Detroit’s condo market slows to over-saturation

NICK MANES

A Crain’s analysis of current condo listings in and around downtown Detroit shows a wide range of prices and fees.

Smaller one-bedroom units in the 1300 Lafayette high-rise, for example, are on the market for as low as $69,000 with HOA fees of around $1,000 per month that include property taxes, heat, air conditioning, water, basic cable, maintenance and 24-hour security.

Just across Lafayette Street, on the edge of Lafayette Park, is a Mies van der Rohe three-bedroom, two-bathroom co-op unit listed at $400,000 with an HOA fee of $890 per month, according to Zillow.

Further east along the riverfront, in the gated Harbortown community, is a one-bedroom, one-bathroom condo for $159,000. e Zillow listing says the unit has a monthly HOA fee of $750 and includes a tax abatement.

Overall, 2022 made for “a harsh reality” for Detroit’s condo market, particularly when compared with the boom year of 2021, according to a condo market report released in January by e Loft Warehouse.

e second half of last year saw 145 condo transactions, the smallest number for that time period in a decade.

By comparison, there were more than 300 in both 2019 and 2020, according to previous Crain’s reporting.

“ is is explained by a sharp reduction in demand due to increased interest rates and buyers’ fear of a recession,” according to the report.

at decline in demand has continued to make Detroit’s condo market over-saturated. e Loft Warehouse report says the market has nearly eight months of supply, whereas three-six months would be considered a balanced market.

Still, the situation is an improvement from two years ago when the market had nearly a year’s worth of inventory, as Crain’s reported at the time.

Austin Black, an associate broker and Realtor with @properties Christie’s International Real Estate, said the current market in Detroit is largely “building-by-building.” When he gives clients tours, it’s easy to see which buildings are doing capital improvements and which aren’t.

Moreover, the point of over-saturation in the city’s condo market is based on location, said Jason Hill, a broker with Historic Detroit Realty, pointing to Brush Park as one example of an area where supply exceeds demand. Neighborhoods east and west of downtown remain quite active, he said. at dynamic, Hill said, “forces agents to dig deep in their toolbox and connect buyers.”

Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes

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“ ey’ve got the note on their condo, they’ve got to pay insurance on top of that and they’ve got taxes on top of that. So that’s a lot and then when you get whacked with these big pop-up expenses … there’s a reason that condominiums are hard to sell.”

‘Pricing out regular people’

Mary Hollens has lived at e Lofts at Rivertown for about a dozen years in a one-bedroom unit of about 725 square feet. e more than 120-yearold building along East Je erson Avenue near the bridge to Belle Isle was built as the headquarters for pharmaceutical rm Frederick Stearns & Co., according to Historic Detroit.

On top of Hollens’ mortgage payment, which she did not disclose, the nonpro t fundraiser said she pays $1,800 every other month as part of an assessment on her unit, plus about $725 monthly in HOA and other fees. ose fees, Hollens said, have climbed steadily since she started living in the community, which Historic Detroit said was converted into condominiums in 1989.

All told, Hollens said she hardly feels like she’s getting her money’s worth. She pointed to maintenance needs all over the building, particularly stained carpet and scu ed baseboards in common areas.

“It feels like you’re pricing out regular people” and makes for a “redundant tax” for residents, Hollens said. “ at’s New York and Chicago money.” e property management company for the building, Detroit-based J.S. Dean & Associates Inc., did not respond to a request for comment. A receptionist for the building told Crain’s recently that a new property management company was in the process of taking over. e pricey HOA and special assessment fees — and the rankling it gives some residents — comes as no surprise to Jerome Huez, a Realtor and owner at e Loft Warehouse.

Huez, who focuses on condos for the Berkshire Hathaway-a liated real estate rm in Detroit, pointed to two problems he sees in the city’s overall condo market.

First, when it comes to new construction condos — particularly highrise and mid-rise developments — Detroit still makes for “a baby market” compared to cities such as New York, Chicago and Toronto, where residen- tial skyscrapers litter much of the skyline. Developers just can’t make thenancials — the gap between development costs and what they can sell a unit for — work on those kinds of projects in a city like Detroit, Huez said.

“I can see a lot of interest from developers and people who come to the city, but we need to wait a few more years before our market grows,” he added.

Meanwhile, Huez pointed out, aging buildings such as e Lofts at Rivertown come with their own issues. Namely, age. ose older buildings tend to struggle on the resale market, he said, largely because of the thousands of dollars a year an owner will pay in HOA fees and assessments.

“So it becomes totally una ordable,” he said. “Even an investor doesn’t want to touch it, because the rent won’t cover those costs.”

Condos and co-ops

While many of the downtown Detroit-area condo opportunities might give some a case of sticker shock, Realtors and residents are quick to point out a subtle di erence: Communities such as the 1300 Lafayette building, townhomes in Lafayette Park and other nearby residences are also cooperatives as opposed to just condominiums.

akin to something of a teacher.

“When I have a new client buying a co-op, I have to educate them on what a co-op is,” Hill told Crain’s. “When you look at the HOA fee and compare it to a condo in close proximity to downtown, it’s often more a ordable, or (there’s) not much difference (in price).” at’s because co-op properties typically include property taxes and many utilities as part of the overall monthly HOA fee. at’s something not found in traditional condo communities.

Given some of the complexities, Realtor Austin Black with @properties Christie’s International Real Estate told Crain’s he typically advises his clients buying condos to hire attorneys familiar with HOA laws to help them navigate the transaction.

Some people to whom Hill has sold co-op units — particularly in the Hyde Park community in the Elmwood Park neighborhood east of downtown — say the co-op mechanism is perfect for the style of living they wanted.

“I wouldn’t want to live in any other kind of situation,” said Suzan Anderson, a retiree of the Wayne County Circuit Court who has lived in Hyde Park for more than 30 years.

Anderson said she and her husband have “never seen a tax bill” in their decades living there, and pay $958 per month for their HOA fee.

—Mary Hollens, resident of The Lofts at Rivertown e main di erence is that residents of co-ops own a chunk of the property, akin to being a shareholder of a public company, as BankRate explains it. us, as a Realtor, “you’re not actually selling real estate. You’re selling shares,” explained Jason Hill, broker and owner at Historic Detroit Realty, where he focuses on many of Detroit’s co-op communities.

Similarly, Terry Campbell — who works as a regional manager in metro Detroit for U.S. Sen. Debbie Stabenow and lives in the Hyde Park community — touts the “carefree lifestyle” o ered by co-op living, noting that snow removal, lawn mowing, the vast majority of maintenance for interior and exterior of units, as well as communal spaces is covered by the HOA fee.

In so doing, Hill says his role is also

Campbell and others also point to the sense of community o ered by co-ops.

“Co-ops are about communal living,” said Trish Hubbel, a Realtor with e Loft Warehouse and resident of the Chateaufort Place Cooperative east of Lafayette Park. “You’re buying into a community. No one is coming in to ip a unit and get out. It’s really a true community.”

Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes