The Threat to Detroit’s Rebound Isn’t Crime or the Economy, It’s the Mortgage Industry

The foreclosure crisis hit the Marygrove neighborhood hard.

The foreclosure crisis hit the Marygrove neighborhood hard.

As a young married couple, Steven and Corey Josephson chose to begin their lives together in Detroit. They came from Greeley, Colorado, a city that couldn’t be more different. It was founded as an experimental utopian community; its majority-white population has more than doubled since 1970; and its unemployment rate is lower than the national average, and about half that of Detroit. But in August 2014, they left. Corey, a theater and English teacher, grew up in Michigan, and Steven found a position in Detroit’s Teach for America program, teaching science to the youngest kids at Coleman A. Young Elementary School.

Along with their beagle, Baley, they moved into a house in northeast Detroit near 8 Mile Road. “We loved the house, we loved the neighbors,” Steven Josephson says. They were renting, but “homes are just so cheap here, it makes more sense to buy.” So they approached their landlord about purchasing the home. At first, everything moved smoothly — but then, Josephson said, the landlord backed out.

“He bought the house originally for $40,000, but home values are not even close to that,” Josephson says. “He wanted $35,000 for the house, even though it wouldn’t appraise higher than $30,000. And besides that,” he adds, “he was enjoying the additional income from renting it out.” And so, in a city with an infamous surplus of homes, the Josephsons had to start from scratch.

Two different stories are playing out in Detroit — though they seem like they should contradict each other. There is the “Midtown story,” the tale of select neighborhoods where the narrative is about revival. Historic residences in Detroit’s most gracious communities are asking for eye-popping prices: $749,500 and $530,000 in Indian Village, $1.55 million in Palmer Woods, $500,000 in Lafayette Park, $80,000 for a high-rise condo in Harbortown, $1.125 million for a downtown penthouse. Over the last decade, home values have nearly doubled along the Woodward corridor, which cuts through the center of the city, and they’ve increased by nearly two-thirds on the eastern riverfront. HGTV star Nicole Curtis is diligently reviving several classic Detroit homes for her show “Rehab Addict,” generating excitement for the potential of investing a little hard work and creativity into the city’s real estate. “Move to Detroit” is the hip mantra echoing in New York City,Houston and well beyond, inspiring not a few enterprising locals to penguides for newcomers. Even Brooklyn’s groundbreaking Galapagos Art Spaceis lifting up its massive operations and moving to Detroit. The swift uptick of interest in a city that’s scarcely emerged from bankruptcy is igniting passionate debates about gentrification, or how the city should adapt to new residents without slamming the door on long-timers.


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Detroit makes strides one year after exiting bankruptcy, Moody's says

The city's economic and fiscal health are stronger almost one year after exiting bankruptcy, but Detroit faces serious risks regarding future pension payments, Moody's Investors Service Inc. said Monday.

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Here are some of the improvements since Detroit exited bankruptcy in December 2014:

  • 7,100 of an estimated 40,000 vacant houses demolished since May 2014.
  • Land Bank has closed on 560 of 21,000 houses it owns. Of the 1,100 that have been put up for auction, bids have been received on 843 houses.
  • Agreements reached with owners of 500 vacant homes to rehab the properties or face legal action by the city.
  • Response times on 911 priority calls down to about nine minutes from reported 50 minutes for all 911 calls.
  • 10 new fire rigs and 15 ambulances added to Fire/EMS fleet; six rescue squad vehicles ordered.
  • 80 new public city buses added, allowed the city to meet posted schedules for the first time in about 20 years.
  • Public Lighting Authority installed 58,000 LED streetlights with another 7,000 coming by the end of next year.

Sources: Associated Press via City of Detroit, Detroit Land Bank and Detroit Public Lighting Authority

Employment is rising and the city's revenue estimates are beating projections ahead of the Dec. 10 anniversary of Detroit exiting the largest municipal bankruptcy case in U.S. history, the service said in an analysis Monday.

"City leaders and management are taking aggressive steps to revitalize the economy and sustain the current positive trends," Moody's Assistant Vice President Matthew Butler wrote. "These efforts are aimed at generating much-needed revenue growth to meet notable expenditure obligations over the next eight years."

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Shouting, reflection mark first year free of bankruptcy

A group of protesters were outside at Wayne State University before an event about Detroit's bankruptcy on Wednesday, Dec. 9, 2015.     (Photo: Jessica J. Trevino Detroit Free Press)

A group of protesters were outside at Wayne State University before an event about Detroit's bankruptcy on Wednesday, Dec. 9, 2015. (Photo: Jessica J. Trevino Detroit Free Press)

Detroit marks one year of freedom today from the nation's largest bankruptcy, but overflowing passions at an event Wednesday night to discuss the state of the city showed some residents remain angered and disappointed by the outcome.

To be sure, the City of Detroit is financially solvent with thousands of new streetlights and its historic art collection preserved. Pensioners get paid despite cuts and key city services have shown signs of improvement. The city's budget is balanced. There is even an expected surplus.

Still, the city is struggling to find new solutions to old problems: endemic blight, vacant land, high crime, struggling schools and a looming pension bill that city leaders are struggling to pay off.


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