Monster loan on US real estate shack

photo credit: cnynfreelancer
It sits on West Hopi Street, in Avondale, Arizona and is a tiny blue shack which has quickly become a symbol of the upheaval in the American real estate market.

According to the Wall Street Journal, this little beauty was bought by someone who borrowed a $103,000 mortgage for it. That’s $103,000 for a property of 576 square feet, now boasting a condemnation notice slapped to one exterior wall.

The paper has hailed the home as the epitome of the type of deal that has sparked the sub prime loan crisis – the woman who lived there took out the monster loan as a consolidation move and defaulted on the payments, according to the Journal, leading to her eviction. The eventual owners of her loan ended up with just a few thousand dollars.

‘We have part of the blame’

The firm who first supplied her with the 103,000 figure was Integrity, owned by Barry Rybicki, who, quoted by the journal, said:

“The banks have part of the blame, I think we have part of the blame. We were part of the system. So does the consumer.”

Mr Rybicki also speaks of the borrowing boom years, saying anyone who had a pulse could qualify for a loan from somewhere.

$18,000 lets you tear it down

The house and its story has quickly become a financial media favourite – the Wall Street Journal has even produced a video on it revealing the neighbours of the “103k shack” are buying it at $18,000 and tearing it down. The couple, like everyone who manages to buy somewhere at the bottom of the current US dip, are the only winners.

2009 looks set to be littered with cheap American property – and at interest rates at new lows, it could be only a matter of time before buyers are out in force again. Just not for condemned shacks.

NOTE: The shack image isn’t the shack, but another shack that you might like to bid on.