Wednesday, February 01, 2006

Detroit's Economy & Housing Market

The Super Bowl is being played this Sunday in Detroit. The injection of money into the Detroit area for the Super Bowl will do little to change the region's economic misery.

Detroit still has the highest percentage of people living below the poverty line (one-third). The unemployment rate of 6.8 percent trails only hurricane-paralyzed New Orleans.

Last week, Ford Motor Co., the company that gave its name to the stadium where the game will be played, announced it will lay off up to 30,000 workers. GM announced similar job cuts in November. (Palm Beach Post 1/31/06)

The troubled Detroit economy is putting a real damper on housing prices. The Detroit News reports:

Southeast Michigan's housing market took a sharp dive at the end of a weak 2005, signaling more tough times ahead with interest rates rising and a scarcity of new jobs.

Statistics released Monday showed median sale prices fell 4.3 percent in December -- the biggest monthly drop in 2005 -- and most sellers were waiting at least 3 months to find a buyer.


Poor sales in the final few months closed out a year in which homeowners were lucky to get a negligible increase in property value.

The region's median sale price for single-family homes and condominiums was $156,000 in December, down from $163,000 a year earlier, according to Realcomp II Ltd., a Farmington Hills real estate listing service.

Total home sales fell 11 percent, while the number of homes listed for sale grew 11 percent.

The 3,735 homes that sold in December had spent an average of 92 days on the market, five weeks longer than the same time last year.

Real estate agents say their biggest problem is finding buyers for higher-priced homes, while sellers asking less than $150,000 are having mild success.

"There's an abundance of listings out there," said Larry Chetcuti, an agent with RE/MAX Prestige in Dearborn Heights, "but there's not an abundance of buyers."
The ongoing miserable economic conditions coupled with rising interest rates and tightening lending standards will cause the Detroit housing market to continue its decline in 2006.

9 comments:

  1. I fear that someday the fate of Detroit lies for Phoenix and other sunbelt growth cities.

    Particularly Phoenix, whose growth is so tied to development. Someday the growth will slow, whether due to the cost of gas, water or quality of life. The city will see massive erosion of the jobs tied to the growth (homebuilding, service, etc) and the city will eat itself. There is no other industry that I can see in Phoenix that will step up to support the city, it is really a one-economy town.

    Detroit's problem begain with the erosion of the automobile industry -- WWII era Detroit was like Phoenix drawing huge growth from its good manufacturing jobs. When those left, there was no remaining industry to support the area. Phoenix will be hit harder since its growth is its industry.

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  2. Detroit is my home town. The region never recovered from the decline of the American automobile industry. Not only have assembly jobs disappeared, but white collar jobs are getting axed as well. Many upper middle-class areas are experiencing housing price declines because of the white-collar layoffs.

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  3. I fear that someday the fate of Detroit lies for Phoenix and other sunbelt growth cities.

    Detroit is a kind of living parable.

    Does Phoenix have a proliferation of smaller jurisdictions -- towns, counties, villages, etc. -- surrounding it? Aside from the over-reliance on the auto industry, to my mind the Detroit area's problems were always exacerbated by the endless feuding between the center city and the suburbs around it. In these battles, the various governments were typically proxies for the deeper and more poisonous race hatreds held by all sides.
    -sglover

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  4. Quick partial solution to the nations debt problem:

    Move the Department of Homeland Security and one or two other government agencies to Detroit. Reduce pay for workers by half. This will be a boon by many because their quality of life would actually go up due to the lower cost of living in Motown.

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  5. The only problem being you probably couldn't get a lot of people to move to Detroit. So you'd have to hire locally.

    I know that it would take a doubling of my salary for me to even consider living in that horrible area. Besides being economically depressed, it also has no redeeming cultural, architectural, or historical qualities. Let it die.

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  6. Yeah, poor Detroit. That market is the pits right now. Was there on business recently and the city itself just feels like it's been deserted.

    Hey David, check out the housing raffles in Cali.

    Cole

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  7. David
    Thanks for your attention to this lunacy. I've been waiting to buy for some time now. Hope it explodes and takes all the naked swimmers to the sea.

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  8. In response to:
    "I fear that someday the fate of Detroit lies for Phoenix and other sunbelt growth cities."

    I grew up around Detroit and now live in Phoenix, working in the construction industry. I do see the danger of Phoenix going in the same direction as Detroit unless something is done to stop that path. Luckily, there are many industries beginning to move to the Phoenix area which could help diversify our job base. Also, one of the other big differences I see here is that Phoenix is currently undergoing many redevelopment projects, particulary downtown, before things start going bad, which could also help ease our dependence on the building industry. Phoenix is learning from cities like Detroit and trying to take preemptive steps to avoid its untimely death. Hopefully these attempts will be successful.

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  9. Well Detroit will not die --- IF immigrants move in and change and fix the city!

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