$1000 for a fixer-upper home is only cheap in the U.S.

[zaimoni]

But it is happening:There are 18 listings in Flint, Mich., for under $3,000, according to Realtor.com. There are 22 in Indianapolis, 46 in Cleveland and a whopping 709 in Detroit. All of these communities have been hit hard by foreclosures, and most of these homes are being sold by the lenders that repossessed them

Comments

[sir_dave]

This make me itch. Despite 17% falls in prices here, a simple three bedroom home in a cheap area of a provincial city still cannot be had for £100,000, which despite currency falls is still $150,000. The average house price here is still about $240,000.

I have spent years developing skills in electrical work, carpentry (especially kitchens), tiling, flooring, basic plumbing (more an astute understanding of what to get a plumber to do than doing it), garden clearance and fencing. The idea of houses at prices like that makes me virtually salivate.

I can imagine that not being the whole story; if no one is buying, there must be a reason, and maybe these are in neighbourhoods where it pays to answer the door with a loaded gun? I don't know, but in all normal circumstances I am highly optimised to make money in that situation. My last two property deals have kept me in a living for six years, and in all likelihood will finance another two years yet at a pinch. What is going on?

[fishsupreme]

Well, two of the areas outlined here are Flint, MI and Detroit, MI. Flint is a wasteland; most of the town consists of abandoned homes and businesses that have not been lived in for years (the town's population has declined 50% since its heyday.) It would be a good place to film a post-apocalyptic movie; it already looks that way.

Detroit has the highest unemployment rate in the United States, and most of the jobs left are related in some way to the ailing U.S. auto industry -- so even what economy there is is reliant on an industry that may disappear at any time. It has a median housing price of $18,000 now. The homes are so cheap because people are willing to get nothing for the house in order to get out of those towns.

Indianapolis and Cleveland are pretty reasonable towns, though, so I'm not sure what the story is with those. These prices are certainly not typical in the U.S.

[sir_dave]

Right. So this is what I was warning about, already happening; local recession hotspots based on collapse of specific industries leading to the abandonment of entire areas. The challenge in that case is to redefine an area and create a new community on new terms, not just to make houses into homes. But for someone like me, used to the idea of being held in slavery for most of an adult life to afford a basic home due to the house prices in the UK, it sounds like the land of opportunity.

[yechezkiel]

Detroit is in a frightening tailspin. The real estate situation is made worse, though, by buyers afraid of losing too much, who then lose even more by holding on to devaluing properties. My parents recently moved there and got much more (brand new) house than they wanted for much less than they had planned on paying.

[detroitfather]

Come on over ... Detroit is near my house, and Flint is near my parish church.

The only thing about buying the fixer-upper houses is, you need an exit strategy. And for that, you have to count on Detroit coming back enough that you'll find a buyer for the fixed-up house. No one wants to live in the only restored house on the block, if the rest of the houses are bombed out.

Here is a photo of an old hotel, not that far off Woodward, really close to St. John's Episcopal Church, Detroit. I had a picture of a typical burnt-out house, but I couldn't locate it.

[zaimoni]

The only thing about buying the fixer-upper houses is, you need an exit strategy.
And if that strategy involves selling: "FATAL RISK, no vulture venture capital for you!" ;)

It's a bit hard to predict the market value of the fixed home in a few months right now :( A healthy trust fund does seem to be the cleanest way to swing it.

(And even back when prices were more predictable, the love of money was the root of poverty. E.g., way back in the late 1980's some airbrained homebuilder thought of the dwarf home next door (back when I was living at Merriam, KS): "huge lot, tiny home -- surely two McMansions with virtually no yards would sell for more than the estate-ditching $30,000!"

Said builder didn't check the sale prices of homes within two blocks. I'm not sure what the gross margin on the dustboard-walled new homes was, but opening with $120,000 (1988(?) dollars) when everything nearby sold at ~$60,000 to ~$85,000 must have hurt. He probably ate negative gross margin on both homes.)