While the nation’s housing markets continue to slump through the collapse and with today’s S&P/Case-Shiller report showing a mix of seasonality driven price increases and outright epic declines, I thought now might be a good time to highlight one of the nation’s worst markets and see if we could draw some inferences from its long slow spiral into the abyss.
Detroit is, by all accounts, a mess of a housing market with prices now receding a full 18 years to a level first seen in 1993.
Worse yet, Detroit home prices are declining at an ever increasing rate dropping a whopping 3.41% from April and 8.67% below the level seen last year.
So what can this mightily distressed market tell us about the future trends for housing and the general economy at a national level?
Let’s consider that just a generation ago the “Motor City” was a shining example of American manufacturing strength harboring the “big three” auto manufacturers and winning the world’s attention as the global automotive center.
But as liabilities steadily mounted for the auto manufactures and they lost their advantage in the face of competition, a trend that ushered in an unwind that culminated with the government takeover of General Motors.
Detroit proper was not spared from this downward slide, jobs declined the economy suffered and by the time that the housing bubble reached its epic top in 2006, Detroit was a shadow of its former self… a fragile disaster waiting to happen.
All that was required to push it over the cliff was a systemic undermining of the accumulated wealth of the area households which, as fate would have it, came in the form of a historic home price slide.
Detroit is going down fast with a broken economy and developing slums that look more like Mogadishu than Michigan, and with it goes a notable tale of the rise and fall of an exceptional city and likely a harbinger of things to come for the U.S.
