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Houses Cheaper Than Cars

1K views 33 replies 15 participants last post by  clearwaterms 
#1 ·
HOUSES CHEAPER THAN CARS

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.
 
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#18 ·
Jrock, that is assuming the market will continue to boom. My current home is paid off after 16 years. If I sell it now and try to get a place in the same area, guess what? All the profits I just made goes towards the new home and worse, often the net net I get from the sale is just a down payment for the new home.
 
#20 · (Edited)
That's right. Your profit goes into the next house which helps you get into a house that is worth more. And the house that is worth more will appreciate and your return will be that much bigger.

The market here in the Chicagoland area is pretty resilliant.

Again, this is just my opinion and I know not everyone will agree, but I still think it is something to think about. And obviously, I had earlier pointed out that I didn't even follow my own advice. Life gets in the way of the best plans.

And to clarify I am not advocating making real estate your primary investment. Nor am I saying that it out performs every other type of investment. It should be part of your investment strategy.

Its just something to think about.
 
#23 ·
I wanna sell mine and just rent. I get an ulcer worrying about what home values are going to do. Granted renting sucks, but if you don't like the neighborhood kids after a year, you just move. none of the real estate hassles.

Screw that I want to move to carrilon. No neighborhood kids there to piss me off.
 
#24 ·
Dust Bowl

It amazes me that an entire city like that is and has been been going down in flames. It reminds me of towns back in the 1800's or something.

Gold rush is over and ghost town is born.
 
#26 ·
It amazes me that an entire city like that is and has been been going down in flames. It reminds me of towns back in the 1800's or something.

Gold rush is over and ghost town is born.
the same thing has always happened. Coal towns in west virgina, gold out west, gary and the steel industry. Im sure there are a dozen other industries that I don't know about. These are the ones that I have heard about. Detroit is a large enough city and the suburbs of detroit are still doing okay.
 
#29 ·
I'm with Tony. Renting isn't the worst thing in the world.

I need to find a new place to rent. What is a good resource to use to shop around. I haven't found alot with rent.com but I don't know what else to use.

It's off topic but this thread just reminded me. Where should I look for info to rent? I want to stay up north here. Gurnee to Deerfield and close to the tollway. Anyone have a good resource?
 
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