Out-of-state investors buying houses by the hundreds in Detroit
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posted by Bob at Monday, March 09, 2009
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Monday, March 09, 2009
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By Jeff Karoub and Corey Williams Associated Press
Posted: 03/09/2009 12:01:00 AM CDT
DETROIT — Welcome to ground zero of the housing crisis, where for-sale signs offer at least 1,800 homes for less than $10,000 that once were worth at least $100,000 or more.
There also are homes on sale for $1. Or less.
All of it has enticed investors to Detroit from as far away as the United Kingdom and Australia — and has a city desperate for some stability in the housing market now hoping a rebirth can be fueled, in part, by out-of-town landlords.
"In the past few months, I've picked up 10 new clients from out of state that are buying in bulk," said Mike Shannon, a suburban Detroit real estate agent. His office specializes in foreclosures in a city that's among the national leaders.
"They're coming to us, saying, 'Look, I want to buy 50, 100, 1,000.' They want to own every decent and cheap house they can find."
While the retail housing market stagnates, sales of foreclosed homes are booming. Shannon recently sold 30 homes in one day to one buyer. A trio of U.K. investors has bought a half-dozen and plans many more.
"I thought it would be quite good fun to have a look," said Darren Veness, who lives near Brighton, England.
Detroit, fueled by its mighty auto industry, once boasted one of the highest owner-occupied housing rates in the United States. Unlike many large cities, Detroit is dominated by single-family homes, not high-rise apartment buildings.
And now Detroit has the lowest ownership rate for single-family detached homes of the 20 largest cities in the country, according to data analyzed by longtime Detroit demographer Kurt Metzger.
Even the sale of U.S. Housing and Urban Development homes has been hurt by the poor housing climate in Detroit. The average sales prices of such homes plunged from $46,702 in 2003 to $8,692 last year. Through the first month of 2009, average sales were $6,035.
And there are the extreme stories —like Realtor Ian Mason's east-side Detroit listing, with three bedrooms, a basement, and a worth of about $75,000 three years ago.
Now, the house next door has plywood windows and no front porch. Across the street is a barren patch where houses once stood. Mason's home itself now features a collapsed garage.
"It was listed at $99," Mason said, but a twentysomething investor got the foreclosed home for far less.
"We sold it for $1," Mason said. "We would have gone lower."
But the real magic number is $1,000, which is the listing price for about 200 homes in metro Detroit.
Still, not all of Detroit's real estate market has bottomed out. Listings include a seven-bedroom, 11,580-square-foot Tudor in Detroit's historic Indian Village neighborhood for $849,900, and a $765,000 penthouse condo in the city's Albert Kahn Building.
What's the effect on a city that has lost half its population since the 1950s with no sign of return? The winners might be the renters lucky enough to live in a home that's been fixed up by a legitimate landlord. The losers might be those who end up in less reputable hands.
The stakes could go either way for the landlords arriving in a market that may not have found its bottom. Same for the dwindling number of neighbors who still own their homes — they could benefit from having the vacant home fixed up and occupied but likely will find theirs will fetch a fraction of what they paid or owe.
Novella Willis, a longtime resident of Cruse Street, soon will have her mortgage paid off, but she is among those caught in the changing market.
"None of these houses are selling. None of them," she said. "If you go down to the next block, you'll see a lot of foreclosures all around here."
The once-stable neighborhood of well-tended brick homes on Detroit's northwest side has some with brick paver driveways and front walks, trimmed bushes and new windows. But foreclosures are creating what Shannon calls "an investor's dream." These are not the infamous $1 homes, but well-built structures falling on hard times that are available for less than $10,000.
Willis, a 70-year-old retired court worker, says renters have hurt the neighborhood.
"A couple of houses across the street, they are in-and-out renters," she said. "They don't stay long, maybe three or four months. The renters rarely cut the grass, rarely do the snow. You don't see the owners until people leave the house."
But investors also are rescuing homes from abandonment.
Anthony Pierson and Henry Suell bought a home for $8,500. It's one of several they bought through HUD, and they expect to rent it within a month after they perform mainly cosmetic repairs.
Pierson and Suell, who live in Detroit suburbs, said the goal is to cover taxes and maintenance through the rent and maybe make some money if property values turn around.
"We just want to invest into it and bring the neighborhood back," Suell said.
Next door, the road to rehabilitation hasn't been as smooth. Days before a tenant was to move in, someone set fire to the home and caused significant interior damage.
"To be fair, with all the publicity and all the scare-mongering that goes with Detroit, we were expecting it to happen a lot sooner," said Veness, the Englander whose SVC LLC has so far rented three of its six homes.
Veness said he sent 10 e-mails to Detroit-area real estate agents after learning about the city's bargains. He promptly heard back from Shannon, whose firm invited him to Detroit for a tour. Veness came for three days with his colleagues and they bought their first two homes.
Veness said they have considered other U.S. cities, but so far Detroit is it. For them, it's simple: The homes are cheap and plentiful.
"Do the math. You can buy and rehab a home for $20,000, then rent for $900 a month," he said. "Three to four months of the year, rent is going to pay the taxes."
Rentals typically range from $800 to $1,000, and many are subsidized by the government.
He rejects the label "absentee landlord" — or at least the image it conveys. He uses local construction and property management companies, and he returned last month to take care of business and shop for new properties.
He also takes a long-term view on investing. Besides raising its stake in Detroit, his group plans to buy, fix and sell groups of homes to other U.K. investors.
"We just want to build our portfolio as big as we can," Veness said. "I know Detroit has been in a mess ... and I think now is the time. The next 10 years, it's going to change.
"If my investment still pays for itself, why am I going to leave it?"
City officials say they know numerous outside investors are buying homes because those who want to rent them must contact the Building Safety and Engineering Department. But exact numbers are hard to come by.
"For every call we get, I would guess there are five or six people we never know are out there," Detroit Planning Director Douglass Diggs said.
Diggs said city officials are trying to bring some stability to neighborhoods.
"We try to make sure that the people who are coming in and making an investment in the properties are going to keep them up. We don't want another crisis down the road where we have inferior housing stock."
Still, the tight credit market makes it difficult for many people to secure mortgages.
"We are pushing that individuals do rent-to-own and lease-to-own so people are moving toward home ownership roles," Diggs said.
One out-of-state investor is attempting to do just that. Newport Beach, Calif.-based Michael Alexander has bought more than 150 homes in Detroit and has hired a local property manager to work with renters to eventually purchase some of the homes.
The recent rush offers some experts hope for a housing market with no better options left. Property values drop when homes are rented, but in many cases the alternative is an empty house.
"At times, it's the only way to get the homes occupied," said John Mogk, a Wayne State law school professor.
Detroit began seeing more homes being rented in the mid-1960s as many white homeowners bought homes in the suburbs but kept their property in the city. The trend accelerated after riots broke out in 1967 and more of the city's white residents moved out.
A HUD program affecting more than a quarter of the homes in Detroit allowed purchases with no down payment to borrowers with reduced credit standards.
"At that time, Detroit was beginning to lose jobs, and unemployment was building up," Mogk said. "Homes began to be abandoned, and then foreclosed on and taken over by HUD and sold en masse to investors."
Metzger said he's skeptical based on the city's history but hopes new efforts succeed where others have failed.
"If indeed these investors are going to ... strengthen the housing stock and really make sure the repairs, the homes are stabilized, I think it's a great thing," he said. "We need housing stability, however that comes."
This report includes information from the Detroit News.
These people are buying in for
$10'000 so I wonder what the taxes would be ?
I think it's going to backfire.
These people buying in bulk at a presumed lower rate of property taxes and when the economy recovers, then the property tax division will jack it up to pre recession taxes.
People that bought in bulk better have the dough.
Otherwise, Obama better bail these people out to.
I am starting to lose faith in this guy.
He is a radical out of control president not caring about the future !
Who would want to live there anyways ?
Jeff Matiatos
When the values start going up, then everyone will start buying again and the flipping will start all over again. Slums bought by the bulk. I can't wait!
Sounds like the landlords in St.Paul.
They should have a vacant building code that requires these properties to be brought up to.They also should tie the hands of the banks before they sell.Hey look all you lib dipshits they market does work when prices hit rock bottom.Ah government should come in and squash this!
And before you start crying in your beer Repke and Eric I hate both partys but tend to vote for the party who wants to limit government.My theory is the smaller government the less they'll F shit up!
Ryan
...and, you wonder why Bostrom wrote the ordinance trying to stop the banks from selling properties that are Cat 3.
I ran into one last fall, where a group out of Atlanta had purchased 26 houses in Saint Paul, site unseen. The guy I spoke to in Atlanta had never seen the buildings that the group bought. But, he had a company put signs on all of the buildings "RENT TO OWN." I said have you seen the work orders on this house, I was looking at on the East Sie? He said, work orders? What work orders?
But hell, he bought it for $6,000, so what did he have to lose?
JMONTOMEPPOF
Chuck Repke
That's the way capitalism works Repke. Lots of cheap housing and a good supply of buyers looking for a deal.
I know how capitalism works, you create an LLC to buy property when the market is going up, sift off the profit, let it go bankrupt when the market goes bad and then start another LLC to acquire the garbage later. You then hold on to the garbage waiting to stick a gun to the City's head when they try to acquire it through eminent domain.
I get it. I just don't like the impact to the people who actually buy houses and LIVE IN THE CITY.
Those are the victims in the investment game.
JMONTOMEPPOF
Chuck Repke
Thats why you don't buy in St.Paul its a bad investment!
Just think if government ran everything Repke.We would all be equal and perfect.Isn't that what Hitler and Stalin promised?
Is it the house or the people that move into the 6,000 dollar house?You know this guy can rent it out cheap and attract low income right?
Maybe you and your neighborhood group could have bought some of these if you didn't blow your wad and lose on your condo projects.Capitalism-you got to love it.It puts people out of business if they make bad investments.Kinda like your group Repke!
Chuck I can tell you hate capitalism due to the fact you have to create everything yourself.Every aspect of your life is intertwined with big government.You need them to survive.
Ryan
Excuse me...
We have the house of cards falling down around us from just 8 years of uncontrolled capitalism and billions of dollars being pumped into wall street and the banks and you guys are singing the praises of the free market, give me a break.
You don't have a clue how or what I get paid or what I do. You assume a lot of crap.
Do, you work Ryan or just blog?
JMONTOMEPPOF
Chuck Repke
Ryan, the government's purpose is to keep a check on capitalism in the name of the people. The government, at least ours, does that very, very well.
Your religious-like economic convictions have resulted in spectacular failures. Some of the worlds biggest companies have folded because of the pursuit of more capital and no regard for their own long term well- being.
Read 'The Jungle' by Upton Sinclair to get an idea on capitalism unchecked. The people always loose. Always.
Its not about the 'haves' and 'have-nots'. Its about the shrinking middle class.
In America, as in the Western world, the middle class just didn't come about naturally. It is/was a creation of government through regulations and laws.
You could try to show us historically the rise of a middle class sans government involvement.
As Soucheray would tell you:
Good Luck
Eric
Eric said :
" Ryan, the government's purpose is to keep a check on capitalism in the name of the people. The government,at least ours,does that very,very well " .
Has the price of a pound of weed gone down Eric ?
People invest and get screwed by Madoff, Tom Petters, and you want us to believe the government keeps a check on capitalism by doing it very,very well ?
How about the SEC who knew this guy was on the take ?
Just more liberal spin.
Jeff Matiatos
Cheech, Chong, and Eric.
or Cheech, Chong,and Chuck
How about Fanny and Freddie? Their top people were stuffing their trunks with cash while the government looked the other way because they getting some of the money too. Government controls my ass. Government is nothing but a bunch of new age mobsters and the people are too syupid to see it.
Jeff,
I don't so drugs, except coffee.
Both of those guys took advantage of lax regulations and new loopholes, the kind someone like Ryan would support. Eventually, the government caught them and they didn't get away for long.
The SEC blew it with Madoff, the same way the FDA and FTC have failed. BUSH and the REPUBLICANS didn't put regulatory minded people on these commissions, they stacked them with industry insiders! How are you going to enforce regulations against your friends you've worked with for 30 years and complained about the government with? They didn't.
Bush did the same thing with the EPA, Civil Rights Comission, FCC, Attorney General's Office, State Department and FEMA- well not FEMA, He just appointed Brownie.
Because of those agencies failure to perform their mission, due to their loyalty to the industry and belief that the government is the problem, we had toys recalled that were full of lead, so many food recalls I can't count them, investment and banking corruption, failed federal emergency action and accounting, over-charging and illegal activity within the communications world- not to mention border illegal monopolies in regions when it comes to cable and communications, and the continued raping of our public lands. But, hey, we made money right?
Damn right the government protects us from the backwash of unbridled capitalism.
You assignment tonight, since you like court cases, is to look up an 1886 Supreme Court Case, Santa Clara County v. Southern Pacific Railroad.
That case is the beginning of some changes that vaulted corporations to a status of almost untouchable.
Of course if you know it all already, then and you and Ryan can pat each other on the back and tell each other how smart you are.
Eric
Eric said: "Bush did the same thing with the EPA, Civil Rights Comission, FCC, Attorney General's Office, State Department and FEMA- well not FEMA, He just appointed Brownie."
Eric, you forgot to mention OMB, NASA, Interior, CIA, HHS, HUD, GSA, FDA and Justice. and those are just the ones where Bush appointees were indicted...
http://tpmmuckraker.talkingpointsmemo.com/2007/12/tpms_great_list_of_scandalized.php
sorry, my link was incomplete. click above if you so wish...
danno
You cited all those regulatory agencys that have failed to measure up.
Companys that were permitted by our Government to permit harmful products to reach our consumers for the partial purpose of creating an image of trade between countrys.
To satisfy proponents of NAFTA.
Take the FDA that lets harmful drugs reach consumers. Why ?
Because first, you would be hard pressed to find anyone willing to submit to the testing of these drugs on a voluntary basis.
The FDA and Federal Regulations give drug companys immunities from suit for drugs and medical devices approved by the FDA.
It just seems like such a contradiction for you to be citing all the things wrong with regulation and then say our government does such a great job checking the capitalists that are responcible for the very products you speak of.
Jeff Matiatos
How about that list Chuck ?
I guess I am living in some other world though.
Jeff Matiatos
Jeff,
You are correct. You and I are not saying two different things.
I'm hitting you with two fastballs. The first is that thest regulatory agencies are the only things that are supposed to protect the public- and over the years they have. The second one, is what has happened to them over the last few years.
It was the last eight where the Republican President decided to weaken the jobs of those agencies by appointing people who were a part of the problem. Danno listed a few more.
It's like letting someone out of prison, then putting them in charge of the prison board. He let the wolves oversee the hen house. It was in the name of 'less government infringement'.
The reason that they didn't work, is because of the conservative philosophy that these agencies impede capitalism.
They worked and will work again.
I wrote a commentary on immunity for the East Side Review last year, I'll see if I can find it. Your right about the tip of the iceberg, its more sinister than that.
Eric
ERIC----Its not about the 'haves' and 'have-nots'. Its about the shrinking middle class.
Eric middle class is a lot different then I grew up.My father and mother had a couple pair of jeans.We didn't have a computer.Had one beater car.Lived in a modest house without all the bells and whistles.We went without many times.1 tv and no vcr.My father worked his ass off to put 2 kids through private schooling and after that there wasn't much left.Sound familiar?Yeah that was middle class during Carter and the early 80's.
So I ask you to tell me what Middle Class looks like today.
If you look at how middle class was 20 years ago it would be poor in todays times.
Middle class hasn't went anywhere its the fact the bar was raised really high.
Chuck the housing marketincreases and all these wacky loans started under Clinton and continued under Bush.Are you so blind to give your own party a pass.I'm not.They all are shit bags.Every one of them.
Ryan
Your right Ryan. Both parties share plenty of blame and that's wehy Eric and Chuck will never have any credibility is because they only want to blame republicans and give their side a pass. Much like the landlord lawsuits....they refuse to see the facts.
Ryan,
Middle Class will change from region to region and family to family. For the sake of debate, a family of four with a household income of $60,000/yr to $150,000/yr would fall in middle class when I describe it. People who are professionals through education (doctors, lawyers, teachers, accountants, nurses, etc) or training and expertise (fireman, small business owners, carpenters, plumbers, delivery truck drivers etc).
Below that would be working class (where most of us grew up) where people are working everyday and barely able to pay their bills (not including health care) but are certainly living modestly. The poor would fall below that where they are dependent on the government and charities for basic survival. Above that would be upper middle class, and then the upper class or wealthy.
10:22
You don't pay attention, you just hate don't you?
I wrote several times going back to the fall and most recently just last week, that there are three causes to the housing/finance crisis:
1. Mortgage brokers who only get paid for saying yes to people seeking loans. New loopholes and deregulation allowed for some 'creative' financing and the rise of sub-prime loans. By the time they defaulted, those loans would be down the line and someone else's problem.
2. Homeowners. Those who wouldn't have qualified in the first place and those who wanted to keep up with the Jones and get a bigger house or refinance for all kind of renovations. Both of these groups wanted more than they could afford.
3. Wall Street Investment Bankers. These people know the loans and mortgage backed securities were junk but, they were excellent for quick BIG money and inflating the financial health of their company. Because of the nature of of our system, it didn't matter that it was only worthless paper being traded.
There's your culprits. Its a three prong stool. Because the Demand was false, the supply really didn't move. Here we are with loan defaults across our purple mountains and a credit crisis from sea to shining sea.
Democrats didn't raise a stink about this because it appeared their interest, working class and middle class people buying more homes, was met.
Republicans ignored it because our markets were through the roof and on paper, "fundamentals of the economy seemed strong".
We both can find individuals on both sides that raised red flags. Some Democrats complaining about predatory lenders and some Republicans complaining about Freddie and Fannie and loaning poor people money.
Eric
How about the DFL congree who were lining their pockets with contributuions from Fannie and Freddie while the poor were getting spld down the river on false hopes ad dreams Eric?
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