Perspective

by hilzoy

From the Detroit Free Press (h/t):

"The median price on a house or condo sold in Detroit last month plummeted 57%, to $9,250, from $21,250 a year ago, according to figures released Monday by Realcomp, a multiple listing service based in Farmington Hills.

Foreclosures represented two-thirds of sales in Detroit in September, and they boosted sales by 81% as buyers laid claim to 1,019 homes."

That's the median. Half of the houses sold in Detroit went for below $9,250. That's astonishing. And:

"More than 37% of the September sales in the metro area were foreclosures, according to Karen Kage, Realcomp president.

But have we hit bottom yet?

"It is near impossible for me to say we are near done," Kage said."

How much further down could the bottom possibly be? If housing prices in Detroit fall just a little bit further, they'll be giving them away for free.

Comments

[AS]

That seems a little low... maybe they dropped the first digit. Random googling brought up this: http://www.housingtracker.net/old_housingtracker/location/Michigan/Detroit/ and this http://www.detnews.com/apps/pbcs.dll/article?AID=/20070918/BIZ03/709180393/1001/BIZ

[g]

They already *are* giving them away for free, near enough:

http://www.detnews.com/apps/pbcs.dll/article?AID=/20080813/METRO/808130360/&imw=Y

[AS]

Oh, I see now they have the higher numbers for the larger Detroit area, too. Sorry.

[liberal japonicus]

I'm sure this is part of a clever plot to let minorities get into homes for free (/snark)

[Mike Schilling]

they'll be giving them away for free.

ITYM paying you to take them. Which isn't as ridiculous as it sounds, since it means living in Detroit.

[Tom Hilton]

WTF? Condos in Detroit cost half the price of a new car?

I'm picturing people who live in cars being forced to move into condos...

[(The Original) Francis]

wow. This would suggest that someone could come up with a low-margin labor-intensive business and move it to the heart of an american city.

Meatpacking done by citizens and legal residents?

Phone centers?

Garment industry?

[Jay C]

Amazing: this means that if I wanted to live in a certain area of Detroit, I could buy a home for approximately half (or less) of the broker's commission I paid on my Manhattan co-op?

Wow.

[joel hanes]

You can't really afford a house that costs more than three or at most four times your gross income.

So we will know that housing prices have declined to sustainable levels when the median home price falls to three or at most four times the household income of the median home buyer.

Renters don't count, which complicates this calculation a bit. Nevertheless, I think that a situation like last year in Sunnyvale CA (med. household income $ 95,000, med. home price $985,000) shows us something about how far prices have to fall.

[joel hanes]

You can't really afford a house that costs more than three or at most four times your gross income.

So we will know that housing prices have declined to sustainable levels when the median home price falls to three or at most four times the household income of the median home buyer.

Renters don't count, which complicates this calculation a bit. Nevertheless, I think that a situation like last year in Sunnyvale CA (med. household income $ 95,000, med. home price $985,000) shows us something about how far prices have to fall.

[LT Nixon]

Have you ever been to Detroit? Most of the homes and factories are abandoned anyways. I'm surprised they're not giving them away either. It was once a great city, long ago...

[zengolf]

These houses at 8k are mostly shells that might/should be torn down. Detroit is very empty having once had 3M residents and is down to 900k so large areas seem almost unihabited. Still have 3.5M in the metro area and the standard of living is much higher then you would think especially in Oakland County.

You can get a very nice house/loft/condo for 175k in a relatively (safer then DC now or NYC in the 70's)safe neighborhood in Detroit. You would have to send your kids to private school as the system here is completly broken.

I've lived in DC, Boston, Seattle and Nashville and I love Detroit.

[now_what]

If housing prices in Detroit fall just a little bit further, they'll be giving them away for free.

Many decaying northern industrial cities did this during the 1970s. Huge numbers of houses in the urban cores were sitting vacant due to white flight and the cities would offer them for free or for a token amount to anyone that would sign a deal to live in them for 3 or 5 years.

People could get 3 story brick mansions for a thousand dollars and spend the next 20 years fixing them up a nickel and a dime at a time. Many of the neighborhoods eventually came back and the houses go for a million or two now.

It was a good deal if you didn't mind living around prostitutes, crackheads, gangsters, corruption and assorted random violence for a couple decades. If the crime rate goes back up to what it was back then, the same process will happen all over again in a bunch of cities besides Detroit.

[flicker]

For what it's worth, the site www.zillow.com is a great way to scan neighborhoods for housing prices. For an example of Detroit, search for the zip code 48210 and zoom in a bit.

[Fred]

Maybe liberal hipsters ought to make Detroit the next Brooklyn and move there -- or is it too black for you guys? Diversity is great when it means some blue collar rednecks get their kids bussed to Central High, but not so cool when it's your kids.

[Gary Farber]

"Diversity is great when it means some blue collar rednecks get their kids bussed to Central High, but not so cool when it's your kids."

I lived for many years in Washington Heights in Manhattan, where most of my neighbors were African-American or Hispanic. Do I win a prize now?

[gwangung]

Maybe liberal hipsters ought to make Detroit the next Brooklyn and move there -- or is it too black for you guys?

Y'all convinced you're talking to just non-blacks on this blog? Might get a surprise, son...

[now_what]

Maybe liberal hipsters ought to make Detroit the next Brooklyn and move there

I hate to be the one to have to tell you this, but Brooklyn no longer exists. It was dismantled and moved piece by piece to Philadelphia. Disney bought up the abandoned land and put up a theme park.

[dr ngo]

Detroit is very empty having once had 3M residents and is down to 900k so large areas seem almost unihabited.

It's been 27 years since I lived in Michigan, but I don't believe Detroit ever had anywhere near 3 million residents. Not even 2 million; barely 1, I think.

The hollowing-out of the city I believe, having been around for earlier stages of it, but the numbers seem wrong.

[hilzoy]

Fred: it's generally not a good idea to accuse a bunch of perfect strangers of being racist.

[Rebecca]

Detroit is a beautiful city, but the vast majority of its residences are small, cheaply built ranch houses. It has relatively few apartments, so it's probably more accurate to think of a small 50s bungalo with a leaky roof and a moldy basement than a turn of the century apartment in need of paint and plaster. Honestly, I would love to live there, but it's hard to find a good job.

[LT Nixon]

Dr ngo,

FYI, It peaked in the 50s at ~1.8M:

http://www.somacon.com/p469.php

It used to be a great place where you can make a decent wage working in one of the Big Three's auto plants, but it kind of saw the urban decay that a lot of cities did in the 70s. Unfortunately, it never recovered.

[Don K]

Okay folks, this really isn't that hard. The official census population for Detroit proper peaked at 1.85 million in 1950, and declined to 1.67 million in 1960. Maybe sometime during the 50's it reached 1.9 million, maybe not.

The traditional three-county metropolitan area (Wayne-Oakland-Macomb) reached 4.2 million in 1970, was a bit over 4 million in 2000, and was 3.9 million in (I believe) 2007.

The cheap little (900-1000 sf) brick ranches are most characteristic of the close-in suburbs such as Warren, Madison Heights, Westland, and older sections of Southfield and Livonia. There are large sections of Detroit itself where the predominant houses are really nice old middle-class houses probably built in the 20's. Unfortunately, as you drive by you can see one well-maintained house next to one that is in desperate need of paint and siding and a roof (and probably serious interior restoration as well) next to a burned-out shell. Sad but true.