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Thread: Low House Prices in Detroit [was: How low can Detroit go?]

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    Low House Prices in Detroit [was: How low can Detroit go?]

    Lower than you can imagine.
    A house costs less than a car in Detroit

    By Alex Spillius in Washington
    Last Updated: 1:22am BST 06/04/2007

    The mortgage crisis in America has deepened so much that family homes can now be bought for less than £15,200 - the price of a new car.

    A four-bedroom home near the original Motown recording studio in Detroit recently sold for £3,700 ($7,000), less than most used cars. A boarded-up bungalow fetched £685, and a three-bedroom house listed for £276,000 attracted just £69,000.

    Detroit, which made its fortune on the back of the car industry, now holds a more dubious distinction: the capital of home repossessions.

  2. #2
    Cyburbian DetroitPlanner's avatar
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    Remember, its not just Detroit getting hit by this though it is getting a double hit due to questionable mortgage practices by banks nationwide and de-industrialization. http://www.bizjournals.com/portland/...tml?from_rss=1

    This article is a re-hash of one that came out several weeks ago. Detroit is burdened with a huge percentage of the poor when compared to national or state figures. This means that the subprime mortgage market has produced a huge number of foreclosures.

    Keep in mind that you are only looking at one half of the picture. Last year Detroit led the state in new houses were built within the city limits; with the large majority of them being higher end in terms of cost and location. http://www.semcog.org/eNews/eNewsRel...alCon_0307.htm

    In some neighborhoods there are definite problems (I live in one). However it helps to keep it all in perspective.

    Bottom line? Don't buy stuff you can't afford. Don't take out adjustable rate mortgages, and don't tap your homes equity!
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

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    Cyburbian The One's avatar
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    Wow!

    Tell me it isn't true.....NOT DETROIT......the ROCK of our economy!!! Nice post Jaws these "corrections" just keep popping up all over the Country, but the one place they don't seem to pop up is.....Southern California The one place they should pop up......I think.....
    Skilled Adoxographer

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    Cyburbian the north omaha star's avatar
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    Quote Originally posted by DetroitPlanner View post
    Remember, its not just Detroit getting hit by this though it is getting a double hit due to questionable mortgage practices by banks nationwide and de-industrialization. http://www.bizjournals.com/portland/...tml?from_rss=1

    This article is a re-hash of one that came out several weeks ago. Detroit is burdened with a huge percentage of the poor when compared to national or state figures. This means that the subprime mortgage market has produced a huge number of foreclosures.

    Keep in mind that you are only looking at one half of the picture. Last year Detroit led the state in new houses were built within the city limits; with the large majority of them being higher end in terms of cost and location. http://www.semcog.org/eNews/eNewsRel...alCon_0307.htm

    In some neighborhoods there are definite problems (I live in one). However it helps to keep it all in perspective.

    Bottom line? Don't buy stuff you can't afford. Don't take out adjustable rate mortgages, and don't tap your homes equity!

    How much are those newer townhouses going for along Woodward by the ballpark?
    I am recognizing that the voice inside my head
    is urging me to be myself but never follow someone else
    Because opinions are like voices we all have a different kind". --Q-Tip

  5. #5
    Cyburbian DetroitPlanner's avatar
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    Quote Originally posted by the north omaha star View post
    How much are those newer townhouses going for along Woodward by the ballpark?
    The larger ones (2,000 sq ft) start at over $300,000.
    http://www.crosswindsus.com/michigan...els_towne.html

    Too rich for my blood.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  6. #6
    Cyburbian jresta's avatar
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    so DP? What does one of these $20,000 houses look like?

    I mean, we have them here too, normaly just a pile of bricks in neighborhoods so bad i wouldn't feel safe working there.

    Are these places that are structurally sound? I'm thinking if this isn't just hype it might be time to get in on that and bring some "TLC" to motown.
    Indeed you can usually tell when the concepts of democracy and citizenship are weakening. There is an increase in the role of charity and in the worship of volunteerism. These represent the élite citizen's imitation of noblesse oblige; that is, of pretending to be aristocrats or oligarchs, as opposed to being citizens.

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    Cyburbian mgk920's avatar
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    Quote Originally posted by jresta View post
    so DP? What does one of these $20,000 houses look like?

    I mean, we have them here too, normaly just a pile of bricks in neighborhoods so bad i wouldn't feel safe working there.

    Are these places that are structurally sound? I'm thinking if this isn't just hype it might be time to get in on that and bring some "TLC" to motown.
    I've read articles over the years about the USA's Federal capital gains tax being a serious and often fatal impediment to people and companies buying up, 'quality' rehabbing and then reselling otherwise very attractive central-city urban S/F houses as a business model. Property resales under this are subject to the CG tax and after it was paid, the people doing the rehabbing ended up working for less than the minimum wage, if not outright losing money.

    Mike

  8. #8
    Unfrozen Caveman Planner mendelman's avatar
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    Most, if not all, of the sub-$30,000 houses are probably not habitable without complete teardown or 90% gut-rehab. And they are generally in the least accessible, most hollowed-out neighborhoods. Plus they are usually cheap frame houses/cottages built qucikly for factory workers in the early 20th century. So they are usually not nice brick bungalows that need some paint and drywall.

    That has been my experience with Detroit (from circa 2002), perphaps DP has more refined comments.
    I'm sorry. Is my bias showing?

    Let's not be didactic in this profession, because that is a path to disillusion and irrelevancy.

    Six seasons and a movie!

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    Cyburbia Administrator Dan's avatar
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    Just as a comparison, these are sub-$20,000 houses in Buffalo. Buffalo hasn't slipped quite as far as Detroit, but some neighborhoods on the city's East Side are reminiscent of Detroit's worse-off areas; cheap frame houses originally built for factory workers, expanding urban prairie, and so on.










  10. #10
    Cyburbian DetroitPlanner's avatar
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    Quote Originally posted by jresta View post
    so DP? What does one of these $20,000 houses look like?

    I mean, we have them here too, normaly just a pile of bricks in neighborhoods so bad i wouldn't feel safe working there.

    Are these places that are structurally sound? I'm thinking if this isn't just hype it might be time to get in on that and bring some "TLC" to motown.
    There is a boarded up house across the street from me (board just went up last month). It has not been vacant long (about three months). It is listed for about $100,000. All Brick, about 1,600 square feet. Nice place. Hey anyone want to buy a house?

    $20k would not buy you anything inhabitable. Something like that would most likely have been stripped of plumbing and heating. That would be a risk factor as it would probably cost you another $30,000 to make them inhabitable.

    Dan, most of those lots are tiny compared to a Detroit lot. Reminds me of Hamtramck. Those, in most neighborhoods here fetch more than $20,000. A few of those are quite large. You sure they are all sub $20k??
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

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    Cyburbian Plus dandy_warhol's avatar
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    Quote Originally posted by DetroitPlanner View post
    Dan, most of those lots are tiny compared to a Detroit lot. Reminds me of Hamtramck. Those, in most neighborhoods here fetch more than $20,000. A few of those are quite large. You sure they are all sub $20k??
    go to www.realtor.com and put in the maximum price of $20k for buffalo and you can see the variety of houses available under 20K.
    In the end, we will remember not the words of our enemies, but the silence of our friends. -Martin Luther King Jr.

  12. #12
    Cyburbian DetroitPlanner's avatar
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    Quote Originally posted by dandy_warhol View post
    go to www.realtor.com and put in the maximum price of $20k for buffalo and you can see the variety of houses available under 20K.
    Great idea, I did it for Buffalo and got a nice look. I'm amazed by how low they are. I did the same thing for Detroit and some of the homes surprised me, but in large they called 'fixer-uppers', 'investment opportunity' or show boarded-up windows and kicked in doors.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  13. #13
    Cyburbia Administrator Dan's avatar
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    What's scary is that shacks in Soweto -- Yes, that Soweto -- are selling for more than homes on Buffalo's East Side. From the New York Times:

    Shacks in South Africa Can Garner Fancy Prices

    By MICHAEL WINES
    Published: June 7, 2006

    Looking for URBAN AMBIENCE (tarpaper shantytown just down the road)? Check out 21 Jonkerhoek St., a two-story HANDYMAN'S SPECIAL (cracked, boarded-over windows) with LOW-MAINT YARD (painted concrete). And it's IMMED AVAIL (if left vacant, squatters will take over).

    MITCHELL'S PLAIN, South Africa, June 2 — Whoops: too late. 21 Jonkerhoek was just snapped up for 140,000 rand, or about $21,000. "Ten or 15 people were interested in buying it," said Glenn Renquest, the agent. "Even when the deal was done, people still called in."

    Sellers' markets are nothing new in South Africa, where demand for real estate — and the rise in prices — has been more robust this decade than almost anywhere. But until now the boom was largely confined to middle- and upper-class homes.

    Now there are hints that it is spreading to an unlikely venue: townships, the ready-made slums erected by South Africa's former apartheid rulers to separate black and mixed-race citizens from whites.

    A recent survey by FNB Bank of South Africa concluded that for every township home put up for sale, there are 7 potential buyers in Johannesburg, 8 in Cape Town and 16 in Durban. Few homes come to market. In most townships the idea of selling one's home is still a novelty because most have traditionally been handed down to family members.

    But not for long. In the last 18 months, two of South Africa's biggest real-estate firms have moved into major townships, and it is not hard to see why.

    "Take Beacon Hill," said Agenor Lureman, a principal in the Pam Golding Properties office in Mitchell's Plain. "A year ago, you could sell a house there for 80,000 or 90,000 rand. Today you can sell the same house for 140,000 rand." Beacon Hill is in Mitchell's Plain, a sprawling township thrown up 30 years ago south of Cape Town to isolate mixed-race South Africans who had been forcibly removed from their homes in the city.

    When Pam Golding Properties, known mostly for selling luxury homes and estates, opened its office here 17 months ago, it hoped to do 2.8 million rand of business each month. This past March, the office sold 4.7 million rand worth of properties, or $700,000. This month it is opening a branch in neighboring Khayelitsha, by far the area's biggest township.

    As with most sure things, a cautionary note is in order. Home prices are rising around cities like Cape Town, Durban and Johannesburg, where jobs are more plentiful and governments have invested huge sums in utilities and other basics.

    But in rural townships, where jobs and paved roads are nonexistent and the water comes from a community standpipe, rising home prices are a distant dream.

    Problems abound even in big-city townships like Soweto and Mitchell's Plain. Demand for new housing is brisk, and banks are sinking serious money into what Americans might call starter-home subdivisions. But in townships, where unemployment can reach into the middle double-digits, poor residents often find they cannot earn nearly enough selling their old homes to make the jump to the next real-estate bracket.

    One result is a dire shortage of homes affordable to the working poor.

    "The secondary market — the resale market in townships — is dysfunctional," said Kecia Rust, an expert on housing for the FinMark Trust, an organization financed by the British government to help the poor gain access to financial services. That said, Ms. Rust has been besieged by investors looking into the township real-estate market, partly, perhaps, because South Africa's upper-crust market, where prices have risen as much as 35 percent a year since 2000, has begun to tail off.

    That boom was fueled by South Africa's dazzling beauty, stable economy and fire-sale prices. Now that those prices are reaching their potential, investors are seeking the next bargain. Some find it at the other end of the income spectrum.

    That may not be a bad bet. Spurred by government pressure — and the profit motive — South Africa's four big banks are entering the low-income market in earnest, offering home-loan packages for poor households and financing malls and other retail ventures in long-ignored areas.

    The national government has also weighed in. After building thousands of free one- and two-room corrugated-roof homes for the homeless, it has arranged to free up billions in low-cost home loans to the three citizens in four who earn less than about $500 a month.

    Finally, big-city townships are no longer the trackless slums of the 1970's. Homes in some neighborhoods are bathroom-size shacks, with endemic crime and roads that turn to mud when it rains. But in many others, gravel paths have become broad avenues, mass-market retailers have taken root and homeowners have built with the enthusiasm of any suburbanites.

    In Mitchell's Plain, Rafeeq Khan, 50, a truck dispatcher, beamed as he led potential buyers through his handsome home, bulked up over 10 years with three bedrooms, a new bathroom, an enclosed patio, a garage, blond-birch closets and other amenities. "One small house here is selling for 300,000 — a small house, nothing done to it. And another for 320,000, nothing done to it," he said, citing two homes in the $45,000 range. "We're asking 480,000," or about $72,000.

    "He'll get it," said Basil Simon, the Pam Golding agent. "It's a gold mine, Mitchell's Plain, a gold mine. You've got more buyers than stock."

    The Tafelsig neighborhood, home to the house at 21 Jonkerhoek St., is by comparison a bit dumpy: stark and grassless, it is distinguished mostly by ill-clad toddlers on plastic tricycles and a shantytown nearby. Gangs with names like $exy Boys rule some streets.

    But its tattered state aside, Jonkerhoek is a quiet lane. Crime is low. "You can't leave the property vacant, because you get these naughty guys who move in, take over," Mr. Renquest, the agent for Jonkerhoek, said disapprovingly. "But you'll have more people who want to buy in an area like this, because prices are better."

    In fact, up to 96 percent of township homes sell at their asking prices, the survey by FNB Bank concluded, compared with 60 percent on average. And while the average home sold in eight weeks, township houses sold in half the time.

    Urban townships have something else in their favor: among the nation's rising black middle class, they are becoming preferred places to live, especially as shopping and other services take root. In short, they are becoming hip.

    In 1994, after South Africa shed apartheid rule, "the main goal was to get out of the townships," Ms. Rust said, "and the people who managed to do that found themselves in neighborhoods that functioned quite differently, and socially were difficult. So they moved back. That could be what's happening here."



    An upmarket agency recently found a buyer for this tin-roofed fixer-upper near Cape Town for $21,000.
    I'm starting to think that the absolute cheapest habitable housing in the US, if not the developed world, can be found on Buffalo's East Side. Here's a few houses for sale in the neighborhood where I grew up.

    $29,000


    $22,000


    $17,000

  14. #14
    Quote Originally posted by mendelman View post
    Most, if not all, of the sub-$30,000 houses are probably not habitable without complete teardown or 90% gut-rehab. And they are generally in the least accessible, most hollowed-out neighborhoods. Plus they are usually cheap frame houses/cottages built qucikly for factory workers in the early 20th century. So they are usually not nice brick bungalows that need some paint and drywall.

    That has been my experience with Detroit (from circa 2002), perphaps DP has more refined comments.
    Almost true. A boarded-up bungalow fetched £685, and a three-bedroom house listed for £276,000 attracted just £69,000.

  15. #15
    Unfrozen Caveman Planner mendelman's avatar
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    The author of this article made an incorrect link between the "fire sale" prices for some junk houses in Detroit to the coming wave of mortgage foreclosures.

    I'm sure the better houses in Detroit that fetched in the over $70,000 range are probably foreclosed houses, but the house for $1,250 was most certainly not the product of foreclosure, but rather just a pile of scrap probably on a tiny lot that has been vacant for decades.

    But it seems that perhaps Buffalo is the "king" of habitable very cheap housing. Those houses Dan showed look good.

    Me thinks poor Detroit is unfairly targeted. Metro Detroit's economy is probably still much larger and stronger than Buffalo's.
    Last edited by mendelman; 09 Apr 2007 at 4:19 PM.
    I'm sorry. Is my bias showing?

    Let's not be didactic in this profession, because that is a path to disillusion and irrelevancy.

    Six seasons and a movie!

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    Cyburbian DetroitPlanner's avatar
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    Quote Originally posted by jaws View post
    Almost true. A boarded-up bungalow fetched £685, and a three-bedroom house listed for £276,000 attracted just £69,000.
    You might be better served by reading the oginal artical from Reuters that mention the million dollar homes being sold downtown or that the 276,000 pound home was actually in Bloomfield Hills, a suburb known for overpricing everything.

    http://www.reuters.com/article/topNe...27997820070319

    In economics, a garbage home at a less than desirable location will not fetch a very good price. This should not be surprising, but it is not reflective of all the homes in the Detroit area.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  17. #17
    Unfrozen Caveman Planner mendelman's avatar
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    When I see all this, I think "legalize" all the illegal aliens and make coming here much easier. All these very cheap houses could be occupied quite quickly.
    I'm sorry. Is my bias showing?

    Let's not be didactic in this profession, because that is a path to disillusion and irrelevancy.

    Six seasons and a movie!

  18. #18
    Quote Originally posted by mendelman View post
    The author of this article made an incorrect link between the "fire sale" prices for some junk houses in Detroit to the coming wave of mortgage foreclosures.

    I'm sure the better houses in Detroit that fetched in the over $70,000 range are probably foreclosed houses, but the house for $1,250 was most certainly not the product of foreclosure, but rather just a pile of scrap probably on a tiny lot that has been vacant for decades.

    But it seems that perhaps Buffalo is the "king" of habitable very cheap housing. Those houses Dan showed look good.

    Me thinks poor Detroit is unfairly targeted. Metro Detroit's economy is probably still much larger and stronger than Buffalo's.
    Certainly much larger, Probably much wealthier at the upper levels but probably not stronger than Buffalo. Buffalo has diversified quite a bit recently and is a lot less blue collar that it was (largest employment sector is education and banking and of course government). Buffalo's big weakness is its lack of corporate HQ. Detroit's big weakness is the frightening weakness of its corporate HQ and the fact that it is not diversified

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    Cyburbian the north omaha star's avatar
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    [QUOTE=Dan;377869]What's scary is that shacks in Soweto -- Yes, that Soweto -- are selling for more than homes on Buffalo's East Side. From the New York Times:



    I'm starting to think that the absolute cheapest habitable housing in the US, if not the developed world, can be found on Buffalo's East Side. Here's a few houses for sale in the neighborhood where I grew up.



    These houses look much like many parts of North Omaha. When I was a kid, I thought that everyone that lived in a 2-story or a split-level house were rich.
    I am recognizing that the voice inside my head
    is urging me to be myself but never follow someone else
    Because opinions are like voices we all have a different kind". --Q-Tip

  20. #20
    Cyburbian jresta's avatar
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    Quote Originally posted by DetroitPlanner View post
    $20k would not buy you anything inhabitable. Something like that would most likely have been stripped of plumbing and heating. That would be a risk factor as it would probably cost you another $30,000 to make them inhabitable.

    Dan, most of those lots are tiny compared to a Detroit lot. Reminds me of Hamtramck. Those, in most neighborhoods here fetch more than $20,000. A few of those are quite large. You sure they are all sub $20k??
    I'm working on something like that now. Except it's about 900 sq. ft. and cost about $50k. The plumbing is intact but it has to be removed anyway, not that big of a deal when there's only one bathroom stacked with the kitchen. The rehab is going to run $40 to $50k and the house will probably sell for $135-$140. Not bad for 6 month turn around. I'm not looking to get rich. I just want neighbors who don't smoke crack.

    Quote Originally posted by MGK920
    I've read articles over the years about the USA's Federal capital gains tax being a serious and often fatal impediment to people and companies buying up, 'quality' rehabbing and then reselling otherwise very attractive central-city urban S/F houses as a business model. Property resales under this are subject to the CG tax and after it was paid, the people doing the rehabbing ended up working for less than the minimum wage, if not outright losing money.
    Last year Philly issued more building permits than in any year since 1955 (when large swaths of the city were still being built) and more than half of those permits went to small time builders building one house or rehabbing many. Even the non-union construction guys are making $20+ an hour. The investors are definitely profiting smartly so i'm not sure how much truth there is to that. The biggest impediment to profit here is the 4% real estate transfer tax (split between buyer and seller). Personally, i like it because it steers a lot of speculators elsewhere.
    Indeed you can usually tell when the concepts of democracy and citizenship are weakening. There is an increase in the role of charity and in the worship of volunteerism. These represent the élite citizen's imitation of noblesse oblige; that is, of pretending to be aristocrats or oligarchs, as opposed to being citizens.

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