John Gallagher, Detroit Free Press 12:10 p.m. EDT April 24, 2016
(Photo: Salwan Georges, Detroit Free Press)
Greater downtown Detroit residential real estate — a near-dead market only a few years ago — is now soaring with a few property owners even listing their downtown and Midtown properties for fantasy prices running into the millions of dollars.
But beneath some of the ridiculous pricing, greater downtown is offering a steady stream of residential openings as prices surge amid downtown’s continued revival.
The surge is fueled mostly by empty-nest baby boomers, along with some millennials, who are paying prices approaching $300 a square foot for upscale condos — levels unheard of just a few years ago.
In the Midtown district north of downtown, median home sale prices so far this year have hit $293,000, almost double the median price of $167,900 in spring 2013, according to data provided by the Realcomp II Ltd. real estate service.
And even in the greater downtown’s hot market, whether anyone makes any money off their investment in housing depends on timing, taxes, renovation costs, whether initial tax breaks are expiring and perhaps other factors, too.
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So far, these price spikes apply only in the greater downtown area and in a few of Detroit’s historic districts such as Sherwood Forest and Palmer Woods. In much of the rest of the city, home sale prices, while rising, remain depressed. In hard-hit neighborhoods such as Brightmoor on Detroit’s far west side, median home sales prices, while improving slightly, have hit just $15,000 so far this year.
But for now, the booming market in greater downtown shows that years of efforts at recovery are at least beginning to pay off. And with more improvements coming in the form of the new arena district, the M-1 Rail (Qline) opening next year, and more, prices seem likely to rise even higher.
“I would say it’s just all of those things that are going on,” said Austin Black II, a Realtor with City Living Detroit who serves clients in the area. “People see enough activity, they see the city is progressing in a positive direction. And It helps that our city government seems to be on the right track now. That helps build confidence that people want to be here.”
Home sale prices downtown outpacing rest of the cityBuy Photo
Home sale prices downtown outpacing rest of the city (Photo: Martha Thierry Detroit Free Press)
Why it’s happening
Two trends have united to produce the sharply rising prices: demand for urban living and a lack of for-sale product. Taken together, those factors explain the price rise and the swiftness with which available condos are being snapped up.
“I just had a listing in Midtown but even before I had it listed I had someone seriously interested in the property,” Black said. “And as soon as it went on the market they put in an offer immediately.”
Black has sold about 28 condominiums in the Brush Park district over the last year, and most sold in just two to three weeks. Detroit homeowners used to struggle more than a year to sell property, but about two-thirds of his listings sold over the past year in the district at or even above list price. Sale prices are approaching $300 per square foot in that district — translating into $300,000 for a 1,000-foot condo.
Home prices surging in Brush ParkBuy Photo
Home prices surging in Brush Park (Photo: Martha Thierry Detroit Free Press)
It’s no secret that young millennials are flocking to the greater downtown area to rent apartments. Dan Gilbert, Quicken Loans founder and chair, told an audience recently that when Quicken moved its headquarters and operations downtown in 2010, fewer than 100 of its employees lived in the city of Detroit. Now, Gilbert said, about 3,100 live in the city.
The millennials are going mostly for the many new apartment units coming onto the market all over the greater downtown area. There are about 1,000 apartment units under construction in the greater downtown area, and many more in the planning stages.
But empty-nest baby boomers turn out to be the prime market for condominium purchases in places like Brush Park and for houses in historic districts such as Palmer Woods.
Consider Dan Burbulla and Laura Wood, a couple in their mid-50s whose two sons are finishing college. With an urge to downsize and find a more urban lifestyle, they’re selling their house in Rochester Hills and moving in to their new condo in the Willys Overland Lofts building near Willis and Cass in Midtown. They paid $330,000 for the one-bedroom unit with a balcony view overlooking downtown Detroit.
“We were looking for a more urban area,” Burbulla, a logistics expert, said last week. “We looked online at downtown Rochester, Royal Oak, and (the Willys) was very comparable to what we saw out there. We were a little bit surprised at the way the prices were increasing. Even in the short time that we were looking, we saw things come and go.”
Many of the condos for sale were built in the Woodward corridor between roughly 2002, when downtown redevelopment began to pick up speed, and the national real estate crash of 2008. So there’s a limited supply of for-sale units available.
Indeed, that $293,000 median sales price so far this year in the Midtown district is based on just 12 sales, according to data provided by Realcomp.
The short supply has required quick decision-making for home shoppers.
“We just started the search in January, and there was a shortage of units for purchase,” Burbulla said. “That surprised us, and the prices seemed to be rising so luckily we found a gentleman who was selling in that (Willys) building. We really liked the building so we kind of jumped in.”
Michael and Bianca Siegel, medical doctors trained at Wayne State University, rented an apartment last summer in the Lofts at Merchants Row on Woodward downtown while they looked for a home to buy. The market, they found, was “insane,” Michael Siegel said.
“We looked to buy a loft in the downtown area,” he said. “Prices were just nuts so we shifted and said we’ll rent, which was challenging in itself finding a rental.”
Michael Siegel had lived in the Kales Building on Grand Circus Park in 2009-13 during his medical training, and prices were much cheaper then.
“You could buy things, I don’t mean to say pennies, but these places that are now going for two, three hundred, four hundred grand were going for like $75,000, $80,000, $100,000. And the two years I was gone, from 2013 to 2015, it was insane. The market just went nuts,” Michael Siegel said.
They eventually bought a home in Palmer Woods, a 4,700-square-foot house for which they paid $555,000. They move in next week.
Black himself had a similar personal experience. Looking to buy a home in Detroit’s Sherwood Forest district, he found himself competing with other shoppers.
“It took a year to find the house,” he said. “I was outbid on three other properties in the neighborhood. Ultimately the house that I bought my offer was sight unseen.” Black paid $365,000 for the house, adding, “And since I bought prices have gone up.”
Such anecdotes are becoming commonplace in Detroit these days. Detroit cannot count itself a success until the rising values spread more generally throughout the city. But something remarkable is happening, all the same.
Contact John Gallagher: 313-222-5173 or email@example.com. Follow him on Twitter @jgallagherfreep.
Detroit Free Press, April 14, 2016