The $1 houses and affordability

Bill.L

Bill.L

Hi all,

In the US you could buy a house in Detroit for $1.

This is not all, the bank that has repossessed the property will pay your legal fees and all the current taxes, such is the state of the subprime disaster.

The big question for property investors here is why?? and why it is extremely unlikely to happen here, despite what the D&G'ers would have us believe.

Here is an example in Detroit...........

http://www.detnews.com/apps/pbcs.dll/article?AID=/20080813/METRO/808130360/&imw=Y

What you have is a shell, in an undesirable area, with a falling population.

OK, you could get that here, that's not the different bit.

This is the crunch
the new owner will owe $3,900 in property taxes in 2009
Click to expand...

Then there is water bills on top of that.

These property taxes make a huge difference to what we have here and is often under rated as a reason for the differences.

As for affordability, if you had to pay that type of tax on top of a mortgage, the property would be far more unaffordable than here.

Now think of the taxes of a decent property in the US :eek:

Any comments???

bye
 
When the jobs dis-appear, (in Detroit's case, cars and "widgets for cars") the people move on, house supply exceeds demand and a "ghost town" is created. Been happening for ever. You just can't beat that supply-demand equation.
LL
 
Hi all,

With the assumption that the house is nearly worthless :rolleyes: the $1 is for the block of land.

The property taxes are what depresses the price. If/when the house was in reasonable condition in 2006, the YEARLY property tax was 6% ($3900/$65,000). That would be like an outer suburban house, in horribly rundown condition, in say Eagleby in Brissy, or Werribee in Melb, having to pay $15,000/Yr in property taxes :eek: (assuming such places are about $250k)

Water bills are extra.

No wonder the prices are crashing, no wonder people are leaving the keys and walking away.

bye
 
There were properties advertised recently in an article on the front page of the Mercury for $1 a week rent in rural Tassie. Sounds like a similar situation even with lower property taxes. Dunno what they would sell for (they weren't for sale).

Of course they got flooded in phone calls so the real market price is somewhat more than $1/wk!

Anyway, to me the other main difference is non-recourse financing. The idea that if you can buy an identical house over the road for 25% less than yours cost, you can just send the keys back to the bank and have no further problems leads to some pretty insane market outcomes... You only lose your deposit and the bank wears any further loss. Massive difference IMO - I would just love to get non-recourse finance for IPs at a decent interest rate. The risks of just losing a deposit compared to funding -ve equity for years are somewhat different! :eek:
 
but buying a block of land @ $1.00 means there's very minimal downside for your 20c deposit...in other words - it may not go ANYWHERE for 20 years and then suddenly your block of land is worth $1000 - how's that for a return on your 20c deposit...?

just make your rent cover the property taxes and water and there you have one cashflow neutral investment.
 
have you SEEN detroit? it's automotive central.

ford/GM stock price at an all time low, no market for big amercian iron mean the "iron city" is fast becoming a ghost town.
 
Hi all,

Blue card,

If you demolish, there are demolition fees, rubbish removal etc. Then there are the taxes, even if you get it reassessed for no house.

If the taxes were only $1000/year for a serviced block of land, then your return after 20 years looks very dismal.

I have no doubt that at some time in the future, this $1 house will be worth much more, but asking if it can overcome the tax burden is not so easy to assume, hence why it is so cheap.

bye
 
Is the sheer size of the US what's pulling it down now, is it suffocating under it's own weight.

I'm no economist, but the US is a LARGE place, with a large amount of people employed in manufacturing / blue collar industry, as that industry sunsets, and the US transitions to a services based economy, the former blue collar people have to go somewhere.

As I said before, the US is large, so people with education / prospects can move, people with no prospects stay and areas that may have been borderline, become crime infested and dangerous and ultimately deserted as wealthier people move away, there is no one to steal from, not much money to support your drug habit, so you too must move.....somewhere.

Australia on the otherhand is comparitavely small in terms of cities and towns, we have a minerals boom generating jobs in mining and other associated industries, which is providing gainful employment for this sector of the economy...and we have gone through most of our manufacturing job losses / pain in the 80's, and we never had the size or scale of heavy manufacturing the US had. To me our economy seems more balanced.

Combine this with better lending practices and the housing shortage and this is why IMHO Australia can better weather the storm than the US.
 
the_captain said:
Is the sheer size of the US what's pulling it down now, is it suffocating under it's own weight.

I'm no economist, but the US is a LARGE place, with a large amount of people employed in manufacturing / blue collar industry, as that industry sunsets, and the US transitions to a services based economy, the former blue collar people have to go somewhere.

As I said before, the US is large, so people with education / prospects can move, people with no prospects stay and areas that may have been borderline, become crime infested and dangerous and ultimately deserted as wealthier people move away, there is no one to steal from, not much money to support your drug habit, so you too must move.....somewhere.

Australia on the otherhand is comparitavely small in terms of cities and towns, we have a minerals boom generating jobs in mining and other associated industries, which is providing gainful employment for this sector of the economy...and we have gone through most of our manufacturing job losses / pain in the 80's, and we never had the size or scale of heavy manufacturing the US had. To me our economy seems more balanced.

Combine this with better lending practices and the housing shortage and this is why IMHO Australia can better weather the storm than the US.
Click to expand...

This is a good explantion captain.. I agree with you..
As the bears (with sarcasm) say.. "its different here".. but it really is !
 
For those on broadband this link to a youtube video on "Detroit Abandoned Buildings" will give some perspective. It's not just houses. It's kinda the whole city. Detroit's abandoned buildings are becoming a tourist attraction.

http://au.youtube.com/watch?v=snsyzaojS78

All the jobs have gone/are going to Asia/China. ( Thailand is now the world's largest manufacturer of pick-up trucks !) US has huge problems ahead, as well as sub-prime etc.
LL
 
What a shame. Some of those buildings and houses would have been just amazing once, real fairytale stuff, and now just wrecks.
 
the_captain said:
To me our economy seems more balanced.
Click to expand...
Sorry to be argumentative Cap'n, but my read is, it's the fact that our economy is quite un-balanced that is really in our favour right now. "The financial world" sees Oz as basically a very large mine plus a middling size farm. Pretty unbalanced. But right now "everybody" wants to buy resources and food. They don't call this the lucky country for nothing:)!
LL
 
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