And we’re concerned about our housing market!: Two

Ok, so the low priced houses that we saw in Detroit were concerning – however, it turns out there is a hell of a lot more of them.

How about $1 houses and 182 properties that are listed below $1000 – holy hell (search result here).

Lets just say that there must be some investors that are being absolutely burned – especially in Detroit!

What is going on in Detroit (other than the continuing collapse in the car industry)? Have they found toxic waste under the city? Is the population leaving? Have rates increased markedly?

  • CPW

    Even the dead people are leaving.

  • “Even the dead people are leaving.”

    That is one backwards housing market – at $1, do you think house prices are nearing a bottom in the area?

  • Michael Kluge

    No one wants to live by Eminem.

    No, seriously, I read someone else that a lot of it is the synthesis of emigration from the town as a result of unemployment and the decline of industry combined with the sub-prime crisis and crime problems
    -bank forecloses on house, occupants leave town (ie don’t rent in the same area)
    -bank can’t sell house (no imigration)
    -vandals start looting & homeless start squatting, turning it into a liability
    -bank practically gives the house away to escape the maintenance and also to get rid of it before it becomes nothing (burned down by homeless – or Eminem)

    Many of the homes are being completely stripped by scavangers to the point of becoming unwanted shells, where they’re only good for burning/demolition. Then the vacant land is practically worthless because no one wants to build in the neighbourhood. In the article I read, they said the bank had tried boarding up the home with plywood – only to find the next day vandals had not only broken in to continue looting, but they also stole the plywood boarding. The property manager found the same boards on another house down the street. When I read stories like this, it reminds of some tales of the Great Depression.

  • “When I read stories like this, it reminds of some tales of the Great Depression”

    Some areas are screwed. Detroit has been dieing for a number of years now – as their car industry has become less and less competitive.

    The best thing any government organisation can do is help to buffer the transition between the old and new economy in the region – things still have to change. Ultimately, I don’t know much about Detroit, but I suspect they need to try and work out where there comparative advantage lies and get to it!

  • Adolf Fiinkensein

    If I remember rightly Detroit is a hotbed of American Islam. Nobody wants to live amongst a bunch of extremists who hate the country in which they live.

    Still, we should look on the bright side. Houses in Taneatua are more valuable than houses in Detroit. Eh, boy?

  • “Still, we should look on the bright side. Houses in Taneatua are more valuable than houses in Detroit. Eh, boy?”

    😀

  • John

    Have you been following the Christchurch City Council +Dave Henderson property purchases issue Matt? The comment was made that the market doesn’t deliver the desired outcomes. How could we encourage developers to do the best thing for the city versus narrow financial goals (or is that too big a topic)?

  • “best thing for the city”

    Some of the worst monstrosities in Wellington are the Council’s apartment blocks. They used to be the desired outcomes that were best for the city.

    I’m rather skeptical about whether councils are best placed to decide what type of retailing and eateries should go where. Invariably the bad things, such as the CCC was seeking to prevent in the Hendo incident, are things that many people will want to go to.

  • “The comment was made that the market doesn’t deliver the desired outcomes”

    Information asymmetry.

    Developers know the quality of what they build, improving quality is costly, but the purchaser can’t fully view the quality. As a result, developers reduce the quality of what they build – as someone who spends more to make a good quality place can’t get a sufficiently better price.

    The solution to this is education for new home purchasers and some way of making information easier to figure out (eg if rating could be given to a new house based on components).

    If consumers knew what they were doing, it would be in the builders interest to make houses that consumers are demanding – leading to the level of quality that the market wants.

    However, if there is an externality between properties – then we reach another issue.

    “I’m rather skeptical about whether councils are best placed to decide what type of retailing and eateries should go where”

    I think that skepticism is fair 🙂

  • John

    This is what Owen McShane says:
    “Surely, chaos must prevail? Well, chaos does prevail, because
    urban economies are what mathematicians call dynamic chaotic
    systems and their behaviour, while unpredictable, is also best described as deterministic chaos.
    Such systems, which we find throughout the universe, and in life
    itself, generate spontaneous order.
    Hence the universe has no need for a “universe-design committee” and life itself has had no need of central
    planners to manage its development.
    Houston is a splendid example of such spontaneous order”

  • Well saying that things are chaotic isn’t going to help us understand them – its a bit like saying we can’t tell whats going on so lets not bother, or lets assume that what we want to happen just will.

    When studying choices we need to actually think of what people will do, and why, instead of saying that their decisions will just be part of some “chaotic order”. In the case of building there is an information asymmetry between the builder and the purchaser which will cause suboptimal outcomes – thats really the crux of the issue.

  • Miguel Sanchez

    What’s happening in Detroit is that these are pretty much the same houses that Michael Moore toured in “Roger and Me”, with an extra 20 years of neglect and decay. Read the fine print: “Buyer is responsible for any municipal requirements”, which probably includes the requirement to burn the damn thing to the ground.

  • “which probably includes the requirement to burn the damn thing to the ground”

    I wonder if the land would still be worth holding 🙂