Investors Bet on Housing Rebound in Detroit
RENEE MONTAGNE, host:
In this sour housing market, it might seem counterintuitive to buy up homes, especially in a city like Detroit, the foreclosure capital of the country. But some investors, including some from overseas, see potentially sweet profits in all those foreclosed homes, and they're betting on Motor City to bounce back.
NPR's David Schaper reports.
DAVID SCHAPER: This is Washburn Street in northwest Detroit. It's a middle-class neighborhood of older homes, but solid brick homes - Georgians, bungalows, and I'm walking in front of an English Tudor right now. These are homes that are very well-maintained by their owners for the most part, but every block has two or three that are up for sale, two or three that might be empty and have been sitting empty for a long time.
These are homes that have been foreclosed upon, and out-of-state investors are snatching these homes up for as little as 30,000, 20,000 or even $10,000 each.
Mr. JEREMY BURGESS (Partner, Urban Detroit Wholesalers): These houses in these great neighborhoods are unpolished diamonds, and I'm shoveling them into the back of my truck.
SCHAPER: Twenty-eight-year-old Jeremy Burgess is a partner in Urban Detroit Wholesalers. His year-old company buys Detroit homes for out-of-state investors.
Mr. BURGESS: My partner is shoveling them in the back of his truck, and there's a lot of out-of-state investors right now making a lot of money in this market.
SCHAPER: In 2007, Detroit's foreclosure rate led the nation, turning over thousands of older homes to banks and other lenders who have no desire to keep them. So as they dump them on the market, investors like Burgess go mining for real estate.
Mr. BURGESS: This is an all-brick, three-bedroom, one-bath bungalow. This is not in bad repair at all. It's actually a very light rehab. The purchase price on this particular property was 23,000. It needs $12,700 in work.
SCHAPER: Burgess and his partner hire a non-profit group, Motor City Blight Busters, to do the rehab work. Blight Busters hires and trains local residents to work as apprentices on the jobs, keeping costs down. So, in this case, for just $36,000, the out-of-state investor has a good house in a decent neighborhood ready to rent.
With so many foreclosures in Detroit, demand for quality rental housing is rising, and that appeals to investors like Jason Imbroglio(ph) of Tacoma, Washington.
Mr. JASON IMBRUGLIO (Investor): I think it's a great long term growth type of investment thing. It's not a quick one. This is not a flip market.
SCHAPER: But in a market where credit is tight and cash is king, an investor's cash can go pretty far here.
Ms. KAREN CAGE (President, Realcom): We've actually seen homes on the market for, you know, $1,000, $1,500.
SCHAPER: Karen Cage is president of Realcom, a firm that tracks real estate transactions in southeast Michigan. And she says bargain hunters are heating up the cold Detroit real estate market. She says the first time in a couple of years, sales of Detroit homes are actually rising - up 30 percent in March over last year, and up nearly 50 percent in February and January.
Ms. CAGE: The banks are a little overwhelmed in some cases with the amount of properties that they have and are looking to turn them over.
SCHAPER: The houses are especially attractive to foreign investors, in part because the weak dollar makes American real estate a real bargain for those paying with euros or yen. Some fair housing and neighborhood advocates in Detroit worry, though, that some of these out-of-state and foreign investors could become slum lords and let their properties crumble from afar.
But back on Washburn Street, Johnny White, a heavy equipment operator at a nearby fork plant says slum lords aren't his top concern right now.
Mr. JOHNNY WHITE (Heavy Equipment Operator): I don't like vacant houses right next to me. You know, it holds a problem. You know, people be trying to go in and break in and steal stuff and like that, you know.
SCHAPER: White says he'd rather have someone there, even renters, than see so many Detroit homes boarded up and sitting vacant.
David Schaper, NPR News.