Welcome back to Property Lines, a column by veteran real estate reporter Alexei Barrionuevo. Every week, Barrionuevo will report on housing trends, real estate deals, and major business moves right here on Curbed.
There is a joke making the rounds in Flint, Michigan, these days that says a lot about how the historical fortunes of the town were turned on their head.
It goes that in the 1970s the factory jobs were in Flint and you couldn't drink the water in Mexico. "Now all the factory jobs are in Mexico, and you can't drink the water in Flint," said Scott Hoyt, co-owner of ChangingStreets.com, a brokerage that serves Flint.
The discovery of widespread lead contamination in the city of 102,000 people has drawn national scorn for the way leaders at all levels of government bungled such a devastating health issue. Still, as real estate brokers working in the city reminded me in recent days, Flint's housing market was already struggling to regain its footing after a series of economic blows dating back to 2005.
Homes in Flint's Woodcroft Estates neighborhood. Photos courtesy Scott Hoyt of ChangingStreets.
Flint is no stranger to bad news. The crime rates and housing vacancy numbers have been high for years now, and the town is no longer the symbol of American industrial and economic strength that it was in the prime days of General Motors.
"This is a city that has been punched in the mouth, constantly, for the last 10 years," Hoyt said.
Today, the median household income is just over $27,000, unemployment has hovered around 9 percent, and in recent days RealtyTrac has reported that the city has the highest vacancy rate in the country, at 7.5 percent, beating out Detroit, at 5.3 percent. According to RealtyTrac, Flint has 11,605 vacant homes, 87 percent of which are investment properties.
Ryan McFarlane, a broker with ChangingStreets who specializes in bank housing sales, said many of the properties declared vacant are so rundown that no one will ever live in them. Still, brokers there agreed that the nation-leading vacancy rate illustrates how far the city has fallen.
Not surprisingly, there are signs that the water contamination is likely to make an already challenged real estate market worse by scaring off some investors.
"Are the prices being affected? I would say yes," said Chris Theodoroff, president of the local East Central Association of Realtors.
He said he lost a deal in late January. An investor had agreed to buy a three-bedroom home in the College Cultural area for $25,000 and then backed out. He decided there was too much work to do to make it sellable. "But his lawyer also contacted him and said, 'What the heck are you doing buying a house in Flint while this is going on? Why don't you hold off until some sort of resolution is made'" Theodoroff said.
While the water issue has scared off some out-of-state investors, McFarlane said, Theodoroff has been seeing more local investors starting to circle around the city's vacant properties in the past three to four months, offering cash to buy homes at a discount, especially those priced at $15,000 or less, of which there are hundreds.
They are typically buying anywhere from two to 20 properties, he said. "They are starting to look around really hard and say, 'this is the time to buy.'"
Despite its historic challenges, Flint had appeared to be turning a corner, with its average sales price-per-square foot rising to $18.55 this past December, up from $13.84 in October of 2014, according to figures compiled from the East Central Association of Realtors.
"We had some momentum," Theodoroff said. "This is probably going to knock down some of that momentum."
But McFarlane doesn't completely agree that Flint was experiencing a rebound. He said that banks are creating an "artificial lack of inventory" in the market by deciding not to go through the foreclosure process. "What you are seeing is a shortage of properties, not that the price of them is rising," McFarlane said. "Many of these properties aren't hitting the market, and because of the deferred maintenance many of them end up getting torn down. This isn't anything positive for the economy" in Flint, he said.
For many years, Flint's economy was all positives. After World War II, General Motors built one of the largest planned developments in the United States in Flint to house its plant workers and others moving into the area to work in the burgeoning auto industry. The company built bungalow-style homes for workers in what became the Mott Park neighborhood.
By the mid-70s Flint had one of the highest per-capita average income levels in the country. Then the gasoline crunch of the late '70s caused the car manufacturers to build smaller cars, and Flint began to feel the effects of the auto-industry downsizing.
But real estate continued its ascent through 2004. Then, in 2005, Delphi, an auto parts manufacturer, filed for bankruptcy and shuttered more than 20 plants in the United States, including the one in Flint.
"I was honestly heading for probably a record year that year," Theorodoff recalled. "After June of that year, I could have stood on the corner of Saginaw and First Street in the middle of downtown with a box of keys that said 'free' and I couldn't give them away. I think I had one or two closings for the balance of the year."
As the national economy began to crater in 2008, Flint residents were in a panic. They were losing jobs in droves. Then GM and Chrysler started to file for bankruptcy. "And people were scared," Theodoroff said.
By 2012, the city seemed to have come out of the worst of it, having passed through the gauntlet of foreclosures and bank sales.
But high unemployment and rising level of abandoned properties spurred a crime wave that made Flint one of the most dangerous places in America. The theft of copper wire and water heaters became "chronic," Hoyt said, with thieves typically selling the stolen goods back to investors.
By 2014, Flint had a murder rate nearly six times higher than the national average and a burglary rate more than three times higher than the rest of the country, according to RealtyTrac.
Flint's economic woes caused the level of lender-owned homes to balloon to 64 percent, a level that has since fallen to 35 percent. The average sales price in the city was $28,735 in January, up from $19,612 in January of 2015.
Once-elegant neighborhoods like Woodcroft Estateswith neo-classic and Tudor-style brick mansions up to 9,000 square feet adorned with Honduran mahogany trim, bespoke Italian tile, and plaster columnshave fallen into disrepair, and many of the trained craftsmen that could restore them have left the area, brokers said. Built by the doctors, lawyers, and small business owners servicing the General Motors plant, the custom homes now struggle to fetch more than $200,000. Since January of 2006 only 20 properties over $250,000 have sold in Flint.
Still, with national attention focused on fixing the lead problem and promises of many millions of dollars to clean up the mess, some brokers are clinging to the notion that the city's crumbling infrastructure will be upgraded, making the city's housing stock more attractive.
"I am betting that in the next 90 days you are going to see some tremendous changes come to Flint," Theodoroff said.
· Flint Architects Find Water Crisis and Infrastructure Issues Create More Questions [Curbed]
· Flint Water Crisis Creates Stigma, Uncertainty in Real Estate Market [Curbed]
· Property Lines [Curbed]