Saw the first wave of tenants moving out of my bldg today due to rent increases

[hamtown mike]

Then my rent went from $1100 to $1175. Even worse news is there's a lengthy waitlist for my building....
Well at least still cheaper for me than owning...

$1175 cheaper than owning? That's the equivalent of the mortgages on 2 decent homes in Detroit.

I've been considering renting my home out. A full 2 story 1,700 sq feet 3 bed 1.5 bath in hamtramck. My mortgage is $550. My comparisons have shown that I would be lucky to get that. Not to mention the increase in non homesteaded taxes hefty heating bills for tenants and on and on.

I'd agree that the housing market is a mess, but at least when you are paying a mortgage you are throwing money down your own hole than throwing money down someone else's hole when renting.

[davewindsor]

$1175 cheaper than owning? That's the equivalent of the mortgages on 2 decent homes in Detroit.

Banks are still giving out mortgages on houses in Detroit anywhere near the selling price, if at all??

[swingline]

It's hard for me swallow that this really could be the first signal of Detroit gentrification.

Why should it be so hard to swallow? First, gentrification usually refers to the movement of higher income residents into low income, often blighted areas. In Detroit, an apartment building that already has $1000 rents is not a low income or blighted building.

Second, gentrification is a good thing for Detroit on every level. If the market is supporting increased rents, that means that residents with higher incomes are moving in. That means more economic activity, more employment, more taxes paid, and less government services consumed.

Sometimes, if poorer residents are displaced by increased rents/housing prices and there are no affordable housing alternatives within a reasonably near vicinity, that would be bad. But given the abundance of affordable housing options almost everywhere in Detroit, this kind of "bad" displacement cannot occur. Renting always carries the risk of an unaffordable rent increase requiring the tenant to move. That's the tradeoff if one chooses to avoid the risks of ownership.

I can't afford $1300 for a 1BR or $350k for a loft condo. But I wish Detroit was flooded with housing that commanded these prices.

[iheartthed]

but at least when you are paying a mortgage you are throwing money down your own hole than throwing money down someone else's hole when renting.

I think you're probably pouring money down someone else's hole either way. What's the median home selling for in Detroit now? Something like $80,000? Roughly about where is was in like the early 1990s, right? If you had paid $80,000 cash for a house in 1994 you'd have a house that might be worth $80,000 today. If you had stuck the $80,000 in an interest bearing account pegged to inflation, you'd have over $116,000 today. If the account was pegged to the Dow, it'd be worth over a quarter million today, even after the severe losses over the last recession.

[Lowell]

I think you're probably pouring money down someone else's hole either way. What's the median home selling for in Detroit now? Something like $80,000? Roughly about where is was in like the early 1990s, right? If you had paid $80,000 cash for a house in 1994 you'd have a house that might be worth $80,000 today. If you had stuck the $80,000 in an interest bearing account pegged to inflation, you'd have over $116,000 today. If the account was pegged to the Dow, it'd be worth over a quarter million today, even after the severe losses over the last recession.

Good points but if you bought in 1994 you get to add in the value of living in the house. i.e. what you would have shelled out in rent minus the property taxes and upkeep expenses on your house during the time your investment would have grown as a renter. If rent was $1000 per month average over that time and taxes and upkeep $500 that would be 17 years X $6000 = $102K value. We all gotta live somewhere.

[Goose]

I think you're probably pouring money down someone else's hole either way. What's the median home selling for in Detroit now? Something like $80,000? Roughly about where is was in like the early 1990s, right? If you had paid $80,000 cash for a house in 1994 you'd have a house that might be worth $80,000 today. If you had stuck the $80,000 in an interest bearing account pegged to inflation, you'd have over $116,000 today. If the account was pegged to the Dow, it'd be worth over a quarter million today, even after the severe losses over the last recession.

$80,000?

I just ran REALCOMP, all sales listed in Detroit from 07/01/2010 to 07/01/2011 that were listed with a realtor in REALCOMP.

5,918 sales
median sales price is $9,000
average sales price is $13,439

If you paid $80,000 for a home in 1994 you probably have a home worth $8,000 today.

[iheartthed]

$80,000?

I just ran REALCOMP, all sales listed in Detroit from 07/01/2010 to 07/01/2011 that were listed with a realtor in REALCOMP.

5,918 sales
median sales price is $9,000
average sales price is $13,439

If you paid $80,000 for a home in 1994 you probably have a home worth $8,000 today.

Actually, I was referring to Metro Detroit.

[BrushStart]

Why should it be so hard to swallow? First, gentrification usually refers to the movement of higher income residents into low income, often blighted areas. In Detroit, an apartment building that already has $1000 rents is not a low income or blighted building.

Second, gentrification is a good thing for Detroit on every level. If the market is supporting increased rents, that means that residents with higher incomes are moving in. That means more economic activity, more employment, more taxes paid, and less government services consumed.

Sometimes, if poorer residents are displaced by increased rents/housing prices and there are no affordable housing alternatives within a reasonably near vicinity, that would be bad. But given the abundance of affordable housing options almost everywhere in Detroit, this kind of "bad" displacement cannot occur. Renting always carries the risk of an unaffordable rent increase requiring the tenant to move. That's the tradeoff if one chooses to avoid the risks of ownership.

I can't afford $1300 for a 1BR or $350k for a loft condo. But I wish Detroit was flooded with housing that commanded these prices.

First, I was simply trying to be sensitive to people who may have been affected.

Secondly, you are correct that true gentrification will not happen in Detroit for a long time, but even if it did, I'm sure people will debate whether it would be good or bad. I did not impute any positive or negative spin on the subject in my OP; I just merely pointed out something I see occurring in my own building. It is interesting to me that people are being displaced due to rent increases.

In other cities, when long-time residents are priced out and replaced by younger, higher income residents, it is typically viewed as a sign that a demographic shift is occurring. That shift is usually given the label "gentrification." For it to be noticeably occurring in Detroit I think would be a subject of interest given the history of the city. It represents a major digression from past trends.

[iheartthed]

Good points but if you bought in 1994 you get to add in the value of living in the house. i.e. what you would have shelled out in rent minus the property taxes and upkeep expenses on your house during the time your investment would have grown as a renter. If rent was $1000 per month average over that time and taxes and upkeep $500 that would be 17 years X $6000 = $102K value. We all gotta live somewhere.

I think $1000 per month average is pretty high for the Detroit area over the past 17 years. Just guessing, I'd say $600 per month would be a more realistic average. Using that guesstimate you'd be in the hole by $22K over the course of 17 years by buying, and in the hole by roughly $6K by renting [[using an inflation pegged interest account).

[cmubryan]

Been in Apartment mgmt since 2004. Rents have pretty much been flat and are actually down, dollar for dollar compared to 2000. If I had to draw a graph, I would say rents peaked 2000-2002, fell signficantly between 02-05 and have stayed that way. Many landlords are in a predicament because their building/complex is leveraged based upon rents that they were getting ten years ago. When rents fall, the overall Net Operating Income falls and if your Net Operating Income is less than your mortage payment, you are in deep water. Hence the reason you may see so many buildings and complexes in poor condition. They have to cut wherever they can [[or reach into the owners' pockets). The last ten years hasn't been pretty.

If you were to compare our rents [[Metro Detroit) to other American cities, you would see our rents our fairly cheap. I managed a community in suburban Chicago simultaneously as managing communities here and an apartment might go for $900 there and you could MAYBE get $700-$750 here for it. However, ten years ago our rents were much more inline with each other.

Finally, there is a little bit of movement in the right direction, it's a positive thing. It means there is more demand and less supply. The more of this, the higher the chances we get new construction which means more jobs and better quality apartments as the older apartments have to upgrade to stay competitive.

[BrushStart]

Been in Apartment mgmt since 2004.

Are you in the city or in the suburbs? Do you know if there's a difference, or do rates in the suburbs track percentage-wise with rates in the 'burbs?

[manualshift]

Setting aside adolescent, smart-aleck inquiries and getting to what Hermod meant: too often tenants, having agreed to pay rent on, say, the 1st of every month, find that they would rather have a smartphone or a bigger tv or spend more time clubbing or something like that. They spend the money that they have contracted to the building owner on other things - much as anyone might do when they measure their own needs and wants against voluntarily giving a wedding gift or a birthday present and deciding not to give the gift.

The point is that renters pretty often think rent is voluntary and decide from month-to-month whether to pay rent or something else.

A cost of doing business. If her rent is too low to take this on possibility, or if her property is so undesirable as to command the necessary rents, then I guess I sort of feel compassion for her. I guess. Personally, I never met a landlord that wasn't satisfied with just having their mortgage paid by other people. More often then not consistently bitching about not turning an immediate profit.

[wolverine]

$1175 cheaper than owning? That's the equivalent of the mortgages on 2 decent homes in Detroit.

I've been considering renting my home out. A full 2 story 1,700 sq feet 3 bed 1.5 bath in hamtramck. My mortgage is $550. My comparisons have shown that I would be lucky to get that. Not to mention the increase in non homesteaded taxes hefty heating bills for tenants and on and on.

I'd agree that the housing market is a mess, but at least when you are paying a mortgage you are throwing money down your own hole than throwing money down someone else's hole when renting.

It depends on where you live and type of construction. My apartment is 780 sqft. I can buy it for $400,000. So comparably sized units in my neighborhood with condo associations fees + taxes + utilities and services leave an amount close to what I pay in rent...excluding the mortgage. Basically owning means I can just say "I own this," nothing else. In both situations, I still have a roof over my head, but I'm paying less for the same place when I rent. And if I'm not happy, I can just walk way from my apartment, break my lease with only a $200 marketing fee or 1 months rent if no renter is found.

Though basic, non-luxury apartments aren't going for $1000+ per month in Detroit right now, they eventually could. And it's strange because it's almost the exact opposite of most parts of the country where renting is usually always cheaper than buying.

[wolverine]

Sometimes, if poorer residents are displaced by increased rents/housing prices and there are no affordable housing alternatives within a reasonably near vicinity, that would be bad. But given the abundance of affordable housing options almost everywhere in Detroit, this kind of "bad" displacement cannot occur. Renting always carries the risk of an unaffordable rent increase requiring the tenant to move. That's the tradeoff if one chooses to avoid the risks of ownership.

Gentrification creeps pretty slow. It's not like poorer residents are forced out immediately. One group of residents will reach old age and move to senior living. Another group may have a particular cultural and ethnic background and move to a neighborhood where there's a bigger sense of community sharing their background.

And finally, since the 70's affordable housing has always remained scattered across cities. So as long as it doesn't develop into a hellhole, it's improved upon but remains cheap as neighborhoods get more affluent. Some of the most richest neighborhoods in Chicago have low income and affordable housing mixed in between condo towers and brownstones. Sometimes developers are required to build a certain number of affordable housing units for X number of market rate units. I remember such a policy was adopted in Ann Arbor, and I'm definitely in favor of it.


But there is certainly resistance in some places.

[Cincinnati_Kid]

It depends on where you live and type of construction. My apartment is 780 sqft. I can buy it for $400,000. So comparably sized units in my neighborhood with condo associations fees + taxes + utilities and services leave an amount close to what I pay in rent...excluding the mortgage. Basically owning means I can just say "I own this," nothing else. In both situations, I still have a roof over my head, but I'm paying less for the same place when I rent. And if I'm not happy, I can just walk way from my apartment, break my lease with only a $200 marketing fee or 1 months rent if no renter is found.

Though basic, non-luxury apartments aren't going for $1000+ per month in Detroit right now, they eventually could. And it's strange because it's almost the exact opposite of most parts of the country where renting is usually always cheaper than buying.

I agree, renting is cheaper in the long run. You don't have rising property taxes to worry about, as well as having that tree cut down whose roots have lifted the concrete sidewalk that you have to pay $1,500 to have fixed, or maybe the sump pump is acting up, or the roof and windows need replacing. The point is, since the housing collaspe, more people are realizing that a home, condo, apt etc... is nothing more than shelter, a roof over your head . You can move around more freely without the obligations of what to do with your home if you have to move, and can't sell it. Owning a home is not a investment anymore, 30 or 40 years ago that would be the case, but not now, and I own a home that I'm underwater in.

[mikeg19]

I'm not sure if this is a possibility or not because it would not be a benefit to the landlord or owner, bt do any type of apartments or lofts give a locked in rate if you lease for a certain period of time? say a year?

[BrushStart]

I'm not sure if this is a possibility or not because it would not be a benefit to the landlord or owner, bt do any type of apartments or lofts give a locked in rate if you lease for a certain period of time? say a year?

Yes. That's how 12-month leases usually work.

[Warrenite84]

In this economy, a landlord that is breaking even on a property is a great thing. If they can't afford to stay in business, available housing stock would drop. The extra a landlord charges over the mortgage is profit or held in reserve for the maintainance issues that will pop up.

I would hate to only break even on an apartment building when the AC breaks or roofing fails. That could get very expensive.

Since an apartment has multiple tennants with 12-month leases, there is always turnover unless there is rent control.

[trotwood]

"Fixed income" doesn't necessarily mean SSI only. She might have been getting a company pension in addition, or had savings that she was drawing from. I'm not saying we should all feel bad for these people. Obviously, they could find another place to live. However, they are being displaced by higher rents, and being displaced [[by my observation) younger yuppie types. The demographics of my building is changing.

Pardon the intrusion but he said Social Security. I can't speak for him/her but I don't think he/she meant Supplemental Security Insurance.


Originally Posted by lilpup
So you're paying around $1k/mo? I work two jobs to pay my rent in Ann Arbor and it's nowhere near that much! I could never afford that, there's no way a retiree on a fixed Social Security income could.

[English]

The prime developments downtown and in Midtown are at least $1000/month for a 2-bedroom. I'm sorry, but that's the going market rate. Of course, with the Midtown incentive, you get slightly more than $200 knocked off per month, but that's just in a specific area IF you work for certain companies. The increase in auto insurance also inflates the cost compared to a suburban rental targeting similar demographics.

The mitigating factor seems to be secured and/or covered parking. I could find three-digit rent for a 2 bedroom without it, but I'm not willing to live in the city without secured/offstreet parking. If I were a guy, I would, but I'm a single woman who works at night. So we have only the following options: 1) studio or one-bedroom, 2) pay what it costs, 3) get a roommate/boyfriend to share the expenses, or 4) move to the 'burbs.

Sure, nothing *might* happen if you go with less secured buildings. But I'm not willing to take that chance. Since I wanted an office/guest bedroom, I'm getting used to living leaner. Sigh...

Even at current rates, core city rentals of all kinds are cheap-cheap-cheap compared to other cities...

[Cincinnati_Kid]

Just saw today that rents are on the rise again. It's all about taking advantage of the sorry- _ss housing market, and the fact that if your credit isn't squeeky clean, you won't be getting a house anyways. So the beat goes on........

[corktownyuppie]

Even at current rates, core city rentals of all kinds are cheap-cheap-cheap compared to other cities...

No kidding. Part of it is an imbalance between the rate demand has increased vs. the lead time necessary to bring a development to fruition. The other part of it is that you can't simultaneously want a world class downtown and but expect the prices to stay low.

A friend of mine has commented that "given the amount of work" they have to do, the professionals in their field "deserve to make more than $50,000/yr...more like $100,000/yr would be fair." I said, ok...I agree with you, people in your profession should make six figures. Guess what -- you're fired. You've been replaced by someone who actually skipped the bar in lieu of the library on Fridays and Saturdays in college.



If Detroit really is on the rebound, the inevitable long-term result is that condos one block from the stadium and Fox Theatre should go for $300-$350k. A 1,000 sq. ft apartment should go for $1500-1700. And the people who are in the $1000-$1200 range will have to settle for living a few miles away. This is a good thing...it means the core of your city is filled with a critical mass of people who are in the $75k-$150k+ per year range. You finally have the beginnings of a tax base for the modern American city.

A client of mine works for an auto supplier and is complaining that his company isn't doing well enough to re-hire any of his laid-off co-workers. I told him, actually, your company has 400 job openings right now. The problem is that they're for people who have a bachelor's in engineering, not for work on the factory floor. My biggest concern for them isn't that Michigan's unemployment situation won't improve. It's that many of his buddies are probably going to have migrate out of the state and be replaced by knowledge workers for it to happen.

Congratulations, Michigan's economy is fixed! Bad news: Part of fixing it was finding somewhere else for you to go.

If anyone has dreams of the City of Detroit coming back hoping to forego wealthy residents in exchange for record numbers of lower-middle to middle- class families...I'd say it's probably not going to happen.

Instead of lamenting rising rents, we should celebrate them...it means the city is attracting more attention...developers will see it as a money maker instead of a money pit...and they'll come back and reinvest some of that profit to renovating another building.

If that means that my buddy gets priced out of the Westin Book Cadillac and now has to move down to Fort and Lafayette.... I'll take it.

[Detroitej72]

Instead of lamenting rising rents, we should celebrate them...it means the city is attracting more attention...developers will see it as a money maker instead of a money pit...and they'll come back and reinvest some of that profit to renovating another building.

If that means that my buddy gets priced out of the Westin Book Cadillac and now has to move down to Fort and Lafayette.... I'll take it.

Wait a minute, weren't you complaining earlier in this thread that you didn't like seeing your neighbor getting displaced for higher income people? What caused you to do a 180 degree flip on your views?

[corktownyuppie]

Wait a minute, weren't you complaining earlier in this thread that you didn't like seeing your neighbor getting displaced for higher income people? What caused you to do a 180 degree flip on your views?

Sorry my friend, in the eternal words of Shaggy... "It wasn't me."

[English]

If Detroit really is on the rebound, the inevitable long-term result is that condos one block from the stadium and Fox Theatre should go for $300-$350k. A 1,000 sq. ft apartment should go for $1500-1700. And the people who are in the $1000-$1200 range will have to settle for living a few miles away. This is a good thing...it means the core of your city is filled with a critical mass of people who are in the $75k-$150k+ per year range. You finally have the beginnings of a tax base for the modern American city.

Yes, exactly. But my advice to those who are worried about getting priced out is -- only if you can afford it -- take advantage of cheap housing prices in prime Detroit neighborhoods and buy. Not only won't you have to worry about rent increases, you might just break even or come out on top.

That's actually what happened to those who bought brownstones in neighborhoods in Manhattan and Brooklyn that were sketchy in the 1970s and 1980s, gentrified in the 1990s, and are now some of the most expensive housing on the planet. A retired buddy of mine has working-class and lower-middle-class friends in the Big Apple who made out like fat cats thanks to New York gentrification. They sold their homes at a huge profit, built homes in Florida or the Carolinas, bought boats and/or RVs, and are now on Easy Street even with the recession.

So... yeah. Buy now, if you can.