Detroit Housing's for Sale, and Global Investors Want In

The Motor City may be synonymous with scorched-earth urban decay to many Americans, but the market for distressed real estate properties there is an exception. Speculators from the U.S. and abroad are scooping up Detroit homes, in some cases by the hundreds, for as little as $500 at Wayne County’s tax-delinquent property auctions. The county sold 10,461 of the 18,897 Detroit properties offered last year, according to public records. “Detroit is the hottest thing happening,” says city native Jasmine McMorris, who has purchased 332 homes in the past two years for an average price of $2,500. She’s rented some at a profit while selling others to investors as far away as Australia and Cambodia. “No place else can I buy a house for $1,000 and put in $3,000 to fix it up and get a 40 percent return on my investment monthly,” she says.

In markets such as Chicago, Miami, and Phoenix, Blackstone Group and other private equity firms have bought foreclosed houses and turned them into rental properties. In Detroit, the foreclosure problem is exacerbated by a large number of properties seized by the government to recoup unpaid tax bills, says Alan Mallach, senior fellow at the Center for Community Progress, an advocate for land reuse. Mass sales can exacerbate instability by attracting landlords who rent without maintaining homes or paying property taxes, Mallach says.