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Detroit Real Estate Industry is Hitting Rock Bottom |
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Written by Administrator
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Wednesday, 21 March 2007 |
As Detroit reels from job losses in the U.S. auto industry, the depressed city has emerged as a boomtown in one area "foreclosed properties." 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.
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. 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.
Realtor Stanley Wegrzynowicz, who attended the auction, said, "These people are investors and they know the difficulty of finding financing. They know the difficulty of finding good tenants. They're cautious."
The housing boom that swept much of the country in recent years has missed out on the city. Detroit, which has lost more than half its population in the past 30 years and struggled with rising crime, failing schools and other social problems. Prices have gained less than 2 percent per year in the five years since 2001, when the auto industry entered a renewed slump.
According to tracking service RealtyTrac, Detroit, where unemployment runs near 14 percent and a third of the population lives in poverty, leads the nation in new foreclosure filings. The national average price rose almost 6 percent but prices slipped 0.4 percent here, according to a federal study. Michigan was the only state to see home prices fall in 2006. 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.
Last week two condominiums in the city's revitalizing downtown sold for over $1 million each, Mayor Kwame Kilpatrick was greeted with applause when he announced the feat. But investors, including some from out of state, proved far more cautious at Sunday's auction.
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, Dave Webb, principal at Hudson & Marshall said.
By:Jron Magcale
http://realestatepress.org |
