a real problem..car payments

inmytree

this is interesting....

http://news.yahoo.com/s/nm/20070319/ts_nm/usa_subprime_detroit_dc

Houses cheaper than cars in Detroit

By Kevin KrolickiMon Mar 19, 11:48 AM ET

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.

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.

"These people are investors and they know the difficulty of finding financing. They know the difficulty of finding good tenants. They're cautious," said realtor Stanley Wegrzynowicz, who attended the auction.

HOW LOW IS LOW?

The city, which has lost more than half its population in the past 30 years and struggled with rising crime, failing schools and other social problems, largely missed out on the housing boom that swept much of the country in recent years.

Prices have gained less than 2 percent per year in the five years since 2001, when the auto industry entered a renewed slump.

Steve Izairi, 32, who re-financed his own house in suburban Dearborn and sold his restaurant to begin buying rental properties in Detroit two years, was concerned that houses he thought were bargains at $70,000 two years ago were now selling for just $35,000.

At least 16 Detroit houses up for sale on Sunday sold for $30,000 or less.

A boarded-up bungalow on the city's west side brought $1,300. A four-bedroom house near the original Motown recording studio sold for $7,000.

"You can't buy a used car for that," said Izairi. "It's a gamble, and you have to wonder how low it's going to get."

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.

HOW MUCH CAN YOU BUY FOR $1 MILLION?

Mayor Kwame Kilpatrick was greeted with applause when he announced last week that two condominiums in the city's revitalizing downtown sold for over $1 million each.

But investors, including some from out of state, proved far more cautious at Sunday's auction.

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.

Dave Webb, principal at Hudson & Marshall, said 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.

"These people that are buying have got to look at holding on for five to seven years," he said. "The key is holding power."

Even with the steep discounts on Detroit-area properties, some buyers handed over their deposits with a wince.

"I'm not sure it's congratulations," said Kirk Neal, a 55-year-old auto body shop worker who bought a ranch in the suburb of Oak Park for $34,000. "My wife is going to kill me."

Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield Hills that had listed for $525,000 sell for just $130,000 at the auction.

"Once we've seen the last person leave Michigan, then I think we'll be able to say we've seen the bottom," he said.

Dustin51

even flow? wrote:

I fight that battle every day in the conflict of where I work and how they do business. It isn't fair at all. But you should be schooled in how much you bring in before you go and take an investment like a house, where you are going to be tied in for life.

I can say I have never heard of "interest only loan".

Glad to hear you're fighting the good fight. I don't disagree with you either. I mean people need to take some personal responsibility as well.

Here's a great website that explains interest only loans better then I can.

http://www.mtgprofessor.com/Tutorials2/Interest_Only.htm

know1

SPEEDY MCCREADY wrote:

what type of vehicle are you driving now???

and what type of vehicle do you plan on purchasing next????

Because of my outdoor pursuits of camping, kayaking and boating, it's a 6-cylinder Jeep Cherokee. I'd plan on buying something similar in the future.

even flow?

hippiemom wrote:

Nothing wrong with that if you've got the resources (the friend, that is .... there is definitely something wrong with anyone who would buy a Hummer), but to go into debt for a car when you already have a perfectly good car doesn't make sense to me.

Now after a few pages of me preaching against car loans, I will say that for my next car I may be willing to take on a small amount of debt if necessary to buy a hybrid. I'm probably a couple years away from a new car, so I might not have to, but I think I could justify that to myself if I were saving money on gas and being more environmentally responsible.

Make sure it is American built!

know1

Pacomc79 wrote:

how are you investing that? Hi yield savings account? Money Market?

Right now, it's just in my savings account, but I should probably put it into something that will earn a bit better interest rate.

even flow?

Dustin51 wrote:

Glad to hear you're fighting the good fight. I don't disagree with you either. I mean people need to take some personal responsibility as well.

Here's a great website that explains interest only loans better then I can.

http://www.mtgprofessor.com/Tutorials2/Interest_Only.htm

Thanks for the link. Who in the world would just pay back interest and leave the pricipal at where you started. It is nice to say you are owning a home. But you want to see the bottom line go down year after year. Not just stay there.

know1

fanch75 wrote:

You drop $25k or more in a brand new car (principal & interest) over five years, and at the end of that five years, it's worthless.

If you put $25k somewhere else over a five year period....now you're talking!

And people wonder why they never have any money.

Exactly. At the end of the five years, I have plenty to pay cash for a car and I can keep the interest I made over that time.

callen

know1 wrote:

I agree. You should only buy used cars and you should only pay in cash.

Whether you can afford it or not, the gigantic hit that you take in depreciation almost immediately just makes very poor financial sense to truly consider buying a new vehicle.

(Just watch as I get bashed for these opinions.)

all depends on what you buy.....buy a ford GM hyndai big SUV and yea you'll loose your shirt...but a Honda ....toyota....and your good to go. I, finally for the first time, bought a new car about a year ago.....and its worth as much now as the day I bought it....well 95% and it gets 30 MPG.......and freakin blast to drive.....Mini Cooper.

josevolution

inmytree wrote:

good point...

a couple of weeks ago, we went for a walk around the neighborhood. There is a laundromat close by. Parked out front was a HUGE Ford Expedition, with the 22 inch aftermarket rims, pimped out...the owners where inside doing their laundry...I guess those rims were more important than a washer and dryer in their home...

they probably don't own a home most likely pay rent but i do agree with your premise people would rather drive around in a 60thousand $ car then to pay a mortgage.......

nick1977

I find it odd in areas where trailers (or manufactured homes as they are popularly known around here) are the preferred method of housing, the same people have brand knew $30,000 to $40,000 pick-up trucks or Yukons sitting in their drive.

callen

nick1977 wrote:

I find it odd in areas where trailers (or manufactured homes as they are popularly known around here) are the preferred method of housing, the same people have brand knew $30,000 to $40,000 pick-up trucks or Yukons sitting in their drive.

whats really right and whats wrong....everyone has different priorities....if you want to drive an expensive car...worth more than your house....go for it. I wouldn't do it.....but more power to them. Just hope the kiddies are being fed.

Abuskedti

gue_barium wrote:

You gave your son a car? That doesn't sound like the educational thing to do.

He pays the insurance.. drives it to work - drives it to college.. there are educational opportunities everywhere...

Abuskedti

callen wrote:

all depends on what you buy.....buy a ford GM hyndai big SUV and yea you'll loose your shirt...but a Honda ....toyota....and your good to go. I, finally for the first time, bought a new car about a year ago.....and its worth as much now as the day I bought it....well 95% and it gets 30 MPG.......and freakin blast to drive.....Mini Cooper.

Yup, I'm currently driving a lovely Honda Accord.. very reliable - holds its value well and has relatively low emissions...

Abuskedti

hippiemom wrote:

Who are these Joneses anyway, and why does anyone care what they do? Honestly, I'm sitting here trying to think what any of my neighbors drive, and I can't. I know they have cars, and I know I see them every day, but who pays attention to such things?

I start to notice other people's cars when I'm in the market for a new car and thinking about what I might like. The rest of the time, they're just vehicles buzzing by.

Oh, and I notice when I see really silly looking 50ish men in bright red sports cars. That's just funny

Hey! When my children are finally totally independant - I will buy a sports car! I'll be old - but I like the small manuverable car - with power.. don't laugh at me Hippie

I'll probably keep my Accord for long trips and get me a cool Mini Cooper - or a VW GTI or maybe one of them cool little Honda convertables to drive everyday.

MrBrian

LikeAnOcean wrote:

How much sense does it make to buy something that only seconds later looses thousands in value? Tell me?

You're better off buying a $500 beater and running it into the ground every few months.

$500 cars probably are not very safe. I get hit by a hummer while in a beater car? i'd probably be stuck in the ground after that.

like in anything, if you have the money to buy something better, go for it. I but dislike the people who buy Ferrari cars yet only drive to starbucks. or the people who buy $200 BOSS shirts yet only wear it for a season or 2. waste is a bad thing.

hippiemom

Abuskedti wrote:

Hey! When my children are finally totally independant - I will buy a sports car! I'll be old - but I like the small manuverable car - with power.. don't laugh at me Hippie

I'll probably keep my Accord for long trips and get me a cool Mini Cooper - or a VW GTI or maybe one of them cool little Honda convertables to drive everyday.

A Mini Cooper or VW I could handle. The Honda would even be ok, I think. Just don't get anything like a Corvette that's on obvious penile replacement, and for the love of god, stay away from fire-engine red ... then I promise not to laugh

Sludge Factory

New car payments can be expensive all by themselves, but don't forget about the insurance payments. Insurance for new cars now is astronomical, and if you are a guy you take more than just one shot to the nuts for it no matter how good your driving record is.

Abuskedti

hippiemom wrote:

A Mini Cooper or VW I could handle. The Honda would even be ok, I think. Just don't get anything like a Corvette that's on obvious penile replacement, and for the love of god, stay away from fire-engine red ... then I promise not to laugh

Deal!

hsewif

josevolution wrote:

they probably don't own a home most likely pay rent but i do agree with your premise people would rather drive around in a 60thousand $ car then to pay a mortgage.......

way to jump to conclusions!

a person can own a home AND a washer and dryer and STILL go to the laudromat. Stuffing huge comforters in a home washer is not a good idea and laundry still needs to be done if something at home breaks.

as long as someone has a job and can pay their bills on time...and isn't getting public assistance... I don't care how they spend the money they earn.

Abuskedti

Sludge Factory wrote:

New car payments can be expensive all by themselves, but don't forget about the insurance payments. Insurance for new cars now is astronomical, and if you are a guy you take more than just one shot to the nuts for it no matter how good your driving record is.

Thats true... I didn't get full coverage when I paid cash. But I am old now and my insurance isn't too bad - and I have teenagers that occationally drive my car - so I don't mind too much..

but overall Insurance is the biggest rip-off in the world of owning a car.