How the Job Market Impacts the Housing Market in Detroit

How the Job Market Impacts the Housing Market in Detroit

There is no question about the fact that Detroit’s bankruptcy filing caused a huge stir. With a staggering $18 billion in debt, Detroit became the largest municipality in U.S. history to file for bankruptcy—an action that has had a negative impact on virtually all of the citizens of Detroit. With the city completely out of money, the citizens of Detroit felt the impact of the bankruptcy hard. Garbage pickup was unreliable, buses either ran late or not at all, streetlights did not work, and many retirees lived in fear of their benefits being cut. But those were just a few immediate effects. What about the long-term effects?

Bankruptcy and the Housing Market

The problem is that while the bankruptcy certainly caused a sharp decline in the city’s public services and a decline in the auto industry, the economy also took a major hit as a result. One of those areas was the Detroit housing market. Even before the bailout, the housing market in the Motor City was not strong. With Detroit holding a top spot on America’s Most Dangerous Cities list and a metro area unemployment rate of 16%, it was not surprising that people were not eager to move into the city. Yet regardless, the housing market showed some signs of hope. Housing recovery grew due to a number of high-risk investors from both inside and outside the U.S. who wanted to see improvement in Detroit’s metropolitan areas. The renewed investments prompted some real estate agencies to move back to Detroit and take advantage of the improvement in the urban and suburban housing areas. But this was all before the bankruptcy. Surely without money and jobs the housing market would take a huge hit, right?

It comes as no surprise that an economic standstill and a lack of jobs would negatively impact any housing market. It is definitely true that if Detroit wants to see its property values increase, it needs to restart its economy and start paying back its debt. However, it does not seem that bankruptcy hit the Detroit housing market as hard as expected. Instead, Detroit’s shattered image opened the city up to more investment, especially foreign investment. Sandy Baruah, the CEO of the Detroit Regional Chamber, said, “One investor described it as an emerging market that happens to take dollars.”

The investment is something that is helping the city. The bankruptcy put Detroit on the world stage as an area in need of help. Now with the investment, new properties are beginning to emerge. Restaurants, hotels, and renovated homes are slowly cropping up in all areas of the city. The bankruptcy ended up simultaneously being a blessing and a curse. While there is no question that the housing market took a hit, the bankruptcy could potentially help the city get back on its feet.

What does the Future Look Like?

Regardless of the how the city progresses, it looks like the housing market still has a long way to go. The value of Detroit homes is growing at a rate of 2.6% each year. At this current rate, it will take Detroit about 14 years for homes to fully recover. Although the housing market seems to have a long way to go, the citizens of Detroit are optimistic that their city will recover. See more stats at www.usajobs.gov.

Job Market Improving in Detroit

Job Market Improving in Detroit

On July 18, 2013, the city of Detroit became the largest U.S. city to file for bankruptcy. With over $18 billion in debt, the city was left to deal with numerous problems, from malfunctioning streetlights, to public utilities issues, to a crumbling public school system.

In an attempt to save the city and the auto industry that was flailing around in the water, President Obama enacted an $80 billion bailout. This bailout was met with tremendous opposition and outrage from the public. Many conservatives saw Obama’s actions as another way of grabbing power. They felt that the government had no business in taking over the actions of private corporations or just meddling in the economy at all. Mitt Romney’s New York Times op-ed “Let Detroit Go Bankrupt” had become a rallying cry of several conservatives. Regardless of the opposition that he faced, Obama saw this bailout as a necessary action to protect not only Detroit but also the numerous middle class families relying on the jobs provided by the auto industry. Regardless of the debate surrounding the bailouts, the main question remains: did they work beyond the lower wages that are found in the fast food industry?

Improving Economy of Detroit

Several conservatives who opposed the auto bailouts did so under the assumption that it would prevent job growth by using resources to save an industry that could not be saved. However, the opposite seems to have happened. Since the bailout, companies such as Chrysler and GM have been slowly bouncing back. Jobs in the automobile industry have been rising and the unemployment rate in the state of Michigan is the lowest it has been since 2001. A report from the Center of Automotive Research says that the 2009 bailouts have saved nearly 3 million jobs.

What does this mean for the economy of Detroit? With the Michigan unemployment rate at 5.5%, things are looking up. The people of Detroit are optimistic that the economy will continue to improve and that the city can begin to pay off its mountainous debt. The president of the Ford Foundation Darren Walker recently visited the city said, “What continues to inspire me is the optimism in the city. People in Detroit have a boundless capacity to be the best and look to the future.”

Fuel Efficient Cars the Salvation for Detroit?

Now that the auto industry is beginning to improve, what’s next for the city of Detroit? Despite the rise in sales of SUVs and pickups, President Obama still has something to say to the city. His advice? Build more fuel-efficient cars. Obama told the Wall Street Journal that if the American auto industry and Detroit are to survive, then Detroit should start to focus on picking up the lion’s share of the fuel-efficient automobile market.

Because the demand for larger cars is so high, U.S. automakers are making more of a profit on smaller cars than larger ones. Ford announced recently that it would lay off 700 workers at its Michigan Assembly plant due to decreased sales. With the falling gas prices, consumers are more likely to be able to afford these larger cars. However Obama warns that these low gas prices will not last forever. He encourages cities like Detroit to leaders in the fuel-efficient car industry, something that will probably serve the American people well in the future.

Detroit Citizens Protest for Fair Wages

Detroit Citizens Protest for Fair Wages

On April 15, 2015, over 700 Detroit citizens gathered at Wayne State University as part of a nationwide movement to protest for a $15 per hour wage. Many of the protestors were low-income earners, such as fast food workers, who work in industries where the work is demanding and the pay is low.

Lately, protests to raise the minimum wage to $15 per hour have been heating up. The Detroit protest is just the latest in a set of three protests that have occurred in the city in the past two years. Similar demonstrations calling for both a minimum wage raise and a union for fast food workers have occurred in New York, Chicago, and Los Angeles. Several McDonald’s stores in New York have had to temporarily close operations due to the protests, although no protestors were arrested for any violent altercations.

Federal and Retail Responses to the Protests

Although unemployment has been declining in recent years, several of the jobs that have been added in industries such as retail and health care do not pay a living wage. President Obama proposed raising the federal minimum wage from $7.25 to $10.10 however such a bill has been opposed by the Republicans in Congress.

While Congress has been unable to raise the federal minimum wage, some cities such as Seattle, Los Angeles, and San Francisco have responded to the call and have passed $15 minimum wage laws. Even some large companies have also responded to the workers’ demands. In April, Wal-Mart announced that it would increase its wage to $9 per hour and is set to raise it again to $10 per hour by next February. This wage increase will affect nearly 500,000 full and part-time workers. McDonalds has also announced that it would increase the wage from $9.01 per hour to $9.90. The company would then work to raise the wage again to over $10 per hour by the end of next year. This raise will affect 90,000 workers at franchised locations. The company additionally announced that it would sponsor college tuitions for workers at non-franchised locations.

Michigan State Legislature to Set Workers Back?

However, despite the national call for a $15 per hour minimum wage, the citizens of Detroit have their own local battles to fight. The Michigan State legislature is currently debating a bill that could allow employers to pay workers under 20 a rate that is below the state minimum wage. The current minimum wage in Michigan is $8.15. However if this bill goes into effect, employers could pay these workers the federal minimum wage, which is almost one dollar lower than the minimum wage in Michigan. The bill, which is still currently being debated, will need to pass in the Senate and the House before going to the governor’s office for a signature.

The debate about raising the federal minimum wage will certainly become a heated topic in the 2016 presidential election. So far the democratic frontrunner, Hillary Clinton, has yet to take a firm stance on this issue. However Richard Trumka, president of AFL-CIO, the nation’s largest labor union, has said that the 2016 have “no place to hide” when it comes to a stance on the minimum wage. A decisive stance on this issue could soon become extremely important in the upcoming race.