lily
03-21-2007, 11:12 PM
I'm telling you, things are rough here in Motown......so where does Bush go to discuss failing auto plants? Kansas. (http://news.yahoo.com/s/nm/20070319/ts_nm/usa_subprime_detroit_dc)
Houses cheaper than cars in Detroit
By Kevin Krolicki Mon Mar 19, 11:48 AM ET
DETROIT (Reuters) - With bidding stalled on some of the least desirable
residences in Detroit's collapsing housing market, even the fast-talking
auctioneer was feeling the stress.
"Folks, the ground underneath the house goes with it. You do know that,
right?" he offered.
After selling house after house in the Motor City for less than the $29,000
it costs to buy the average new car, the auctioneer tried a new line: "The
lumber in the house is worth more than that!"
As Detroit reels from job losses in the U.S. auto industry, the depressed
city has emerged as a boomtown in one area: foreclosed property.
It also stands as a case study in the economic pain from a housing bust as
analysts consider whether a developing crisis in mortgages to high-risk
borrowers will trigger a slowdown in the broader U.S. economy.
The rising cost of mortgage financing for Detroit borrowers with weak credit
has added to the downdraft from a slumping local economy to send home values
plunging faster than many investors anticipated a few months ago.
At a weekend sale of about 300 Detroit-area houses by Texas-based auction
firm Hudson & Marshall, the mood was marked more by fear than greed.
"These people are investors and they know the difficulty of finding
financing. They know the difficulty of finding good tenants. They're
cautious," said realtor Stanley Wegrzynowicz, who attended the auction.
HOW LOW IS LOW?
The city, which has lost more than half its population in the past 30 years
and struggled with rising crime, failing schools and other social problems,
largely missed out on the housing boom that swept much of the country in
recent years.
Prices have gained less than 2 percent per year in the five years since
2001, when the auto industry entered a renewed slump.
Steve Izairi, 32, who re-financed his own house in suburban Dearborn and
sold his restaurant to begin buying rental properties in Detroit two years,
was concerned that houses he thought were bargains at $70,000 two years ago
were now selling for just $35,000.
At least 16 Detroit houses up for sale on Sunday sold for $30,000 or less.
A boarded-up bungalow on the city's west side brought $1,300. A four-bedroom
house near the original Motown recording studio sold for $7,000.
"You can't buy a used car for that," said Izairi. "It's a gamble, and you
have to wonder how low it's going to get."
Detroit, where unemployment runs near 14 percent and a third of the
population lives in poverty, leads the nation in new foreclosure filings,
according to tracking service RealtyTrac.
With large swaths of the city now abandoned, banks are reclaiming and
reselling Detroit homes from buyers who can no longer afford payments at
seven times the national rate.
Michigan was the only state to see home prices fall in 2006. The national
average price rose almost 6 percent but prices slipped 0.4 percent here,
according to a federal study.
The state's jobless rate of 7.1 percent in January was also the second
highest in the nation, behind only Mississippi.
HOW MUCH CAN YOU BUY FOR $1 MILLION?
Mayor Kwame Kilpatrick was greeted with applause when he announced last week
that two condominiums in the city's revitalizing downtown sold for over $1
million each.
But investors, including some from out of state, proved far more cautious at
Sunday's auction.
In the most spirited bidding of the day, a sprawling, four-bedroom mansion
from Detroit's boom days with an ornate stone entrance fetched just
$135,000.
Dave Webb, principal at Hudson & Marshall, said Michigan had become a "heavy
volume" market for his auction firm in recent years, although bigger-money
deals were waiting in California, a market he said was ready for the first
such auctions of repossessed property in years.
"These people that are buying have got to look at holding on for five to
seven years," he said. "The key is holding power."
Even with the steep discounts on Detroit-area properties, some buyers handed
over their deposits with a wince.
"I'm not sure it's congratulations," said Kirk Neal, a 55-year-old auto body
shop worker who bought a ranch in the suburb of Oak Park for $34,000. "My
wife is going to kill me."
Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield
Hills that had listed for $525,000 sell for just $130,000 at the auction.
"Once we've seen the last person leave Michigan, then I think we'll be able
to say we've seen the bottom," he said.
Houses cheaper than cars in Detroit
By Kevin Krolicki Mon Mar 19, 11:48 AM ET
DETROIT (Reuters) - With bidding stalled on some of the least desirable
residences in Detroit's collapsing housing market, even the fast-talking
auctioneer was feeling the stress.
"Folks, the ground underneath the house goes with it. You do know that,
right?" he offered.
After selling house after house in the Motor City for less than the $29,000
it costs to buy the average new car, the auctioneer tried a new line: "The
lumber in the house is worth more than that!"
As Detroit reels from job losses in the U.S. auto industry, the depressed
city has emerged as a boomtown in one area: foreclosed property.
It also stands as a case study in the economic pain from a housing bust as
analysts consider whether a developing crisis in mortgages to high-risk
borrowers will trigger a slowdown in the broader U.S. economy.
The rising cost of mortgage financing for Detroit borrowers with weak credit
has added to the downdraft from a slumping local economy to send home values
plunging faster than many investors anticipated a few months ago.
At a weekend sale of about 300 Detroit-area houses by Texas-based auction
firm Hudson & Marshall, the mood was marked more by fear than greed.
"These people are investors and they know the difficulty of finding
financing. They know the difficulty of finding good tenants. They're
cautious," said realtor Stanley Wegrzynowicz, who attended the auction.
HOW LOW IS LOW?
The city, which has lost more than half its population in the past 30 years
and struggled with rising crime, failing schools and other social problems,
largely missed out on the housing boom that swept much of the country in
recent years.
Prices have gained less than 2 percent per year in the five years since
2001, when the auto industry entered a renewed slump.
Steve Izairi, 32, who re-financed his own house in suburban Dearborn and
sold his restaurant to begin buying rental properties in Detroit two years,
was concerned that houses he thought were bargains at $70,000 two years ago
were now selling for just $35,000.
At least 16 Detroit houses up for sale on Sunday sold for $30,000 or less.
A boarded-up bungalow on the city's west side brought $1,300. A four-bedroom
house near the original Motown recording studio sold for $7,000.
"You can't buy a used car for that," said Izairi. "It's a gamble, and you
have to wonder how low it's going to get."
Detroit, where unemployment runs near 14 percent and a third of the
population lives in poverty, leads the nation in new foreclosure filings,
according to tracking service RealtyTrac.
With large swaths of the city now abandoned, banks are reclaiming and
reselling Detroit homes from buyers who can no longer afford payments at
seven times the national rate.
Michigan was the only state to see home prices fall in 2006. The national
average price rose almost 6 percent but prices slipped 0.4 percent here,
according to a federal study.
The state's jobless rate of 7.1 percent in January was also the second
highest in the nation, behind only Mississippi.
HOW MUCH CAN YOU BUY FOR $1 MILLION?
Mayor Kwame Kilpatrick was greeted with applause when he announced last week
that two condominiums in the city's revitalizing downtown sold for over $1
million each.
But investors, including some from out of state, proved far more cautious at
Sunday's auction.
In the most spirited bidding of the day, a sprawling, four-bedroom mansion
from Detroit's boom days with an ornate stone entrance fetched just
$135,000.
Dave Webb, principal at Hudson & Marshall, said Michigan had become a "heavy
volume" market for his auction firm in recent years, although bigger-money
deals were waiting in California, a market he said was ready for the first
such auctions of repossessed property in years.
"These people that are buying have got to look at holding on for five to
seven years," he said. "The key is holding power."
Even with the steep discounts on Detroit-area properties, some buyers handed
over their deposits with a wince.
"I'm not sure it's congratulations," said Kirk Neal, a 55-year-old auto body
shop worker who bought a ranch in the suburb of Oak Park for $34,000. "My
wife is going to kill me."
Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield
Hills that had listed for $525,000 sell for just $130,000 at the auction.
"Once we've seen the last person leave Michigan, then I think we'll be able
to say we've seen the bottom," he said.