Monday, March 09, 2009

Bulk Purchases of Detroit Homes

The Associate Press is reporting on a growing trend for investors: to purchase large numbers of foreclosed properties in places like Detroit in hopes that they will make a dramatic profit once the housing market returns to levels that are at least close to normal. This trend has been going on for several months. However, now that the news media is reporting it, one can only presume that we will see more and more people from outside the Detroit area purchasing these properties.

Since the Warrendale neighborhood is the epicenter for the mortgage crisis in southeastern Michigan, and since the neighborhood's housing market was historically among the strongest in Detroit, it's safe to assume that we will receive more than our fair share of investors flocking to us.

On its surface, I believe that this trend the potential to be a very positive thing for the Warrendale neighborhood. Housing prices, like any other price after all, are a function of supply and demand. When these investors swoop in, they naturally create a demand for these properties that did not exist before; thereby increasing prices. Since bringing these prices closer to their historic norms is advantageous to current homeowners, there is a potential value to this trend for those of who live here.

However, and this is the important part, there is a huge difference between a potential for something to be positive and the actual positive effect.

All one has to do is look at the plethora of vacant properties elsewhere in Detroit to realize that, far too often, the "investors" who own these properties get too impatient in their desire for a profit. Once that happens, they stop maintaining the property the way that it should. Grass doesn't get cut. Vandals strip anything from a property that they can.

This is a condition that historic preservationists call demolition by neglect. The only way to combat this is through effective and active enforcement of the building codes. Unfortunately, the City of Detroit has not done a very good job of this in the past.

The other possible outcome from this lack of patience is that the "investors" simply torch the property for its insurance money. While this isn't as common as the demolition by neglect option, it is something that definitely happens within in the neighborhood. Worse yet, it's something that is on the rise.

And that, more than anything else, is what worries me.

It's a danger to the fire fighters who are called in to combat these blazes, such was the case in the arson that led to death of Senior Fire Fighter Walter Harris last November.

It's also a detriment to the homes that are left because very few people want to buy a home that is near a burned out hulk. These homes can be demolished at an estimated cost of $10 - $15,000 per structure. This, of course, strains the City's already limited budget. Demolition also leaves a hole in the urban fabric of our neighborhood; an empty spot where something should be standing.

Therefore, I believe that the best course of action is one of prevention: to encourage these investors to mothball their properties until the market begins to improve. I also believe that the City ought to enforce code violations aggressively.
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