In a 4,500-word longform piece for Next City, Detroit author and journalist Anna Clark digs deep into a setback to Detroit's recovery more insidious than high crime rates or a sluggish economy--the mortgage industry.
Clark describes a serious disconnect between prices reached between would-be home buyers and sellers and the appraisals banks conduct before they issue mortgages. In many Detroit neighborhoods, auction sales of tax-foreclosed properties for $500 or $1,000 could be the only available comparables, making it difficult to arrive at appraisals, which are based on sales of nearby homes, that reflect the actual price buyers are willing to pay.
"The result is a system where loans are not available across most of the city," writes Clark. "In Detroit, only 12 percent of home sales are financed, compared to 65 percent in Ferndale and 90 percent in Grosse Pointe. And they are not all at those infamously low price points. An $87,000 house in the Woodbridge neighborhood was recently bought with cash. So was the $1.6 million Fisher Mansion in Palmer Woods."
Clark reports that only 462 single family homes sold in Detroit in 2014 were purchased with a mortgage, and that nearly 87 percent of sales were cash deals, more than double the national average.
To learn about why the conventional mortgage system is failing Detroit and how groups like the Detroit Land Bank Authority and Talmer Bank are working to fix it, read more in Next City.
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