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Houses cheaper than cars in Detroit

This is unbelievable. I can hardly imagine being the Mayor of a city under such economic hardship. Do any of you live in the area? My girlfriend's family and some of my coworkers are from Detroit. I don't mind competition from overseas for manual labor, but the readjustment and pain to a community are always difficult. Would you buy a house if it cost less than the car that you parked in front of it?

Source: Reuters

Quote:

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.

Get used to it. It's coming to North East Ohio and the Midwest, Great Plains area next.

And yet, here in most of NJ, an 1800sf 'starter home' will fetch upwards of over $300k. Yet, we are also losing industry; Ford and GM both closed their plants here, as did Johnson & Johnson, Revlon....
Not all of the midwest is in dire straits, though. The Kansas City area is emerging as a technology hub, for instance and its housing reflects that as building new homes continues and KC has made some 'cities to watch' lists.
The automakers that put Detroit on the map couldn't care less about what happens to the city and the general area-they're concerned about their own bottom line, so they have their 'American' cars built it Mexico and/or import parts from all over the world. Can you blame the automakers, who were paying high union wages, for wanting to go where they could get the same thing at less than half the payout?
Related Irony: A Nascar car owner, Jack Roush, has been very vocal against letting Toyota participate in Cup racing. A commentator, Darryl Waltrip countered with the irony that Toyota is the only car maker in the series whose cars are made in the US.
We're losing to a global economical market; we reaped the spoils for so long, got comfy without keeping an edge up against emerging cheaper markets and then woke up to find everyone had packed up and gone elsewhere.

I'd be happy to buy a home there. I may not live in it.

To quote Mark Twain, “Buy land, they're not making it anymore”

Cities ebb and flow just like tides. There is no doomsday to any cities where suddenly the city gets wiped off the face of the planet.

Weren't the automakers - the people, not the companies - the ones who moved out of Detroit in the first place? "White Flight" klled the City of Detroit. The suburbs are still relatively prosperous, although the recent troubles the automakers have had are starting to cut into that success. Its entirely possible that we'll see Detroit implode in on itself in the next 20 years and be absorbed by Southfield (just to pick a random suburb).

Certain parts of the country are going to have a hard time succeeding in the next 20-50 years, Northeast Ohio among them. Other areas - Kansas City, Chicago, Las Vegas and Phoenix - are going to have a much easier time. If ethanol remains a going concern, we may even see a move back to the countryside out of some of the urban areas. It's a thought anyway.

Quote:

Originally Posted by Randerolf

This is unbelievable. I can hardly imagine being the Mayor of a city under such economic hardship.

Kilpatrick's on his second term. Befuddles me as much as it befuddles some that Bush was reelected. Not that he bears the brunt of the responsibility - I'd sooner put that on Coleman Young and "white flight" - but I don't expect him to improve it.

I grew up in Detroit and North East Ohio(Toledo), and I think one of the main factors is lack of jobs...in Toledo especially. Donald Trump should swoop in there, and buy the city...God knows he would have enough to do so.
"'Trumptroitium', the largest, most luxurious city of all time, Its gonna be huge!".

I live in the suburbs. They are talking about Detroit, which is in Wayne County. Wayne County has experienced a 6% population reduction over the past five years while the Detroit suburbs have experienced as much as a 15% increase.

It's a shame that everyone thinks of SE Michigan when Detroit is mentioned. The suburbs are awesome. I've heard it said that the perfect place to live would be to combine downtown Chicago with the Detroit suburbs.

The only reason I go near downtown is to eat at a few restaurants and go to Tigers and Lions games. Their ball parks are pretty cool as well.

My tiny, modest home here in the SF Bay Area is worth close to a million.

ugh....

I could tear down my house, build a duplex for really cheap, and sell each side for $800,000

And I live in a semi-bad part of Denver.

I think your country might be following the North/South divide that we have in here in England.

You can buy a whole street of houses for the equivalent of $500k in some parts of the North, where industry has steadily declined over the years, yet most houses here in the South, especially close to London are worth $1m.

As Cynthetiq said above, "buy land, they're not making it anymore"

I'm lucky enough to have grown up in London and shared in the boom.

NGdawg is right, too - and the same thing happened over here, we didn't prepare for cheaper European markets where people work for less money, and manufacturing is cheaper. We used to be the strongest steel producing nation in Europe until 20 years ago when the decline began.

Hell, we used to be the strongest Empire in the world and gave civilisation to many under-developed nations in the 16-1800's. Not much left of it these days.

We did what the Romans did in latter days, and are left with not much but a good history book. Luckily we are now one of, if not "the" financial capitals of the world. Our economy is stronger than the US, our currency is worth almost double the dollar. It's all about being able and willing to open the doors to global trade and welcoming change

Baltimore, in it's serious urban renewal phase, had a plan in a few neighborhoods where you could buy a house for a dollar, just so they could get people into vacant homes and try to fix some of those areas up.

Sounds like that might be next for Detroit.

Heh, I live in the area. About 20 minutes west of Detroit. Housing market sucks. I had bad credit in the past and refinanced into an adjustable rate mortgage that is expiring next month. My credit is way better now, but the value of my home is exactly the same as it was 2 years ago instead of going up $8-10k / year. I am unable to refinance because there is no room for all the BS fees and such unless I want to pay them out of pocket. I'm sure I'm not the only one affected like this. It sucks. Thankfully, I might be moving to Tampa for my job in the next 1-2 years.