Change is more than just a word. It’s a force that’s transforming Detroit’s real estate market.
The struggle from Great Recession of 2008 to rising star has been the Cinderella story of a city hit hardest by the economic downturn. Yet the glass slipper of development that’s popping up in Downtown, Midtown, Corktown, and other areas further supports that Detroit’s comeback is more than a fairytale – it’s happening in real time.
“It’s a really tight market,” says Sabra Sanzotta, owner of The Loft Warehouse. “The rent prices are…going up. [And] it’s very common for us to see three-to-five bids for [a home or apartment].”
On the surface, it’s a collective effort from Detroit Mayor Mike Duggan, city officials, urban developers, and individuals returning to the city. If you dig a little deeper, though, you’ll find people from across the country – and around the world – making a real investment in Detroit’s future.
Moving up in the rankings
A momentum is occurring in Michigan. Where once the narrative spin tended toward disparity, more positive news is becoming the norm. And with good reason: according to a report conducted by the Detroit Free Press, the median price of a home in 2009 was $7,000; today it’s $30,000.
In fact, according to a recent report from the National Assoc. of Realtors, nationally, the median list price rose seven percent, and it continues to grow. Both Detroit and Ann Arbor made the “Top-20” list (Detroit was number 10 and Ann Arbor number nine at press time).
“A really tight market”
Sabra Sanzotta, owner of The Loft Warehouse in Detroit, has seen the progression of the market firsthand. The company, a team of highly specialized realtors who live and work in the city of Detroit, is involved in many aspects of the city’s real estate resurgence – particularly in the loft arena.
“It’s a really tight market, as far as there not being a lot of inventory at any given time,” Sanzotta says. “Our sales inventory right now is maybe $10 million in property for sale, and we represent about a third of sales that happen downtown. There’s probably not more than $18 million worth of condos at any given moment on the market. That just means that buyers have to compete with other buyers for the ones that come up.”
That competition is coming from nearly everywhere imaginable: investors from New York, Canada, and even France are showing interest. “So buyers have to have a realtor that can really help them find property before it comes to the market,” Sanzotta warns.
For those looking for a condo, particularly in downtown Detroit, Sanzotta adds that 50-60 percent of all the condo developments are considered non-warrantable. The Mortgage Reports defines non-warrantable as a condominium that does not meet the eligibility standards as set by Fannie Mae and/or Freddie Mac.
“[It’s] not a huge obstacle,” Sanzotta says. “It does mean you can’t use a conventional loan to buy these condos. You have to work with a bank that does portfolio loans. Fannie Mae won’t purchase these notes. There are a few local banks that offer the portfolio loan. It’s just another one of those extra requirements that a buyer will be faced with.”
Shipping container phenomenon
Nontraditional forms of real estate are also on the rise. Take, for example, shipping containers. Used for cargo and other bulk items, a shipping container today might hold a living room couch, a gaming console, and some wonderful paintings against ambient light. The architecture might even rival the most contemporary structures found in America.
From an environmental standpoint, instead of having these unused shipping containers sit collecting rust, it can be repurposed as a home. “The shipping container loft development will be an example of adaptive reviews and very environmentally friendly,” Sanzotta says. “It utilizes shipping containers that would actually go in landfills.”
Sanzotta says that it’s hard to really understand how desirable the shipping container homes are until you see drawings – or some other visual representation. “The architecture that you can find using these components, it’s not just putting the shipping containers back together; it’s visually very modern and attractive from the outside,” she says. “It strikes with people who like industrial style. People love the exposed structure, concrete, brick, and spiral ductwork. The exposed shipping containers is just another structural element for people to experience.”
The Loft Warehouse has worked with the firm Three Squared, Inc., which is behind an ambitious shipping container development in Corktown. “The interior design is so fresh,” Sansotta says. “It matches the uniqueness of the overall structure. The walls are curved; some off these curved walls have interesting cut out shapes. The islands – a kitchen island – has the waterfall style counterpart. A quartz material, horizontal and vertical surface, sort of looks like a big desk. People haven’t seen anything like it.”
Even more choices
The proliferation of abandoned buildings in the city remains a notable concern for the city. The Detroit Land Bank Authority works to acquire vacant houses, auction off those in better condition, and demolish the worst of them. Dealing primarily with single-family homes, the Land Bank can offer an alternative for those looking outside the Downtown or Midtown areas.
“There’s a whole different mechanism going on for the sales and marketing for those types of homes,” Sansotta says. “The people coming in from out of town, only a very few of them are willing to consider neighborhoods. They would have to want to start their own little community somewhere, not considering walkability. As far as the demand, it’s between Midtown and downtown; that’s where the concentration of inventory is.”
Rising tide, rising prices
From downtown to Midtown, Corktown, the Riverfront, as far north as Boston Edison, and as far east Indian Village, things are developing in Detroit.
“The rising tide brings all the prices up,” Sansotta says. “We manage 350 loft units for rent. The rent prices are also going up. They’re looking to buy [or] looking to rent downtown. The price increase is a direct result of higher compensation from more people working. I’m getting multiple offers and it’s very common for us to see three-to-five bids.”
Development in the Woodbridge neighborhood is also underway. “We had 1,000 people come to our open house,” Sansotta says. “It shows you the pent-up demand.”