Once the backbone of American manufacturing, the city of Detroit is poised this Friday to commit financial seppuku (Japanese ritual suicide).
And it is really a damned if they do and damned if they don't situation.
You see Detroit needs $80 million in emergency funding just to keep the city running and in April Detroit Mayor Dave Bing handed financial control of the city over to the state of Michigan (which ironically owes Detroit $220 million, but is also suffering financially).
It seems like an extreme measure for Detroit Mayor Dave Bing who just weeks ago shocked America by announcing plans to save Detroit money by cutting off all street lighting to large swaths of the city. (And watch the crime rate go even higher.)
This is after all, Detroit, America's first "Ghost City". It was once America's 19th largest city, but since 2007 its population has shrunk to 713,777 (according to Google). Truth be told Detroit was dwindling in size since the 1960s.
Detroit has been on life support since April, when the mayor and city council approved an agreement that handed over control of Detroit’s finances to the state of Michigan. But that apparently wasn't legal says Detroit's city lawyer, Krystal Crittendon, who was never consulted on the deal. Since then she has filed a lawsuit arguing the agreement was illegal because it contravenes the city’s charter, which states the city cannot enter into agreements with parties that owe it money. Since the state of Michigan owes Detroit about $220 million, then the agreement has to be struck down. A ruling is expected tomorrow (Wednesday the 13th).
Meanwhile the state of Michigan says it is going to cut off crucial funding to Detroit starting this Friday. Funding that governs everything from street lights to garbage collection. The city will basically be cut off completely.
And frankly who will want to live in a city that doesn't even have garbage collection or street lights?
Right now the bulk of the jobs in Detroit are the result of teachers and city services. The Detroit public school system is the city’s largest employer, with more than 13,000 jobs. #2 is the city of Detroit staff with 12,400. #3 is the Detroit Medical Center with 10,500 staff.
Manufacturing in Detroit is down to two thirds of what it was in 2006. 271,600 jobs in 2006 to just 187,800 jobs in 2010. Probably less than 170,000 by mid 2012.
In 2011 unemployment in Detroit was 20.2% (compared to 8.9% in the USA) and suicide, abortion and crime rates are all up due to extreme poverty.
City libraries have been closed, the quality of education has slumped because teachers are leaving for sunnier pastures and the spike in crime is filling the city jails and creating a huge backlog. The city can barely afford to pay for defense attorneys.
However... on the plus side land is super cheap.
You can buy a 750 square foot condo for $10,000.
Or a 3-bedroom 1500 square foot condo for $19,000.
Or how about a 6 bedroom + 3 bathroom, 3,600 square foot HOUSE for... $16,000. A mere $4.44 per square foot.
And this is just one Detroit real estate website I consulted (trulia.com), but you can certainly find other cheap listings on various Detroit real estate websites.
Including prices as low as $1 because the previous owner didn't pay the back taxes and the property has been seized by the state. All you have to do is pay the back taxes and its yours.
However if Detroit really does cut "the gravy train" (as Toronto Mayor Rob Ford likes to call essential services) then we can expect property prices in Detroit to collapse even further. In which case a wait and see approach is best, since you could in theory snap up a lot more for your dollar if you wait a bit longer. (But why would you want to live in such a horrible city???)
Frankly if you're in the market to buy cheap property why not buy it somewhere NICE?
For example you can buy a 2 bedroom condo in Hawaii for $25,000. However the current renters are unwilling to leave so you will need to find a way to kick them out if you want to live there. Still if you manage to do so its in HAWAII! The place is a paradise and a no brainer in comparison to Detroit where you can get mugged going to the bathroom.
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Tuesday, June 12, 2012
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