In Motown, your car is probably worth more than your house.
“The median price on a house or condo sold in Detroit last month plummeted 57% [from, prices a year ago], to $9,250.”
Meanwhile, everyone is still waiting for the other shoe to drop in the automobile industry. Both General Motors and Ford are in dire economic straights. GM talked to Ford about merging with it, only to fail and start new talks with Chrysler. Either merger would mean massive job cuts, many of them U.A.W. jobs in the Rust Belt. And, a General Motors merger would also hit the General Motors headquarters in Detroit, one of the leading sources of good paying white collar jobs in the city, particularly hard.
While the vast majority of those GM headquarters workers don't live in Detroit, and the Rennaisance Center that houses it is hermetically insulated from the rest of the City. Street parking downtown is easy to find and sidewalks are empty as workers take above ground level enclosed walkways instead.
Probably no other city in the United States has as much vacant housing stock as Detroit. The Detroit Free Press story provides additional detail: "Foreclosures represented two-thirds of sales in Detroit in September[.]"
Even worse, local experts doubt that the market has hit bottom yet. The part of Wayne County outside Detroit has been almost as hard hit, with median prices dropping to $35,000, a 54% drop from twelve months ago.
Foreclosing on and evicting people from houses that are going to resell for less than $10,000 is, of course, absurd. The case for allowing cramdowns on residential real estate in bankruptcy is obvious in places like Detroit. A payment on a fixed rate, subprime 9.75% interest rate mortgage of $10,000, amortized over 30 years is just $85.92 per month, which, even once property taxes and insurance are added in, is extremely affordable compared to rent.
Yet, despite record low home sale prices, apparently, Detroit is not seeing the creation of a new class of low income homeowners. Instead, the properties are being picked up en masse by slum lords and perhaps also by investors with an eye towards redevelopment in the medium to long term future. While the Detroit Metropolitan area had one of the highest homeownership rates in the country (about 76%) as of 2007, the last year for which figures are available, the City of Detroit had a far lower homeownership rate in 2000, the last year for which I have been able to locate numbers, and has seen record numbers of foreclosures that have tended to replace homeowners with investment property owners.
In due course, all of these sales will work their way into the calculations of the Wayne County Assessor, dramatically reducing the tax base of the city, while driving up property taxes on properties that have retained their value sky high.