Thursday, April 3, 2008
Oh Brother...here we go again!
Detroit named the riskiest real estate market in the U.S.
Wow! We made it to number one again. They're going to have to invent a new category for us soon - The top ten bad things you can say about Detroit real estate. Maybe we'll get a spot on the David Letterman Show. In the latest bit of Detroit bashing news, Forbes Magazine ranks Detroit as the riskiest place in America for real estate. I guess that's what makes it the best place in America for real estate investors (according to a story in the Detroit Free Press over the weekend). One investor was quoted that buying houses in Detroit is “like shoveling diamonds into the trunk of your car.” Investors are swooping in and buying up 50-100 houses at a time, some for as little as $20,000-30,000. I guess they have evaluated the risks and consider Detroit to be worth it.
Forbes reported the following:
The riskiest housing markets are those where foreclosure rates are high, homes are selling slowly, local economies are struggling, and lenders are reluctant to make money available.
Forbes magazine examined the nation’s 40 largest metros and identified the 10 housing markets that are in the worst shape. These are the markets Forbes cited:
Detroit – Prices are so low it’s hard to imagine them falling further. Foreclosures are five times the national average.
Orlando, Fla. – The vacancy rate is 7.4 percent
Cleveland – There’s been no job growth here since August 2006.
St. Louis – Year over year, prices dropped 20 percent.
Miami – The inventory of unsold homes has climbed steadily.
Las Vegas – Job growth has been flat since the housing construction bubble burst.
Sacramento, Calif. – The city has the nation’s highest rate of seller price reductions.
Denver – The state has ninth highest rate of foreclosures in the country.
Tampa, Fla. – Weak job market and high inventory of premium properties
Phoenix – Housing inventory is five times higher than it was in 2005
In other news, Forbes failed to mention that Detroit also has the most beleaguered mayor in the country, along with a police department that may soon be under increased scrutiny over the handling of the death of a stripper, following a party at the mayor’s mansion that may or may not have ever happened according to sources that may or may not be creditable. The jury may or may not be still out on that – text messages to follow. And to save having to do another post, we also learned recently that Detroit leads the nation in the high school drop out rate. So not only is it the riskiest place to invest in real estate, but apparently the dumbest place, too.
Unfortunately the mess in Detroit spills over to the suburbs in the form of a stigma with out of state lenders. We are now designated as a “declining market” all the way out through the 5-6 counties that surround Detroit, so our borrowers pay more, our sellers get less, our houses appraise for less and we all suffer. But, we can wave our foam #1 fingers and claim to be number 1 again! Sigh!