A healthy Detroit residential real estate market cannot exist without a robust set of mortgage-backed buyers. In 2018, more than 1,000 mortgages were issued for the first time since 2006. (Detroit Stock City photo by Erik Hall)

A University of Michigan analysis shows how broken Detroit’s housing market remains 15 years after the subprime mortgage crisis. 

The crisis caused mortgages to come to a near halt in the city for a number of years, and the number of mortgages issued in Detroit has yet to return to pre-crisis levels. The median sales price plunged by 82 percent between 2006 and 2008 and housing values are still only a little more than half what they were before the collapse. It helped spark a foreclosure crisis and increased the number of empty, blighted homes by the thousands. And during that period, Detroit became a city where a majority have become renters instead of homeowners.  


The 64-page study, titled “Good Deeds,” is part of an announcement today that a program intended to help revive Detroit’s residential real estate market is working and expanding. The program is called Rehabbed & Ready, which renovates vacant homes owned by the Detroit Land Bank Authority and sells them through the land bank. 

The program, created in 2015, has shown to be effective in raising the overall home values in four west side neighborhoods: Bagley, Crary/St. Mary, College Park and Evergreen/Outer Drive. The program is now expanding to 10 other neighborhoods throughout the city. 

‘Market stopped working’

Part of the U-M study shows the effectiveness of the Rehabbed & Ready program. It also gives an overview that Detroit remains a city where many can’t get a mortgage — a direct result of the subprime mortgage crisis that began to surface in Detroit in 2006. The crisis had spread nationwide by 2007. 

“We just didn’t experience a depression, or a decline in values. We went all the way to the point where the market stopped working,” said Chris Mueller, lead author of the U-M analysis and a lecturer at U-M’s Stephen M. Ross School of Business.

Before the subprime mortgage crisis, Detroit averaged more than 3,000 mortgages a year.  Sixteen years later, the city has not returned to that 3,000 mark. Fewer than 375 mortgages were issued each year between 2009 and 2013, as the median sales prices for a Detroit home fell below $10,000, according to the U-M study. In 2018, more than 1,000 mortgages were issued for the first time since 2006. However, most home sales in Detroit are still done with cash.

Intervention was needed

A healthy Detroit residential real estate market cannot exist without a robust set of mortgage-backed buyers. The dearth of mortgages means the market “is not going to fix itself”,  Mueller said. That’s why there have been widespread efforts by foundations, businesses and various government agencies to stabilize the city’s housing market. Among those efforts are the City’s campaign to eliminate thousands of blighted homes, stop the rampant number of property tax foreclosures and create various funds to help people buy homes.  

In March, Quicken Loans  founder Dan Gilbert announced his family foundation will pay the property tax debt of up to 20,000 low-income homeowners as part of a $500 million investment aimed at building “economic opportunity” in neighborhoods.There will be $15 million to pay for residents’ property taxes and $50 million invested annually over the next 10 years focusing on neighborhood issues that could range from jobs, home repair and supporting entrepreneurs.

On Thursday, Gilbert’s Rocket Community Fund, the City of Detroit and Invest Detroit announced a joint $5 million investment in the Rehabbed & Ready program. The program is one of many responses to revive parts of Detroit where few mortgages are being lent.  

To date, 85 homes have closed, and 40 more are in the pipeline. The average combined cost of the properties and renovations is $114,540. The average sales price of the homes is $97,711 – a 15% loss covered by the Rocket Community Fund.

The new investments will expand the program to 10 neighborhoods that are part of the Strategic Neighborhood Fund. The goal is to develop at least 200 homes.

The U-M study found median sale prices grew an additional 11.5 percent per year in Rehabbed & Ready neighborhoods during the program’s first three years, from 2016 to 2018, compared to neighborhoods without the intervention.

The ultimate goal is to stabilize the market and create comparable sales to help future buyers.

Pockets of stability

Detroit’s housing market is slowly recovering, Mueller said.  

“We are seeing a working and functioning residential real estate market returning in pockets,” he said. It’s returning in communities where comparable home sales allow banks to start lending with confidence again,according to the study. 

“Once mortgages start getting lent in those pockets, they actually revive quite quickly. In Detroit, that’s happening in micro-markets” but not citywide, he said.  

The study benchmarks show a neighborhood becomes economically self-sustaining once it achieves a median sale price of greater than $50,000, as well as 50 percent mortgage sales. 

Louis Aguilar is BridgeDetroit’s senior reporter. He covered business and development for the Detroit News, and is a former reporter for the Washington Post.

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