From Forbes 06.14.2012 — Do glimmers of improvement in one of the country’s most depressed real estate markets suggest something larger – that a long-term economic rebound may be getting underway?
Though it’s far too early to make bold predictions about the Motor City – where unemployment topped 14 percent three years ago – you can’t deny that something is stirring in the real estate sector:
–Home prices have stabilized by some measures and are on the upswing according to others. In Realtor.com’s latest monthly price and inventory study, based on data from hundreds of Multiple Listing Services (MLSs) across the country, Detroit emerges as a surprise bright spot, with average listing prices in April up more than 5 percent compared with the month earlier and 7.6 percent compared with the year before. Median prices rose 4.7 percent between March and April, the fastest month-to-month rate of gain among the 146 largest metropolitan markets surveyed by Realtor.com. In fact, prices in Detroit have now gained every month since last December. Nonetheless, the city’s median list price of $89,900 ranks it the lowest-cost large urban market in the U.S
–Continuing affordable home prices, combined with low mortgage rates, are steadily reducing the glut of houses sitting for sale in Detroit – and represent a key factor pushing prices up. The total inventory of homes for sale has plunged 25 percent in the past 12 months, and the median “age” – the time the inventory has been sitting on the market – has shrunk to just 48 days, ranking it 8th among the 146 markets. In terms of inventory age, Detroit now ranks with economically robust cities like Washington D.C., Seattle and San Jose.
So what’s stirring in Detroit to produce such hints of a budding recovery? Number one, there’s been a steady decline in the metropolitan unemployment rate, which dropped to 8.7 percent in April from 11.1 percent the year before, according to the US. Bureau of Labor Statistics – the largest decrease among the largest US. markets. A major factor here, of course, has been the rise from near-death bankruptcy at General Motors and the continuing rapid growth at Ford. Both companies not only are major direct employers but also are employment creators at hundreds of manufacturing and service companies whose jobs are tied to the health of the big automakers.
It may also be a reflection of another effort that doesn’t draw a lot of attention outside Detroit: A group of private investors and business community leaders have been having significant success transforming downtown areas of the city into a new hub for Web-based and information technology start-ups – a project that goes by the names “Detroit 2.0” and “brain gain.” Dozens of commercial buildings in sections of the center city that once were on the brink of economic collapse now house start-ups and established Internet firms. Quicken Loans, for example, has moved its headquarters and what it claims to be more than 4,000 jobs to the center city. Venture capitalists are actively recruiting IT professionals in Silicon Valley to come to work in downtown Detroit, and reportedly having some success.
None of this guarantees that hard-hit Detroit will be the urban comeback kid market of the next 10 or 15 years. But the signs of activity now visible in the real estate market do suggest there are some real potentials here – and probably some serious opportunities.
Ken Harney writes a nationally syndicated column on housing and mortgage issues, the Nation’s Housing, and has won numerous “Best Column – All Media” awards from the National Association of Real Estate Editors, along with the Consumer Federation of America’s prestigious “Media Service Award,” for lifetime contributions to consumer interests in housing. He served a three year term on the Federal Reserve Board’s Consumer Advisory Council and is the author of two books on real estate and mortgage finance.