Restarting motor city
After bankruptcy and bailout, fortunes in Detroit-Warren-Livonia, Michigan MSA are turning over again.
Five years ago, as the four-year, $80 billion bailout of its idling Big Three economic engine was ending, Detroit, the principal city in the Detroit-Warren-Livonia, Michigan Metropolitan Statistical Area, was declaring bankruptcy with debt estimates as high as $20 billion.
This summer, those troubles seem comfortably in the rearview as, according to the latest VeroFORECAST, real estate values in the nation’s 14th most populous MSA are predicted to increase at an average of 6.8% over the next 12 months. That is nearly 2.5 percentage points higher than the national forecast of 4.4% and ranks it 68th of the report’s 354 MSAs, which include 1,005 counties, 13,877 ZIP codes, and 82% of American residences.
Two months ago, in its assessment of the city’s post-bankruptcy history, Forbes said, “It’s incredible how far Detroit has come.”
The proof was in its emergence from bankruptcy in just 13 months, thanks to a government, business and philanthropic collaboration to restructure the debt, set at $19 billion.
The 6.8% figure is the projected appreciation for single-family residences throughout Detroit Metro’s six counties. For condos and townhomes, the forecast is for a slightly lower increase at 6.%.
The U.S. Office of Management and Budget, which originally created and occasionally revises the nation’s MSAs, grouped the counties of Lapeer, Livingston, Macomb, Oakland, St. Clair and Wayne into the Detroit-Warren-Livonia MSA. They cover nearly 4,000 square miles and as of the 2010 census, had a combined population of 4.3 million.
The appreciation predictions are borne out if we look more closely at the detailed breakouts of data within the second quarter 2018 VeroFORECAST, which covers June 1, 2018, through May 31, 2019. There are separate data for SFR and condo-townhouse appreciation by county as well as by price tier, and they show consistent upward valuation in the mid-6% range across the region.
This is due to the fact that Detroit Metro has some good affordability and a supply of homes near only two months. Unemployment is just a touch above the 4.5% national average and the population has been relatively stable after fairly dramatic rises and falls during the 20th Century. With current interest rates, unemployment rate, affordability and population trends, this market is expected to do fairly well.
Its economic renewal also seems to be providing security for business investment. One of the nation’s largest metropolitan economies, Metro Detroit, boasts the headquarters of more than a dozen Fortune 500 companies, including the bolstered General Motors and Ford, TRW Automotive Holdings Corp., Lear Corp., Penske Automotive Group Inc. and Ally Financial Inc., which spun off from General Motors during the federal bailout that began in 2009.
In 2011, Cleveland Cavaliers owner Dan Gilbert, after moving his Quicken Loans to downtown Detroit, launched Bedrock Real Estate. According to Business Insider, Bedrock has now “invested or allocated a total of $5.6 billion across 100 or so properties in downtown Detroit and nearby neighborhoods, and said it has 98% occupancy of office and residential properties.”
VeroFORECAST reports include price-tier information (if available from our sources) for each MSA, separated according to home and condo-townhouse prices, and divided into three tiers: below 25% of the top price in the county, above 75% of that top price, and between those 25 and 75% marks.
For Detroit-Warren-Livonia, the projected appreciation ranges from Livingston County’s 7.6% across all single-family residence and condo price tiers to around 6%, again with little variance across all tiers and both categories, in Oakland County.
Businesses can license the reports for all areas they serve and use the valuation forecast models to gain competitive expertise at the metropolitan, county and ZIP code level. Those designations are further stratified between single-family residences and condominium/townhomes, and three price tiers – below the 25th percentile, the 25th through 75th percentiles, and above the 75th percentile – at the county and ZIP code levels and are used to add greater granularity.
Source: Housing Wire