Low home prices along with affluent buyers, more investors, and those wanting to bypass appraisals are prompting all-cash transactions to surge in Detroit. Eighty-seven percent of all single-family home and condo purchases in the city during the first half of 2018 were cash deals compared to 28 percent nationwide, according to ATTOM Data Solutions, a real estate data firm. “The city of Detroit has an absurdly low share of financed home purchases relative to the nation—and even relative to the greater Detroit metro area,” Daren Blomquist, ATTOM’s senior vice president, told The Wall Street Journal.
Home prices are much lower in Detroit than the rest of the country. The median price of a home in the city was $32,428 in the first six months of 2018, up 20 percent from a year earlier. But that is far below the national median of $234,000, according to ATTOM Data Solutions.
Investors are buying up distressed properties to renovate and flip in Detroit’s downtown area and historic neighborhoods, but traditional buyers are finding mortgage financing difficult to get on properties that are in bad condition, says Kyle Swink, a real estate professional with Coldwell Banker Weir Manuel in Birmingham, Mich. Such properties also can be difficult to appraise since the value of a newly renovated home in a neighborhood filled with distressed properties likely won’t match up against comparables.
“You may be the first one with a resale in a particular neighborhood, so there may not be very much to compare to, making it difficult for appraisers to find tangible evidence of value,” Jonathan Miller, president of appraisal company Miller Samuel Inc. in New York, told the Journal. Buyers may end up paying cash as a result.
Source:
“Why So Many Detroit Home Buyers Are Paying in Cash,” The Wall Street Journal (Sept. 5, 2018) [Log-in required.]
