Wednesday, March 21, 2007

Homes in Detroit sell for less than new cars

Yahoo posted a story that says "After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: "The lumber in the house is worth more than that!"". Several other bloggers have picked up on this...Tim Iacono and Paul Kedrosky, for example.

A couple of more quotes from the Yahoo article:

"The city, which has lost more than half its population in the past 30 years and struggled with rising crime, failing schools and other social problems, largely missed out on the housing boom that swept much of the country in recent years.

Prices have gained less than 2 percent per year in the five years since 2001, when the auto industry entered a renewed slump"... and :

"At least 16 Detroit houses up for sale on Sunday sold for $30,000 or less. A boarded-up bungalow on the city's west side brought $1,300. A four-bedroom house near the original Motown recording studio sold for $7,000."

There has to be opportunity here. If the auctioneer was right about the lumber in the house, one could buy the house, take it apart, and sell that lumber. I know from a friend in the design business that there has been a market for distressed lumber of a certain age, where such wood commanded premium prices. With metals prices still elevated, the wiring in these houses ought to be worth something, as well

In any case, cheap acreage could make a worth-while long term investment. And I do mean long would compare this to buying 30 year Treasuries. The primary negative factors for Michigan is the climate, and in the medium term the potential for increased crime rates.

No comments: