Have the Property Prices in Detroit Hit Rock Bottom

Just how low can housing prices go, and when will they turn around. If anyone had those answers, they would be the next Warren Buffet or Donald Trump in waiting. When considering housing prices and how low they can go, you must also consider location. A foreclosed $1 Million USD home if Hoboken, New Jersey will sell for a lot less than the exact same house located on the waterfront in Los Angeles.

At the moment, you can buy a freestanding, single-family home for under $10,000 in many cities in many States? Foreclosed houses in rural Detroit, Michigan, can now be purchased with a credit card. It used to be that people would live in their cars when they could not afford a roof over their head. But now, in Detroit, you can live in a single home if your car gets stolen or towed away, since many houses are cheaper than new cars.

A real estate company in Detroit by the name of Urban Detroit Wholesalers advertises the fact that they take credit cards. The scheme may seem too good to be true for many people, however, they will be paying full interest on the full amount of the final purchase price, after all taxes and fees have been added to the selling price. At 18% to 29% annual interest rates, a $20,000 home may come with a $1,000 per month minimum payment, which barely touches the capital.

The down side, however, could be the neighbourhood that you are buying into; when buying houses at rock-bottom prices, and with the fact that unemployment is at record levels, squatters may be your neighbours, as many homeless people are now taking residence in boarded up houses. Small stores close almost daily, and the big-box stores have boxed-up and left. Homes that just 5 years ago would fetch over $150,000 can be purchased with a credit card carrying a $20,000 to as low as a $7,000 line of credit.

Liquor and lottery sales are up, and the city is thinking about building a casino to generate revenue. Great idea, put a casino in the one city in the USA that is facing bankruptcy. Hire the few people who don’t have criminal records, and who is left to play besides tourists, politicians and successful drug dealers? Has Detroit really gotten this bad?

In a word, yes. Detroit has lost half of it’s population in the past 50 years, with manufacturers, business and stores closing, bailing out before the losses piled up too high. The most profitable stores are corner stores, casinos and liquor stores, which does not paint a rosy picture for the hopes that the citizens have in their futures.

But, have the property values hit rock-bottom? No, there is still room for prices to drop, as people are getting to the point where they would take just about anything to unload a property that they have to keep paying utilities and land taxes on while not living there anymore. New neighbourhoods are starting to feel the pinch, and more people are bailing out of their mortgages, getting whatever they can for their homes before foreclosure proceedings are initiated against them.

The current economic downturn is happening in forestry-related towns, automobile manufacturing towns, and pretty much all towns that are dependant on just one or two companies for their financial existence. They are now finding themselves with the daunting task of keeping tax bases in line with taxpayer incomes, so that all the homeowners are not driven away from their homes, and into another city, by tax bases that are way too high for the value of the services received.

If the government had seen early enough that the American working people could not support three large automakers during a major economic downturn, they should have seen the signs with constantly reducing sales, yet increasingly large executive bonuses continued in earnest. Allowing one of the automakers to go bankrupt, and leave the other two major car makers to regroup themselves and design newer, cheaper and green-technology related vehicles.

It may seem easy to be able to buy a home with a credit card, but for the people who will be living in the dilapidated neighbourhoods, there are extra costs to be considered. Homes must be made to be habitable before moving into them, and the cost of fixing up most of these homes is more than the cost of the home itself.

As in any other area of sales, always remember it is buyer beware. But if the location is ideal, the house could always be torn down and another built in it’s place.