Houses cheaper than cars in Detroit

[Lyion]

Wow..

http://www.reuters.com/article/topNews/ ... 7820070319

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.

[Tossica]

That is fucking sad.

[ClakarEQ]

Oddly enough, Detroit is one of maybe 3 places in the state where housing / real estate is on an increase, elsewhere, the state is in a depression below every other state in the union.

Don't kid yourself though, Detroit is setup in an odd way. Not sure how it compares to other big city wanna-be's but there are these little island neighborhoods that have near mansion sized houses surrounded by complete shit holes. Sometimes they are gated, sometimes they aren't (not that a gate would make the difference). It is strange though driving through some of the Detroit neighborhoods to see condemed houses and half a block down you see these victorian treasures (of course these typically look less than well kept).

Point is you walk outside of your little island and you might want an armed guard beside you. Let alone that if you're a white couple, I'm not saying this to be racists but it is a bit dark downtown.

Some of the condos and appartments though look very nice from the outside, waterfront (if you call the Detroit river "waterfront"). I hope it turns the city around.

I'm doubtfull though, Comerica appears to be shifting it's home base to Texas. Bummer :\

[Tossica]

Minneapolis is kinda like that too. All the money used to be downtown, along the river and just south of downtown in the early 1900's. Sometime in the 50's everyone jumped ship and left the inner city to fester and rot so there are entire neighborhoods of 8+ bedroom mansions that were broken up in to boarding houses or small apartments. Things were pretty nasty until about 15 years ago when big money came in and started buying up whole neighborhoods, rennovating the homes and selling them back to rich people. There has also been a HUGE push to build condos in the run down neighborhoods and it has worked pretty well for the most part. I wish I had bought the house I was renting in the early 90's. The owner wanted $38K for it and was willing to sign a contract for deed. I was too young to commit to something like that back then... too bad. That house is probably worh $300K these days.

[Tuggan]

Ahh, home sweet home.

[Reynaldo]

That house is probably worh $300K these days.

What pisses me off now that I'm a home owner is that on good deals like that, you get assrammed with the property taxes. It's like a penalty for being smart and unless you're just in the business of flipping homes, increasing the value of your house will kick you in the butt in the short term with taxes that match or surpass your actual mortgage payment.

[Eziekial]

Detriot is what happens when black people take over. Give my regards to the Mayor.

[Lueyen]

I hear this company named Omni Consumer Products has some big plans for the city.

[Tossica]

I hear this company named Omni Consumer Products has some big plans for the city.

Ha! /slaps knee

[ClakarEQ]

haha indeed