On a quiet, tree-lined road near Detroit’s city airport, sits a house that was briefly the most famous in America. When the three-bedroom home at 8111 Traverse Street found a buyer last summer, the purchase price made headlines around the world — the house sold for one dollar, then worth about 50p.

The unnamed buyer was a local woman who bought the house as an investment. Yet two months later, America’s spiralling financial crisis is wreaking so much new havoc in decaying property markets like Detroit’s that even a $1 house cannot be resold for a profit.

As the home of America’s once-omnipotent automobile industry, Detroit is scarcely a stranger to adversity. “Blight is creeping like a fungus through many of Detroit’s proud neighbourhoods,” an article in Time magazine noted in 1961. It has since become America’s poorest city, the Motown that lost its mojo. Last week the city’s big-three motoring manufacturers, Ford, General Motors and Chrysler, announced their worst monthly results for car sales since 1993.

The house on Traverse Street tells part of the story of a decline so dizzying that other cities around America have begun to talk fearfully of “Detroitification”, a seemingly irreversible condition of urban despair that slowly takes grip of once-flourishing communities and strips them of value and life. For much of the world it might seem unthinkable that a house in a large American city could be sold for a single dollar, but the shocking reality of Detroit’s urban implosion is that there are tens of thousands such homes in varying states of calamitous disrepair, with no hope of finding buyers.

Officials still debate the varying causes of the city’s ruin, but race riots in the 1960s, competition from foreign carmakers, a galloping murder rate and a flourishing drug culture all took a heavy toll.

In the past 40 years, Detroit has lost half its population, which is now estimated at 850,000 — more than 80% of them African-American.

It continues to lose residents to the suburbs at a rate of 1,000 a week. Spirited attempts to revive the city centre with new skyscrapers, waterfront developments and brand-new sports stadiums have failed to halt a long-term decline symbolised by a single building — the Michigan Central railway station, a beaux-arts masterpiece built in 1913 with a waiting room that is modelled on a Roman bathhouse. Closed in 1988, it is now a vandalised ruin, with every single one of its thousands of windows smashed.

The credit crisis of the past year has exacerbated the city’s woes. Downtown developments have been frozen for lack of funding.

Last week the city tore up a project to build new blocks of upmarket flats along the Detroit river. An attempt to preserve part of Tiger Stadium, the city’s former baseball mecca, is also on the verge of collapse. It scarcely helped that the city’s energetic and popular black mayor, Kwame Kilpatrick, became embroiled in a sex scandal and was jailed for perjury.

Many of Detroit’s empty houses are now owned by banks trapped in a vice of their own making. Having once handed out mortgages irrespective of buyers’ ability to repay them, the banks are no longer handing out mortgages at all.

Vast swathes of Detroit have become effective no-go areas for lenders; even a derelict church is for sale with a sign that reads “Best cash offer”.

The Traverse Street house sold for $65,000 (£36,450) in 2006 but within a year its owner had stopped making mortgage payments and the bank stepped in to repossess it.

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