Pardon me for my sometimes overly negative take because I am tainted by my Michigan economic bias. When you live in a 1 state Depression, you have to remember times are fantastic in Washington D.C. and there has been no recession in the Dakotas and Nebraska. One does wonder if this region is the canary in the coal mine for the nation as “making stuff” becomes uncool, but we won’t know for a few decades and for now as long as we can drill baby drill print baby print, it is impossible to tell what is going on in the real economy.
While we often get disturbing headlines locally, such as 13 of the 25 cities with the largest income plunge the past decade being in this 1 state, every so often you read something that even rocks your numbed senses. Yesterday in the Detroit News we saw a story that home prices are back down to 1994 levels…. before accounting for inflation. If you take into account inflation a $100K home bought in 1994 is $34,000 in the hole. Did I mention I have Michigan economic bias? What is amazing is how far behind we are from even the 2nd to last city – Cleveland, which is back to 2000 price levels; that’s a 6 year variance. Those of us in Michigan are really going to need The Bernank to get the Dow to 40,000 just to make up for our homes.
Via Detroit News:
After slowly ticking up, home prices are falling in most of America’s largest cities, but nowhere is the drop as huge as in Metro Detroit, where November home values were at their lowest point since the summer of 1994.
The latest Standard & Poor’s/Case-Shiller index released Tuesday showed November home prices in eight major markets hit their lowest levels since the housing bust began. Still, prices in all but one of the 20 markets surveyed are at or even above where they were in January of 2000. The exception: Detroit, where home values are off by 34 percent during the past decade.
According to Case-Shiller, Detroit home prices dropped 2.7 percent from October, and are 48percent off their February 2006 peak. That’s much worse than markets such as Tampa, Fla., where values more than doubled during the housing boom.
But home values in Tampa remain more than 30 percent above their January 2000 level. That big gap in home values illustrates the big difference between the Detroit economy and the rest of the nation, said Dana Johnson, chief economist for Comerica Bank.
“What Detroit experienced is plausibly a depression, rather than the sharp recession most of the country had to go through,” Johnson said. “There were several years of downturns in Detroit and Michigan before the national recession ever got going.”
The news gets even worse when inflation is factored in. According to Case-Shiller, a Metro Detroit home worth $100,000 in 1994 would be worth, on average, the same today. But a home that fetched $100,000 in 1994 would have to bring $147,136 today just to keep pace with inflation. So instead of breaking even, the buyer of a $100,000 Detroit home in 1994 has lost more than $32,000.
Read the whole thing here »