Articles in today’s Detroit News reported on the surprisingly high percentage of empty homes in some of Detroit’s more upscale suburbs. Places like Bloomfield Hills and Birmingham with upscale homes have always been considered to be somewhat immune to economic downturns. After all these are not places where hourly workers live, don’tcha know.
The News articles reported empty hoe rates of of 9.4% in Birmingham and 10.2% in Bloomfield Hills. One interesting note in the article was the fact that this issue is masked somewhat in those areas because the local governments make sure that the lawns and exterior of the empty homes are maintained, so as to keep up a good impression for the neighborhoods. One resident was quoted as stating, “Even our blight is better.”
These are neighborhoods where owners are walking away from $1.5 Million homes that are nor only worth $600-700,000. These are mainly occupied by what were (and still are in most cases) wealthy Baby Boomers who are now retiring. Many are people with money who are making “strategic default” decisions (see my blog on that topic here). Some are older and may be headed to elder care homes. There are many reasons sited for the high vacancy rates in these rich suburbs, but the bottom line is that many of the people who were apparently wealthy weren’t as well off as we thought or they aren’t as willing as the average Joe on the street to sacrifice in order to keep up payments on underwater assets. That is perhaps the main reason – they see these houses more as assets than as homes and they are willing to cut their losses with those assets just as they would with a poorly performing stock. After all, they can go live in their 4,000 Sq Ft cottages in Traverse City or Aspen until this all blows over. One is hard pressed to feel much sympathy for those now “homeless” people.
In the same Detorit News issue there was also an article that claimed that much of the current home buying in America right now involves cash sales to foreign investors. Apparently they see the U.S. housing market as a golden opportunity to park money in something that they feel has better potential for income (rentals) or eventual appreciation than stocks or bonds. We certainly all know that it is great time to be a buyer, especially if you come with cash in hand. So if you see a foreign buyer wandering around you market with a bag of money, send him my way – have I got some houses for him.