You might wonder if there's an easy way to identify a really bad real estate market. Detroit can help. How about when you can't auction houses off with a starting bid of $500? Yep, that's pretty bad. We all know that things are truly awful in Detroit, but this answers the question: just how bad?
In a report that can really only be described as scary, Reuters says:
Despite a minimum bid of $500, less than a fifth of the Detroit land was sold after four days.
So that's not one or two properties not selling for $500. That's over 80%. Maybe this shouldn't be surprising, since back in January there was a report that the median home price in Detroit was $7,500. This might just indicate it's fallen a bit... further. Here's some more detail from the article:
After five hours of calling out a drumbeat of "no bid" for properties listed in an auction book as thick as a city phone directory, the energy of the county auctioneer began to flag.
"OK," he said. "We only have 300 more pages to go."
There was tired laughter from investors ready to roll the dice on a city that has become a symbol of the collapse of the U.S. auto industry, pressures on the industrial middle-class and intractable problems for the urban poor.
On the auction block in Detroit: almost 9,000 homes and lots in various states of abandonment and decay from the tidy owner-occupied to the burned-out shell claimed by squatters.
Poor Detroit. Things there are just terrible. I'm sure no one needs to be reminded of the condition that the Big 3 automakers are in. They call Detroit their home and have laid off thousands. Consequently, lots of their suppliers, many of which are also located in or around the city, have suffered as well.
That's part of the reason Michigan has the highest unemployment rate of any other U.S. state. As of September, according to the Bureau of Labor Statistics its unemployment rate was 15.3%. The next highest state was Nevada at 13.3%. Michigan's rate was more than 56% higher than the disastrous national rate of 9.8%!
And the Detroit metropolitan statistical area was even higher at 16.4%. That's 372,500 unemployed people. That means the Detroit MSA has more unemployed people than the city of St. Louis, Missouri has total residents.
But the real picture is even worse. Another BLS release from last Friday indicates that Michigan has the highest rate for the broader unemployed population. That's the portion BLS defines as "total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers." They only offer up that number as an average for the fourth quarter of 2008 through the third quarter of 2009. For the U.S. it was 15.2%. In Michigan it was 20.9%! Needless to say the number for just September is almost certainly a few percent higher than that. These are Great Depression-like numbers.
So what can people in Michigan do? Well, I would move. And I suspect that many are, which probably helps to explain why a house won't sell for $500.
Eventually, businesses might take note of these drastically low real estate prices and move in. But until then, Michigan will continue to be the definition of a sad state of affairs. Although, I guess there's always tourism to fall back on: