"What was old is trying to be saved and renovated, and when they're done with it, the finished product is very trendy. Accessibility to technology, transportation, arts, sports," Tarala said. "It does tend to be expensive because the land cost in the city has really recovered significantly. The initial investment was much higher than it was. It jumped from distressed to expensive."
Detroit, however, is still a tale of many neighborhoods. While the downtown is growing pricey new pads for young workers, there are still thousands of distressed properties littering the rest of the Detroit landscape — neighborhoods where blight is the buzzword. But a veritable army of community bankers and nonprofit groups are fighting the good fight, and slowly but surely, seeing results.
"We've made a lot of headway, but there is a lot more work to do, so we remain optimistic," said Krysta Pate, program director at Detroit Home Mortgage, a program launched in February and designed to make home ownership more affordable and accessible to local Detroiters. "I'm born and raised Detroiter, so I understand the market conditions."
One of the biggest barriers to homebuyers in Detroit is what city officials call the appraisal gap. The city's median home price is just $24,000, according to RealComp, due to the fact that so many homes are foreclosures or have been purchased by investors using cash. Investors renovate the homes, driving up the values, but the original, low sale prices are still used as comparables for neighboring appraisals. Regular, mortgage-dependent buyers who want to rehab homes and live in them, are unable to get large enough mortgages because the homes they want to buy are appraising too low. Detroit Home Mortgage is offering an option.
"We're in this cyclical mess, so we are trying to stop that cycle and provide the financing to buyers," said Pate.
Through a combination of private funding and cooperation of five different banks, the program offers 3.5 percent down payment, fixed-rate loans to buyers with at least a 640 FICO score. They split the loan in two, with the first covering the appraised value of the home and the second loan covering the "appraisal gap," which would be the value of the home once renovated and on the open market. The second loan is held by a nonprofit.
"We understand that you're putting someone in an underwater mortgage based on standard appraisals, so we split it so we could create equity protection. We split the mortgages up based on the value. If there is a hardship, or life event, then what happens is that they would submit paperwork to the nonprofit and we would forgive the amount of the second mortgage over the appraised value," Pate said.
So far, they have looked at about 1,000 inquiries, closed 10 loans and approved 23 others.
"Nothing is going to happen overnight. No one is going to wave a magic wand," added Pate.
But rehabbing the old bones of old Detroit homes is all part of both neighborhood stabilization and revitalization. That's the foundation of another program run by another Michigan native. Detroit LISC (Local Initiatives Support Corporation) is part of national LISC, a community-based development organization that works to transform distressed communities.
"We've been working on a partnership with the City of Detroit Home Repair Program to bring capital back to neighborhoods for homeowners who have been in their home at least six months," said Tahirih Ziegler, executive director of LISC Detroit.
Through a combination of public and private funds, block grants, and $5 million from Bank of America, the program is helping current homeowners to rehab their properties, again, adding value as well as commitment to local neighborhoods. It offers zero percent interest loans over 10 years. The program has had over 4,000 inquiries and 1,500 applications so far.
"The goal is really for the existing homeowners who have roots in the city to improve their properties. If they don't have access to capital, they become part of the issue in terms of blight and neighborhood disinvestment. It's getting people to have a personal commitment," said Ziegler.