Housing Market Crashes In Detroit
Housing prices continue to plummet in Detroit
Evidence of the recent collapse of the Detroit Real Estate market has never been more evident. Continuing cutbacks in the automotive sector has caused an exodus out of the city. A city that was once a vibrant, and productive piece of the American cultural framework is beginning to fade into the night.
High levels of unemployment and declining sales in the automotive sector are the root cause of the issue. A secondary cause is the trend towards unconventional financing options has exacerbated the issue. The homes that were purchased just a few years ago no longer have the value they did when they were originally purchased for them. With these obviously devastating economic conditions many homes have been foreclosed upon.
Reuters reported that during an auction by Hudson & Marshall of about 300 foreclosed homes in the city of Detroit recently, “the mood was marked more by fear than greed”. (Reuters) Some homes sold for less than a new car would in today’s market.
Many are beginning to wonder weather the financial issues being experienced in Detroit are an early warning of what is to come for the rest of the country.
The mortgage market has made borrowing easier than ever, with sub-prime mortgages, amortization periods of 30, 40 and 50 years as well as zero down payments required to purchase a home. Plummeting prices and rising interest rates are sending shudders of panic through the financing community. Detroit has caused a reason to re-examine the validity of these lending practices.
Consumers continue to demand this type of financing package, so it is not unrealistic that these packages will continue to be offered. However the cost of borrowing is likely to increase. Up front fees and mortgage insurance rates will continue to escalate if measure cannot be made to reduce the impact of a Real Estate marketplace that is in decline.
