Detroit Real Estate: Down and Out at Market Value
Detroit must be feeling like a streetwalker far past her prime.
Some 9,000 homes and lots went up for tax foreclosure auction in the American symbol of industrial urban failure…yet 80% of them remain unsold despite a minimum bid of $500.
How the world turns.
Once Detroit was a dynamic city, the urban equivalent perhaps of a can-do, modern woman, the kind who could have easily attracted money and devotion from deep-pocketed suitors.
But now the ol’ gal just ain’t what she used to be. “Motor City” must sting like an accusation. Her industries are gone and the political props have only prevented the sort of changes that she needed to retain her vitality.
Now she’s lost her looks…and her dignity…and the only ones willing to touch her aren’t willing to pay very much. But apparently a few banks are hoping to buy claims to pimp Detroit out, while making absolutely no investment in improving her lot.
“Critics say the poor showing at the auction underscores the limits of using a market-based system to clean up property tax problems.”
Critics are always blaming a market-based system…even when it was politics fighting the market that made things so bad in the first place. And God forbid that the market tries to clean things up.
There are plenty of people who would love to buy Motor City’s properties cheap and actually move into the city…but the banks keep outbidding them for the decent properties.
The banks, of course, are hoping to make a quick profit…but property prices improve only when the right kind of productive, mindful people move in and form strong local economies.
By buying up the properties, banks are pricing out precisely the kind of people who would make their investments pay off!
I suspect the banks believe that they can simply count on the government kicking off another real estate bubble with the old bag of tricks: by manipulating interest rates and the cost of money and debt. And who can blame them?
We’ve all been conditioned to believe that politics will trump markets forever, that the universe runs on votes instead of physics. Things will–predictably–get worse until this belief is temporarily wrung out of our collective consciousness.
In the meantime, consider homesteading in Detroit. In a little while, the banks will have lost their taste for speculation…along with another chunk of taxpayer money.
Living in Detroit would be rough at first, like living on the frontier full of hostile natives: Mad Max meets the Ol’ West. And it may not pay off. Cities do die occasionally, you know.
But that’s what smart investment is all about. The gains are puny when the chances of success are high. If risk has its rewards, then Detroit’s abandoned streets may be hiding gold under the grit.
Managing Editor, Whiskey & Gunpowder
October 26, 2009