A market for ultra-cheap homes has emerged in cities around the U.S., and the result is that in many cases it’s much less expensive to buy a house than it would be to purchase a new car.
The Baltimore Sun reports that one in ten homes sold in Baltimore during the first half of 2011 was purchased for less than $10,000. The roughly 275 homes sold in that price range in those six months outnumber the tally of homes sold for $10K or under in all of 2009 and 2010 combined. More than 500 homes in the city, meanwhile, sold for $20,000 or less from January to June of 2011. In a dozen city neighborhoods, you won’t find a single home listed for more than $30,000.
Why the rise in ultra-cheap home sales? For one thing, prices in cities like Baltimore have plummeted to the point that there are simply more homes listed today at sub-used car asking prices. In 70 Baltimore neighborhoods, average house prices dropped by 20% in a year, compared to overall price decreases in the region—suburbs included—of just 6%. (It’s also noteworthy that while city prices have dropped substantially, Baltimore tax rates remain high, which is why one councilman has proposed to decrease city property taxes by half over the course of a few years.) Rather than wait for the housing market to rebound, the banks now in possession of more foreclosed homes than they know what to do with are increasingly eager to unload properties in the city, even at prices that wouldn’t cover a semester’s expenses in college.
As one real estate told the Sun why banks are antsy to get foreclosed homes out of their hands:
“The bank is much happier to just cut their losses and sell it to somebody who can buy it within 14 days.”
So if looking for a bargain, you can handle buying in an iffy neighborhood, and you have cash (banks are unlikely to bother with mortgages for a paltry $10K or $20K or so), cheap city homes are waiting to be scooped up.
Meanwhile, in Detroit, another city flooded with shockingly inexpensive houses, the first steps are taking place of an initiative that aims to simultaneously put more residents and police officers in neighborhoods—by allowing cops to purchase city homes for next to nothing. Last week, the first police officer took advantage of the Detroit’s Project 14 initiative, in which homes can be purchased with as little a down payment as $1,000, and in which the officers who become city homeowners are eligible for renovation grants of up to $150,000. In effect, the program is paying cops to live and own homes in the city.
A recent post at real estate site Trulia’s blog revealed that it is now cheaper to buy than rent in 74% of America’s 50 most populous cities—and unsurprisingly, Baltimore and Detroit are two of the cities where it’s cheaper to buy. For that matter, there are dozens of Detroit homes listed under $1,000 each right now at Trulia.
Buying a home may seem like a gamble right now—especially in cities like Baltimore and Detroit, where neighborhoods have been crumbling and emptying for decades. Interestingly enough, according to Trulia, the U.S. city where buying is much cheaper than renting today is the one best known for gambling, Las Vegas.