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.
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.
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.