Interest and investments in Detroit’s neighborhoods are rising. Whether it’s immediately evidenced on your block or somewhere just “around the corner,” it is, indeed, welcome news that recovery is on the horizon.
Although financial institution executives offer differing opinions on the top issues and impediments that hinder Detroit’s real estate market, there is 100 percent agreement on one primary concern – real estate values.
Detroit’s home real estate values are on the rise, according to our experts, who agree the time to get in on the market is now.
A newly minted program, Detroit Home Mortgage (DHM), will help solve Detroit’s appraisal gap problem and may well be the catalyst that catapults those would-be homeowners on the fence into action.
Supported by a consortium of the largest financial institutions serving Detroit, the new program will enable banks to lend qualified homebuyers the full amount needed to purchase a renovated home or to buy and rehabilitate homes anywhere in the city of Detroit.
Although there is a lot of interest in home purchases in targeted neighborhoods in Detroit, there has not been much movement in the market due to financing issues associated with loan-to-value rates, which often come in at less than the asking price of the home.
The current trend makes it impossible for would be buyers to qualify for traditional loans and further drives down the value of homes sold by desperate homeowners. They are often forced to accept cash offers that frequently dip far, far below the appraised value of homes currently on the market.
Two years ago, only 529 homes in Detroit were purchased with a traditional mortgage, according to data from the Home Mortgage Disclosure Act. That number was up from 318 in 2011.
“This is a game-changer for Detroit,” says Mayor Mike Duggan “We are confident that Detroit Home Mortgage will increase homeownership in the city of Detroit. This initiative is critical to rebuilding Detroit’s neighborhoods.”
This collaborative program and others announced by Duggan, represent an era of unprecedented collaboration that will change the trajectory of Detroit’s neighborhoods.
The new DHM program complements existing programs like the Detroit Neighborhood Initiative ,which gives homebuyers in Detroit a zero-down, low interest, fixed-rate mortgage and other very favorable terms with rehabilitation dollars needed to rebuild Detroit’s classic houses and neighborhoods. The program is a partnership between the City of Detroit, the Neighborhood Assistance Corporation of America and Bank of America.
“We know the desire to renovate these houses and rebuild our neighborhoods is there,” says Duggan of the Detroit Neighborhood Initiative. “What we haven’t had is enough lenders willing to take a chance on our city to show what’s possible. That changes now, in a big way.”
Under the program buyers can receive loans worth up to 110 percent of a home’s loan- to-value ratio. It’s even better for homes bought through the Detroit Land Bank where the loan-to-value ratio increases up to 150 percent. The Detroit Land Bank owns nearly one-fifth of the land in Detroit.
“I think the best 100 years are ahead of us,” says Matthew B. Elliott, Michigan market president and market executive, Bank of America, who notes that the pace of restabilization and redevelopment efforts will be as unique as the character of Detroit’s many neighborhoods.
“I definitely sense, more than ever before, that everybody feels like we’re all in this together,” says Linda D. Forte, senior vice president of business affairs for Comerica Inc. and Comerica’s chief diversity officer.
Editor’s note: To showcase more of what’s happening in Detroit neighborhoods we are collaborating with the Detroit Regional Chamber (DRC) and media partners to bring you coverage of the Detroit Policy Conference on February 24. Our media partners include Comcast, Detroit Unspun (Detroit Regional News Hub), WWJ Newsradio 950, 910AM Superstation The Pulse host Karen Dumas, WXYT 1270AM Small Talk with Mark S. Lee, and Detroit Smart Pages Publisher Beverly Smith, as well as our publishers alliance. You can also follow the coverage on our Twitter @DetroitUnspun.