Cash is King in Detroit, but is that really what is best for our development? The Wall Street Journal investigates why and shows how companies are working to stabilize the housing market.
Cheap Houses and Quick Profits
The days of taking out complicated mortgage loans seems to be coming to an end in the city of Detroit. People are packing it up, calling the moving company and moving in on cash deals. During the first half of 2018 an astonishing 87% of all single-family home and condominium buyers paid cash to buy in the Motor City. The national average for cash buyers nationwide was three times less than that at 28%.
The outskirts of Detroit and surrounding suburban areas are also cash friendly with 40% of home buyers paying in cash. This may come as a surprise, but the inexpensive housing market in Detroit is to blame for consumers cashing out on homes. The average cost of a home in the city of Detroit is $32,428, which is a 20% increase from last year, but still far behind the country’s $234,000 average. The spike in residential homes being bought has also been a cash boost for local moving companies like Corrigan, Stevens of Detroit and Palmer Van Lines.
Flipping Houses in Detroit is Paying Off
Another trend in the city that plays a key factor in the housing industry is “Flipping Houses.” Numerous investors are buying homes, renovating them and putting them up for sale at a higher price point. Mortgage financing is less likely to happen on homes that are not in the safest neighborhoods and are in rough conditions which make the properties almost impossible to appraise. Investors are throwing down the cash to get things turned around, hoping to make a profit on the market.
The demographic that seems to be attracted to the flipped homes are young professionals and empty-nesters, many of whom have used Detroit moving companies to make the transition as smooth as possible. Buyers have also put money into storage and moving companies that have been around for years and are more than excited to keep business busy.
Detroit Cash Buyers Force Lenders to Strategize
Some local companies are looking to redirect the movement. Quicken Loans is leading the charge by teaming up with Home Depot and the Detroit Land Bank Authority, according to the Wall Street Journal. These companies are focusing their efforts on rebuilding Detroit’s vacant abandoned and foreclosed properties.
Quicken preapproves buyers that are interested mortgage financing and starts renovating the homes. Quicken and its partners hope to stabilize the market and help future buyers. Tax Foreclosures seem to be at the center of the cash out explosion in Detroit, which has made residents uneasy and brought property values down. With this new strategy in place Quicken hopes people turn to refinancing for more equity in their homes or look into buying new homes to get improve business.
If the housing market continues to be unstable, it can make it difficult for working Detroiters to find homes, continuing to feed blight in its outlying neighborhoods. Moving companies all over the Detroit Metro area have been feeling the positive effects of Detroit’s revitalization, and a stable housing market will bring steady net population growth and a healthy economy.