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Why the Mortgage Industry is a Threat to Detroit's Rebound

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The mortgage system is is failing Detroit, at least according to Detroit author and journalist Anna Clark in her latest longform article in Next City. In her article, Clark examines the difficulties in gaining a loan in the city when nearly 87 percent of home sales were done in cash in 2014, more than double the nationwide percentage. While acknowledging that Detroit has large swaths of land littered with abandoned buildings, many foreclosed or currently recommended for demolition, there is still little ability to revive these properties into livable conditions. For one, the renovation can often cost more than what the listings would eventually sell for, especially when the average home sale prices in Detroit have fallen nearly 28 percent since 2006.

In her article, Clark writes:

"The low appraisals also lead to a problem for owners who want to stay in their home but need to access equity to make improvements. When such an owner goes to refinance at the bank, they find that their $140,000 house is now valued at $17,000—and there is no equity for them to access. This harms the individual, and further deteriorates the value of the home, setting the stage for the nearly inevitable cash sale at a low price if the owner does ultimately choose to put the house on the market. The alternative scenario—the appraiser recognizing a house's true value and appraising it for higher than comparable sales—doesn't guarantee a smooth process either. If an appraiser values a house at $55,000, when several similar houses on the same street recently sold for $1,000, he has to justify it in a way that withstands scrutiny from federal regulators who have never seen the house and are relying wholly on quantifiable data to support valuations. For an appraiser, it's much easier to not do the extra legwork, even if it will bring in lower home values and blow up a home sale."

Be sure to read Clark's entire article here.

Clark is the founder of Literary Detroit and edited the 2015 publication A Detroit Anthology. She has been published in a variety of publications, including The New York Times, The New Republic, and POLITICO Magazine. According to her website, she was also a Fulbright Fellow in Kenya.
· The Threat to Detroit's Rebound Isn't Crime or the Economy, It's the Mortgage Industry [Next City]