To many people along the coasts, Detroit is a bust. One in three Detroiters lives in poverty. Entire blocks are abandoned, and whole neighborhoods go with minimal police protection or even street lighting — the so-called “grayfield”. The only reason you don’t hear more about corruption in Detroit’s City Hall is because of its proximity to Chicago’s. There are only a hundred feet of difference between Detroit’s highest point and it’s lowest, providing the kind of unbounded plain you’d expect tumbleweed to roll across. And to top it off, the weather is awful.

But maybe Detroit has hit its inflection point. True, it’s still losing population, but not like it once was. Almost one out of every four Detroiters left town as a result of the Great Recession; that’s an even higher proportion than moved out during the oil shocks and economic turmoil of the 1970s. But jobs are coming back, despite ongoing restructuring in the city’s emblematic auto industry. While some areas have gone fallow and might just return to nature, the Downtown, Midtown, Corktown, and Lafayette Park sections are just as packed with hipsters as anywhere in Brooklyn or San Jose. And the weather — well, believe what you will about global warming.

Out With The Old

Viewed from the outside, Detroit looks like a fix and flipper’s dream. In 2016, the mean price for an apartment in a five-unit-or-larger building was $304,380. A single-family, detached home went for $68,701 on average. In some Detroit neighborhoods, most of us could buy a house and put it on a credit card.

But things could be worse. And recently had been. In 2012, when the economic recovery proved slow to spread to the upper Rust Belt, something like 1,300 Detroit homes a month were sold, while the average price plunged from around $70,000 to around $56,000. Meanwhile, the city issued just four residential building permits. Not four per month. Four over the entire course of 2012. Construction has come back since — at least permits are in the double digits now. But Detroit still has the lowest ratio of housing starts-to-population of anywhere in America.

Of course, housing price collapses don’t happen in a vacuum. They’re a symptom of a larger economic catastrophe and not the symptom which the population experiences almost immediately. Detroit’s falling residential real estate market stemmed from a rise in both unemployment and crime. Motown’s jobless rate climbed as high as 14%, and its incidence of violent crimes renders it No. 2 to Camden, N.J., on City-Data.com’s least-safe cities list.

The fair question to ask is, “Why would anybody live there?” Originally, it was a key port connecting the Great Lakes with the St. Lawrence Seaway. To this day, it’s the most voluminous point of entry into the United States — yes, that’s right, more traffic comes into Detroit from Windsor, Ontario, in a day than crosses into the States from anywhere along the Mexican border. And as the ancestral home of the American auto industry, the Detroit metropolitan area claims the third-largest local economy in the Midwest, behind Chicago and Minneapolis-St. Paul. There’s plenty of money to be made there, but the time when a shift worker could expect lifetime employment at a middle-class wage is gone, and there are still hundreds of thousands of people who haven’t figured out a Plan B yet. If you do have a job, though, your paycheck goes farther in Detroit than in any other city in the U.S., according to Forbes.

And of course, there’s the cultural scene. It’s famous as a magnet for visual artists and even more famous as a magnet for musicians. While widely associated with Berry Gordy’s studio that produced the Supremes, the Temptations and much of the rest of the 1960s’ soundtrack, Detroit is also an important spot on the rap, jazz, blues, techno and rock maps. Architecturally, there are few cities that compare and UNESCO named Detroit a City of Design, a designation that has so far eluded every other U.S. city.

In With The New

And yet Detroit never cried “uncle”. Yes, the city famously became the largest municipality in America ever to declare bankruptcy; that made headlines in 2013, but less noise was made when it emerged from protection in 2014. While crime remains pervasive in the city as a whole, the urban core is emerging as a safe space. And unemployment, while not quite at the labor-shortage level that has become the national average, has dropped to around 4.7%, seemingly in record time.

That employment isn’t coming from the traditional — that is, automotive — sector. Manufacturing is down to about 12.6% of the city’s jobs. There are more opportunities in education and human services; trade, transportation and utilities; and professional and business services. Construction, while accounting for less than 4% of Detroit jobs, is the fastest-growing segment of the local economy by far at 6.1% year-over-year employment growth.

While Chrysler and General Motors remain major employers in Detroit — Ford not so much — these aren’t where the growth is occurring. Government, health providers, schools, utilities, and the hospitality and gaming industries make up much of the rest of the workforce. The boost in white-collar jobs has come courtesy of Quicken Loans, Compuware, Comerica, Deloitte and the headquarters of Little Caesar’s.

The population is growing — slowly, but at least the needle is pointing the right direction now. More than 7,000 people moved into Detroit in 2017. While this represents a population growth slower than that of the U.S. as a whole, it also represents a reversal of direction for a city that has seen a consistent decline since the 1950s.

“Drawn by the market’s low entry costs and attractive yields, multifamily investors primarily targeted Class B and C assets with a value-add component,” according to Adriana Pop writing in a Yardi Matrix report for winter 2019. “Following the completion of only 306 units last year, deliveries are bound to hit a cycle high in 2019, with 2,730 units expected to come online.”

Right Time, Right Place

As can be claimed by any city, each of Detroit’s neighborhoods has its own distinct personality and its own distinct destiny. While the city is overwhelmingly African-American, there is an enclave of Indians and Pakistanis in Hamtramck, for example, and a recent influx of Mexicans gave rise to the rather hastily named Mexicantown. The Hmong population of the Osborn section was featured in Clint Eastwood’s 2008 film Gran Torino.

“Submarkets recording the strongest rent hikes included Dearborn (up 7.3% to $1,346), which now commands the metro’s highest rents, as well as Detroit–West (up 7.2% to $641) and Holly/White Lake (up 7.0% to $797). Following Dearborn, Bloomfield Hills/Birmingham ($1,306), Detroit–Downtown ($1,297) and Detroit–Midtown ($1,232) also posted some of the highest rates across the metro,” Pop writes for Yardi. “The resurgence of Detroit’s core is bound to prompt developers to bring more multifamily units to the market.”

Downtown and New Center are getting the most attention, but that’s hardly surprising in this age of urban gentrification. We told pretty much the same story about Chicago, Houston and most recently Los Angeles. Even so, it’s important to remember that the Detroit metropolitan area has 4.3 million residents, and the city accounts for only around 700,000 of them. At the moment, the biggest single project in the pipeline is a 613-unit mixed-use community in Clinton Township, referred to by the locals as “up I-94 past the Walmart.” Dearborn, Canton/Plymouth, and Waterford are also active submarkets.

But even the more shopworn areas of Detroit have not been forgotten by policymakers, so ought not to be completely dismissed by investors. Fannie Mae supported two communities with a total of $47 million in refinanced loans for green initiatives, and Detroit is more active than most cities when it comes to subsidizing affordable units.

“To avoid the massive displacement of renters as low-income housing tax credits expire through 2023,” according to the Yardi study, “the city council has approved nonprofit Detroit Local Initiatives Support Corp. as manager of its $250 million Affordable Housing Leverage Fund, set up with the purpose of preserving 10,000 existing affordable housing units and creating an additional 2,000 units.”

A lot of the action, then, is at the low end. The Yardi report, which tends to focus on Class A, B, and C stock, makes note of Detroit’s C- and even D units. Even so, there is a high end emerging in both the city core and the exurbs. The draw for investors is that Detroit’s high end has as low a barrier for entry as you can find in a major American city.

Detroit at a Glance

• Average monthly rent (projected, year-end 2019): $1,015, up 3.8% year-over-year
• Vacancy rate (projected, year-end 2019): 3.6%, up 30 bps year-over-year
• Annual multifamily transaction value (10-year average): $328.1 million
• Homeownership rate: 70.0%

Sources: Marcus & Millichap, Apartment Association of Michigan