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Re-examining the $500 house: You get what you pay for

Good Magazine makes a compelling argument with which many who have bought "cheap" homes in Detroit might agee: When it comes to the $500 house, you often get what you pay for. In fact, these houses often carry a negative value.

"Here’s why very cheap can mean very big trouble," writes Good's Angie Schmit. "Houses, in addition to the land they occupy, are the sum of their parts. That key threshold where "affordability" turns into market collapse is when housing becomes so cheap that the cost to repair the structure is more than someone is willing to pay for the house. Just because houses might sell for peanuts in Detroit, doesn’t make, say, roofing materials or lumber any less costly. In other words, if your home is worth less than it costs to fix the roof, there’s strong incentive to walk away. And that’s what thousands of people have done in cities like Detroit, Youngstown, Ohio, and Buffalo, New York."

In other words, cheap houses generally require large investments of time and money, which Good Magazine's Angie Schmitt argues is a big problem, especially for the working poor who inhabit cities where this is the case. She suggests that the solution to this problem is actually the addition of more expensive housing to weak markets like Detroit, as well as an overall a reduction of the supply of housing.

Source: Good Magazine
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