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Reuters: Houses cheaper than cars in Detroit [Copy link] 中文

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Post time 2007-3-22 13:08:02 |Display all floors
Houses cheaper than cars in Detroit
(Reuters)


Detroit  --- 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 US 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 US 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.

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.

Mayor Kwame Kilpatrick was greeted with applause when he announced last week that two condominiums in the city's revitalizing downtown sold for over US$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 US$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 US$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 US$525,000 sell for just US$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.

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Post time 2007-3-22 13:10:45 |Display all floors

bewildered

I am bewildered by the above Reuter report, because I just do not understand why the price of a house fails to meet that of an auto vehicle.

After the story was carried by Chinadaily.com.cn,  several Americans send in their comments, which helped me to understand,,, a little bit...

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Post time 2007-3-22 13:15:07 |Display all floors

COMMENT I

VROD100    (comment delivered 2007-03-21 23:27 pm Beijing Time)

This is a reprint of a Reuters story I read two days ago.  I'm a real estate appraiser in the Detroit area and have watched this situation unfold for the past two years. There are a lot of factors involved.

The sub prime market is just part of the story.  Adjustable rate mortages taken out by solid borrowers are now resetting upward. The plan was to refinace before the interest rate went up. The problem is the houses are worth less so they owe more than it's worth and they can't refinance.

The massive layoffs in the american auto industry is also a major factor. This isn't happening just in Detroit. The story refers to a house in Bloomfield Hills, that is full of $1,000,000 houses. This is a perfect economic storm. There will be hundreds of thousands of foreclosures nationwide in 2007-08.

Detroit is on the leading edge because of the loss of tens of thousands of good-paying auto jobs in the last few years. This will affect everyone from home-owners to Wall Street. Don't think it can't happen in your area. Many of your neighbors are mortgaged to the max. They will lose their houses and lower your property value.

The lesson: Buy American !

Real jobs keep this county strong, not phoney paper assets and profits concocted by Wall Street. A $300,000 mortgage can be leveraged over and over again to make it look like it's worth millions. The scam is starting to fall apart and we're all fu**ed.  The Bad Guy - Allen Greenspan.

[ Last edited by chinadaily at 2007-3-22 01:18 PM ]

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Post time 2007-3-22 13:19:49 |Display all floors

COMMENT II

by Matthew A. Sawtell   (delivered on 2007-03-22  02:43 am Beijing Time)


There used to be an old saying in Michigan, "When Detroit coughed, the rest of the country got a cold."

Take heed of this article, for Detroit has more than a cold - and the world is going to catch it. China, Japan, and good portion of the world still depends on the American consumers as the backbone of their economies. If the American consumer cannot afford a good home, or say a decent meal three times a day - will it continue to buy foreign goods?

Do not forget, American currency is not backed by gold or silver - but by the buying power of the American consumers.

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Post time 2007-3-22 13:21:23 |Display all floors

COMMENT III

by Prophecy  (delivered 2007-03-22 05:18 am Beijing Time)

The U.S. is a country with great disparity: You either have it or not.  The middle class is diminishing at an alarming rate. The rich people better watch out, as the the poor and hungry will come for you.

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Post time 2007-3-22 13:22:18 |Display all floors

COMMENT IV

by "Buy American"   (delievered  2007-03-22 03:30 am Beijing Time)

Every time I see an American driving a Japaneese car I want to slap a big sticker on it that says "God Bless Japan". What is TRULY stupid is the idiots driving Japan cars that stick the American Flag on it!  Talk about an oxymoron!

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Post time 2007-3-22 13:24:17 |Display all floors

COMMENT V

by Yamashiro   (delievered 2007-03-21 18:35 pm Beijing Time)

Japanese cars are destroying America. There is no need for weapons, just build factories and manage these idiots to make cars for themselves, destroy their industrial base and make money as well.

What a scheme, what a scheme.

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