phil43 0 Report post Posted October 8, 2007 House hunters find "buyer's paradise" in Detroit By Nick Carey Sun Oct 7, 3:50 PM ET DEARBORN, Michigan (Reuters) - Robert Neal is in heaven. "This is not a buyer's market, this is a buyer's paradise," said the 37-year-old former auto worker as he waited for a foreclosure auction to start in this Detroit suburb. Wearing dark glasses, a black baseball cap and a chunky silver necklace, Neal was a sprayer for 12 years at Chrysler LLC until June - when it was still owned by DaimlerChrysler AG - when he took a buyout offer to leave the company. He wouldn't disclose the size of his buyout -- offers for someone with his experience were typically around $100,000 -- but came here to buy one or two houses to rent out to working families. Neal wants family homes with a market value of up to $90,000 and will pay up to $15,000 for them. "If the price is right, I'm buying," he said. "When the market rebounds, I'll probably sell them." This is where economic misery meets business opportunity, as investors look to snap up properties for a fraction of their value while the housing market is in a slump. The auction room in Dearborn is full of people seeking bargains. This depressed city had five times the national foreclosure rate for a U.S. city in August - behind only the three California towns of Modesto, Stockton and Merced. "This city has been hit by the slowing economy, the housing slowdown and the fact that lenders are being much more cautious with new loans," Dave Webb, a principal at Dallas-based auction firm Hudson & Marshall, which organized this recent auction of 700 Detroit area homes, said. "But you also have the problems of the God-danged auto industry, which just makes things worse." Detroit and Michigan were further hit recently by budget wrangling that came close to shutting the state government and by a two-day strike by United Auto Workers union against top U.S. automaker General Motors Corp.. "Detroit is just unlucky," Webb said. The recent auction here was in a Ford Motor Co convention center. Buyers had to pay a non-refundable $3,000 cash deposit and, in a sign of the times, Hudson & Marshall repeatedly cautioned prospective buyers they should have their loans cleared with lenders in advance. The auction included smaller family homes as well as large houses in once posh neighborhoods, such as a 3,500 sq ft (325 sq metre) building in the city's Indian Village. Many homes in the neighborhood were designed by prominent 20th century architects for the auto barons. In a leafy area a few miles from the center of Detroit, this 1920s mansion would be worth many hundreds of thousands of dollars. At the auction, it sold for just $116,000. WAITING FOR THE REBOUND Nigerian-born Robert Festus came here looking to buy homes to rent out in upscale suburbs of Detroit. "The homes I am looking at should be worth up to $300,000, but I'm going to steal them for around $100,000," he said. Like Neal, Festus said he plans to wait for the market to pick up before reselling his properties. Detroit has lost more than half its population in the past 30 years and has been hurt by rising crime - according to 2006 Federal Bureau of Investigation statistics it had the third highest violent crime rate in U.S cities with more than 100,000 inhabitants - failing schools and other social ills. At 7.4 percent Michigan had the country's worst unemployment rate in August. In Detroit, unemployment runs near 14 percent and a third of the population lives in poverty. Given the decades of decline here, some might question whether a rebound will ever happen here. "The Detroit area will bounce back. It has to," said Joe Tuttle, 28, who works in medical sales. He and girlfriend, Carla Kumrow, 26, a buyer at an automotive supplier, want a home to live in, a rarity at this auction. They want a specific home in the well-heeled suburb of Birmingham with a market value of around $300,000. Willing to pay $200,000, they are outbid at $216,000. Hudson & Marshall's Webb also says the area will recover. "Michigan will need to diversify its economy more, which takes time," he said. "If investors are willing to hold their properties for a long time, their investments will pay off." "I am becoming more optimistic about Michigan's medium-term economic prospects given that GM and the UAW have agreed on a new contract and a state budget accord has been reached," Comerica Bank Chief Economist Dana Johnson wrote in a recent note. "However, in the near term, the local economy is likely to remain pretty stagnant." While the market is down, property auctions in the Detroit area are the stomping ground of people like Pat Karbon, 28, and Dave Ehrlichman, 27, who buy small family homes valued at around $80,000 to $90,000 for up to $15,000 then "flip" them - sell them quickly on the market for around $40,000. "In five years of doing this I've never seen prices so good," Ehrlichman said waiting to bid on a house. Email Story Share this post Link to post Share on other sites
MichaelC 160 Report post Posted October 8, 2007 Interesting spin, but that isn't investing. That's speculating. And gambling on an economic rebound in Detroit is really a toss of the dice. Share this post Link to post Share on other sites
West Coast Girl 1 Report post Posted October 9, 2007 Interesting spin, but that isn't investing. That's speculating. And gambling on an economic rebound in Detroit is really a toss of the dice. ABSOLUTELY AGREE with MC! I read that story on Yahoo's news on Sunday and was shaking my head when I read it! Actually, I read it twice to make sure what I read was what he was doing! UNBELIEVABLE, especially what's going on in that marketplace!!!!!!! WOW! I know a ton of investors in that area that are struggling themselves -- folks that have a few exit strategies and are having troubles! I think he needs a life preserver like MC's manual! Because without that, he's surely going to drown! Share this post Link to post Share on other sites
phil43 0 Report post Posted October 9, 2007 I agree with both of you! This would be only good for someone who has money and patience to "buy and hold". Phil Share this post Link to post Share on other sites
MichaelC 160 Report post Posted October 9, 2007 I agree with both of you! This would be only good for someone who has money and patience to "buy and hold". PhilEven buying and holding would make me nervous in that market. The assumption we make with buy and hold is that the market will eventually appreciate. With Detroit, when is that going to happen? Will it happen? I read an article a few weeks back where the author wrote, tongue in cheek I imagine, that Detroit homeowners who bought 20 years ago are still waiting for appreciation to kick in. Share this post Link to post Share on other sites
swm8675309 0 Report post Posted October 13, 2007 Interesting spin, but that isn't investing. That's speculating. And gambling on an economic rebound in Detroit is really a toss of the dice. There is really no dice to toss. Until the Big Three start making cars people want to buy, the economy is going to stay in the dumps in my state of Michigan. Share this post Link to post Share on other sites
MichaelC 160 Report post Posted October 13, 2007 Interesting spin, but that isn't investing. That's speculating. And gambling on an economic rebound in Detroit is really a toss of the dice. There is really no dice to toss. Until the Big Three start making cars people want to buy, the economy is going to stay in the dumps in my state of Michigan.I was trying to be optimistic, but I have to agree. Share this post Link to post Share on other sites
