Need Your Input: How Will Detroit's Bankruptcy Affect its Housing Market?

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Woodward_Ave_Detroit_1942Jeeze Louise. $18.5 billion in debt. Will city workers, firemen and policemen, get their pensions? Does the garbage get picked up?  This is a great piece by Morgan Brennan over at FORBES on how other cities that have endured bankruptcy are seeing home prices start to stabilize and inch up. Of course, that is happening everywhere in this country, as we saw last week. Still, it is no secret that Detroit’s property values were, no, ARE about as low as you could go.

But Brennan says investors are snapping up those homes.

Lormax Stern Development partner Daniel Stern echoed a similar sentimenton CNBC, noting that,”The bankruptcy, for us, it’s old news.” He says prices in desirable neighborhoods like downtown Detroit (currently undergoing a massive revitalization initiative) and the city’s surrounding suburbs have been climbing for the better part of four years.

I am not buying any plane tickets to Detroit, are you?

“If the city continues to hollow out, it’s unlikely the housing market will continue to recover,” says Dr. Svenja Gudell, senior economist of Zillow. “Roughly 30% of Detroit’s housing units already lie vacant, and without job growth and a healthy economy to attract new workers, what demand there is will inevitably dry up. Those homes currently vacant will remain so, blighting the cityscape and creating a double whammy of downward price pressure in the city’s neighborhoods.

(See why these economists come in handy?) There may be more pain to come, but the big price declines or cutbacks in services probably already happened, says Jeb Kolko over at Trulia.

“By the time your city files for bankruptcy, it’s too late: declining home values are more cause than effect of city bankruptcy. Poor city services reduce housing demand and can hurt prices, but bankruptcy itself doesn’t cause city services to disappear. Struggling cities will cut back on services long before they go bankrupt.”

Thankfully, except for the Never-Ending Story of school board shenanigans, Dallas is light years from Detroit’s problem, Still, let’s just keep eyes on our Dallas city leaders so we don’t end up in the same sinking boat.

Candy Evans, founder and publisher of CandysDirt.com, is one of the nation’s leading real estate reporters.

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