home ownership is now a viable pathway that many will pursue.”
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