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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