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How Would a National Recession Affect Detroit?

October 14, 2019

Curbed Detroit

Aaron Mondry

Many economists believe a national economic recession is on the horizon. A number of indicators, like the inversion of the yield curve and shaky stock market, point to a downturn of some sort in the near future. Not to mention that economic health is cyclical and the United States is undergoing the longest period of growth in the country’s history.

Given the likelihood, it’s worth asking how a recession would affect the local economy. Are Detroit’s fundamentals different enough from other cities that it would be hit harder by one or able to weather it better?

Detroit’s poverty rate still hovers around 35 percent and the population has plateaued—a modest improvement after decades of loss.

These numbers concern Mark Skidmore, a professor in the Department of Economics at Michigan State University.

Detroit’s housing prices may have stabilized after bottoming out during the mortgage and tax foreclosure crises. But because population isn’t increasing alongside housing prices, Skidmore says, “There shouldn’t be much more demand for housing. That’s as a whole; there might be pockets where demand is pretty high. But there are huge areas where it’s not.”

On the other hand, banks have been relatively tight despite the steady increase in home mortgages. That might not be great for homeownership now, but means there’s little chance of another subprime mortgage crisis.

“The credit available for housing in Detroit has continued to be a challenge and that’s been an impediment to the current recovery,” Sandy Baruah, president and CEO of the Detroit Regional Chamber, says. “People being underwater on mortgages is highly unlikely because lending standards have increased so much and credit has been so careful, particularly in Detroit.

“When comes to housing,” he adds. “We don’t anticipate seeing anything like the Great Recession.”

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