Detroit's Housing Market Has Never Recovered

S&P Case Shiller released its housing data for June, and Detroit did fairly well. Home prices rose 10.3%, compared to the same month last year. That was against a national improvement of 6.2%. What the headlines about the housing recovery did not show is that Detroit is the only one of the top 20 housing markets where prices are still below its Case Shiller January 2000 benchmark.

All 20 markets measured by Case Shiller had a base value of 100 at the start of 2000. Despite the horrible drop in home values during the recession, several markets have home prices worth more than double what they were at the start of the measurement period. Washington D.C.’s level is 210. For Los Angeles the figure is 223. And for San Diego it is 203.

However, for Detroit, the figure is 97. The only other city with a score anywhere close to that low is Cleveland at 107. They are the only two cities in the 20-city measure that are located in the old rust belt.

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The Detroit number is easy to explain. The population was 1,029,000 in 1990, 951,000 in 2000 and 714,000 in 2010. Many estimates put the current figure below 700,000. As the number of people who live in the city has dropped, so has the tax base. As city services drop, more people leave, and the trend has become a vicious cycle, ending in Detroit’s bankruptcy. Some of the people who have fled Detroit have gone to nearby suburbs, where often incomes are higher and services better.

Detroit’s Case-Shiller index may never get back to 100, or if does, it will continue to be well below the national 20-city average. While the city’s improvement looks strong over the past year, the numbers are really deceiving.

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