Having been born in Detroit and raised both in the city and one of its suburbs, news like this distresses me:
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.
And:
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.
Finally:
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.
Although I haven't lived in Michigan since the late 1980's, most of my family is still there. Coupled to the auto industry, Detroit's been subject to a boom-and-bust cycle as long as I can remember, but overlaid on that cycle seems to be a long-term decline that depresses the hell out of me to think about. There are some very beautiful suburbs, where the affluent live, but the central core of the city is deteriorating.
Worse, later last week, Mike the Mad Biologist had to point me to this article:
SHAKER HEIGHTS, Ohio -- In a sign of the spreading economic fallout of mortgage foreclosures, several suburbs of Cleveland, one of the nation's hardest-hit cities, are spending millions of dollars to maintain vacant houses as they try to contain blight and real-estate panic.
In suburbs like this one, officials are installing alarms, fixing broken windows and mowing lawns at the vacant houses in hopes of preventing a snowball effect, in which surrounding property values suffer and worried neighbors move away. The officials are also working with financially troubled homeowners to renegotiate debts or, when eviction is unavoidable, to find apartments.
"It's a tragedy and it's just beginning," Mayor Judith H. Rawson of Shaker Heights, a mostly affluent suburb, said of the evictions and vacancies, a problem fueled by a rapid increase in high-interest, subprime loans.
"All those shaky loans are out there, and the foreclosures are coming," Ms. Rawson said. "Managing the damage to our communities will take years."
Cuyahoga County, including Cleveland and 58 suburbs, has one of the country's highest foreclosure rates, and officials say the worst is yet to come. In 1995, the county had 2,500 foreclosures; last year there were 15,000. Officials blame the weak economy and housing market and a rash of subprime loans for the high numbers, and the unusual prevalence of vacant houses.
I used to live a stone's throw from the main area described, the Moreland area of Shaker Heights, except that I actually lived on the Cleveland side of the border. It's right near Shaker Square, for those familiar with the area, and it's where my wife and I had our first apartment together and lived for four years after we got married. There are all sorts of beautiful old houses and apartment buildings in the area; it was a pretty nice neighborhood when I lived there, although I will admit that if you wandered further into Cleveland the neighborhood started to get dicey fairly quick, and that was 11 years ago.
And it's even worse in Cleveland itself:
With so many homeowners running into trouble, the City of Cleveland has been unable to keep track of the number of vacant houses, said Mark N. Wiseman, director of the county prevention program. He estimates that 10,000 of the city's 84,000 single-family houses are empty.
Suburbs like Shaker Heights are trying to avoid the experiences of blighted neighborhoods in Cleveland like the one where Barbara Anderson lives. Ms. Anderson, 59, said her block of East 76th Street was fully occupied three years ago, but now about half the houses are empty.
Many of the houses are filled with smelly trash and mattresses used by vagrants. They have been stripped of aluminum siding, appliances, pipes and anything else that scavengers can sell to scrap dealers.
"It stifles you," Ms. Anderson said of the squalor. "It lowers the value and affects the kind of people who are willing to move here. I'm embarrassed to say I live here."
I've lived over three quarters of my life in either Detroit or Cleveland. It's just plain depressing to hear what's happening there now.
I'm from Detroit, too. My parents, who, poor things, still sell commercial/industrial real estate there, blame the union-imposed heath insurance costs (which add a considerable chunk to the price of every car).
I blame the lack of innovation in the auto industry and terrible city planning downtown. As for the lack of innovation, when hit with the oil crisis back in the previous century, Detroit designed the ugliest, crappiest econoboxes. They have yet to design a hybrid car that comes anywhere near my Honda Insight (which, I believe, started selling in 1999 -- bought mine in 2004. Spent $157 on gas last year. For THE ENTIRE YEAR.)
As for the terrible city planning downtown, they've knocked down all the beautiful old buildings like JL Hudson. There's no real bid for preservation there, just my boyfriend's friend Lowell Boileau's site, The Fabulous Ruins Of Detroit: http://www.detroityes.com/home.htm
An example of the waste of downtown: We recently went to a wedding at The Roostertail on the waterfront. On the way there, we were musing at how Detroit was the only city where riverfront property was used for PARKING GARAGES!
Many years ago, I spent a couple weeks work in Cleveland (national touring company of a Broadway show). I was impressed with the music scene there, the world class orchestras, and community support of arts. It was also a nice walking city. I recall one of those gorgeous old Polish Catholic churches. And finely designed tall city neighborhood houses.
Very sad. So many of our cities have huge swaths of depression, looking like postwar zones. Homeless people and personless homes and not the jobs to make the two meet.
I too grew up in a suburb of Detroit. I had friends in high school that used to arm themselves and go rappelling down the sides of the many abandoned buildings downtown... It's kind of an urban wilderness.
After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car
...
banks are reclaiming and reselling Detroit homes from buyers who can no longer afford payments at seven times the national rate.
That is crazy. It almost sounds like the best strategy in Detroit at this point would be to go ahead and let your bank foreclose, and then just go back and buy the property at auction. I rent so I don't really know much about this stuff, but as far as I know $29,000 for an effective mortgage buyout is a fantastic deal.
I hate to sound paranoid, but could the fact that this seems to be happening in mostly Democratic areas account for the fact that the Administration seems to not care?
The auto industry and health of Detroit are tied to the economic health of our nation.
There's a town in northern Japan, Yubari, that's become infamous recently by managing to go bankrupt (no mean feat for a town here). The basic problem is that it used to be a mining town. When the mine ran out, the town essentially lost its reason for existence. Now, Japan probably has a slightly declining population overall at this time; totally swamping that effect, however, is the migration to regional and national centers and away from small communities like Yubari. Every small town is competing for those people that want and is able to live in semi-rural areas. With a lot more towns and rural population areas than there are people willing to live there, however, something has to give.
And one early thing to give, it seems, is Yubari. When migration patterns change like this, the completely inevitable result is that not all towns will live on. The question becomes how the "retructuring" will play out in practice. There is/was a coastal village (forgot the name) who's last ten or so households basically sold the village to a trash company for use as a dumping ground and moved to the nearest regional city (the built-up urban area of the village itself is not nature in any case). In the case of Yubari it's a bankruptcy, tax hikes and severe cutting down on services and public jobs - mostly the only jobs that were available. This will of course push all the more people to move somewhere else.
I rad the articles on Detroit as well, and my first reaction is that this may be how it is playing out for larger cities. A much slower, ponderous collapse, played out not over fifteen years as in the case of Yubari, but perhaps fifty. And with the quirk, because of the slow speed, that it's not so much the elderly that move last, but the poor. Again, in the end, any place needs a reason to exist. And if Detroit can't find another reason than being a car factory town - and can't find a reason that actually competes with other places having he same reason - then it will probably gradually collapse as well.
Spending millions to maintain adandoned houses. How stupid can you be? Demolish the damn things, tear out the utilities, and either sell the surplus land to the neighbors, or let it go.
Robert Heinlein: If at first you don't succeed try, try again. Then give up. No sense in making fool of yourself.
Actually, that's W.C. Fields, not Heinlein: "If at first you don't succeed, try, try again. Then quit. There's no use being a damned fool about it."
I was in Windsor Ontario a few months back and their property values have tanked. The Hiram Walker building looked nearly abandoned, during the day the Ford and Chevrolet/GMC plant parking lots had maybe a hundred cars in them, and the Chrysler van plant, while a little more filled was still at least 2/3 empty. The only "rocking" industry was the casino, which because of the new passport requirements, is now in jeopardy as well. Unemployment is ridiculous.
A 5 bedroom brick house in one of the papres, just over five years old was 135,000 if I remember correctly.
It is a frightening place to be these days.
"I've lived over three quarters of my life in either Detroit or Cleveland."
I knew there was something oddly familiar about your tone, in a biting-wind-off-Lake-Erie kind of way, Orac..... shoulda known it to be the product of formative years spent resisting oxidation in the Rust Belt.....
We lived in the Buffalo suburbs for a dozen years. While wide swaths of the city were near abandonment, most of it struggled through with a stiff upper lip. But that was only after the steel mills in Lackawana south of Buffalo had been shuttered and laid off something like 30,000 workers. Today it's probably even more dire as the Buffalo area still hosted some major auto plants at least 10 years ago. But the place still has some lovely old homes unlike anything being built today and which, if built today, would cost three times as much.It's truly sad to see the old manufacturing centers in the Great Lakes go down hill so.
Amy Alkon -
The auto industry and health of Detroit are tied to the economic health of our nation.
I don't know if I would put it that far, but it certainly has tanked the economy in Michigan. I moved out here to Portland, OR, about two years ago, when my son's mom decided we should. I decided not to argue against, because, in spite of being within a year or two of home ownership there (Portland making that a much harder goal), I didn't like the long term prospects.
I had a reasonable job, as a roofer - also looking into a partnership with my landlord (whom I also worked for). What was indicative to me (at least at first), was that when I started working for the roofing company, about 20% of our work was high-end, specialty order roofs. We had the majority of the market in Lansing, buying 85% and 93% of the specialty order shingles from the two major roofing suppliers in Lansing. Five years later, we we're buying 100% from one and 98% from the other - while the high-end roofs were only making up about 4% of our business.
On top of that, one of our biggest clients, a multi-national builder, based in Lansing, had reduced their consturction in MI by over 95%. Two contractors we worked for went completly under. Were it not for the fact that we were one of the top 3 rated roofing companies, we would likely have sunk too. As it is, we went from running six to seven crews at the height of the season, my first year, to two and for a couple fo jobs three, my last year. Two years later, they have run only one crew - though part of that is due to losing me, as I was coordinating and running all crews we had going, by the end of my time with them.
Also, I have heard that a condo project we worked on, the last two years I was there, has tanked big time. They put up 23 units, before going under - the project called for 80 units all told. So they have a street that winds through a houseless neighborhood. Less than a dozen of the condos that were actually built were sold, the rest just sit empty. The service contract for the ones that were sold can't be kept up either.
Housing is a big indicator of the economy. I probably would have been fine if I had stayed, but it's rapidly becoming a place that one just shouldn't try to raise kids. And being in a business that relies on the housing market, it was clear that I wouldn't ever make the sort of income that I would like, even with the cost of living adjusted.