The Chicken's From The Uaw Are Coming Home To Roost.....

harry54

7-04-04 10:57 (New York)





(Adds General Motor's headquarters in 12th paragraph.)



By Kathleen M. Howley

April 4 (Bloomberg) -- Todd Alford put his Dearborn, Michigan,

house on the market in February when he left his job as a Ford

Motor Co. marketing executive. He hasn't received any offers.

``The real estate market has plummeted because of auto

industry layoffs and the foreclosures that go with it,' said the

37-year-old Alford, who put a $215,000 price tag on his family's

three-bedroom brick bungalow.

Alford is selling in an area where almost no one is buying.

Metropolitan Detroit led the nation in foreclosures last year as

the auto industry's losses left more than 350,000 people jobless,

giving the state the highest U.S. unemployment rate. While

regulators and lawmakers focus on the crisis in subprime mortgages,

Detroit is evidence that even borrowers with good credit aren't

immune to the risk of default.

The percentage of prime loans in Michigan that were overdue by

at least 90 days was 0.67 percent in the fourth quarter of 2006,

third-highest in the U.S. after Mississippi and Louisiana, states

that are still struggling to recover from Hurricane Katrina,

according to a March 13 report from the Mortgage Bankers

Association. A year ago, the Michigan rate was 0.59 percent.

About 78 percent of Michigan mortgages are prime, given to the

most creditworthy borrowers, just above the 77 percent national

rate, the mortgage trade group in Washington said.

Even homeowners who haven't fallen behind on their mortgage

payments are feeling the pain of foreclosures, said John

Kilpatrick, president of Greenfield Advisors, a Seattle real estate

consulting firm. Living on a block with multiple foreclosures can

result in a 10 percent to 20 percent decrease in property values,

he said. In some cases that can wipe out the equity of homeowners

or leave them owing more on their mortgage than the house is worth.



`Auction Signs'



``If you see a neighborhood with a couple of foreclosures on

the block, a couple of auction signs in the yards, that's going to

be a neighborhood that's stigmatized,' Kilpatrick said. ``The

innocent houses that just happen to be sitting next to those

properties are going to take a hit.'

The challenges facing homeowners in the Detroit area show what

can happen in a market where prices fall and an economy dependent

on a single industry falters, said Ralph Marcus Maupin Jr., a real

estate investor in Highland, Michigan, a Detroit suburb, who runs a

seminar called ``Foreclosure Bootcamp.'

``We've had a tremendous loss of industry and we've seen

people refinance their loans to pull equity out only to see their

house value drop,' Maupin said. ``People have over-borrowed,

they've seen adjustable rates go up, and they can't pay their

mortgage because they've lost their jobs.'



Home Prices



The Detroit median home price fell 5.8 percent in the past

three years, even as prices rose nationwide by 14 percent, data

from the National Association of Realtors show. The median price of

a house in the Detroit metropolitan area was $154,600 in the fourth

quarter, trailing the U.S. median of $219,300, the Chicago-based

trade group said.

``I could have sold this house 10 times over but everyone's

credit is gone to hell in this state,' said Robert Springer, a

carpenter who's trying to sell a property he renovated in

Eastpointe, Michigan, 30 minutes north of Detroit. ``Everyone used

their homes as cash cows when the market was good, taking out home

equity lines of credit, and now no one is paying them back.'

Michigan's unemployment rate was 6.9 percent at the start of

2007, the highest in the U.S., according to the Bureau of Labor

Statistics. ``Motor City,' as Detroit is known for its

concentration of automakers and parts suppliers, has seen the rate

hover near 7 percent since January 2003 as Ford, the second-largest

U.S. automaker, and No. 1 General Motors Corp., headquartered in

downtown Detroit, reduced expenses to compete with Toyota Motor

Corp. and Nissan Motor Co.



Ford Motor



Such statistics are dispiriting to sellers like Alford, a

father of two children, an 11-year-old daughter and a 9-year-old

son. He left Ford, where he worked for nine years, when the

automaker announced it would cut 30 percent of its executives and

offered him a severance package that was a ``good deal,' he said.

Before Alford left his job, he and his wife Paula spent

$25,000 on renovations to their brick house, sure they would recoup

the investment whenever they sold it. They purchased the property

for $200,000 in December 2002 and have a $1,428-per-month mortgage

on it. The house is set on a 130-foot by 40-foot lot accented with

outdoor lighting.

They redid the kitchen with a Jenn-Air refrigerator, a Maytag

gas stove, oak cabinets and granite countertops. The living and

dining rooms have newly restored hardwood floors. Two bedrooms have

new carpets and the third has a hardwood floor. In the finished

basement, there's a media room, a game room and a laundry.



Five-Hour Commute



Now the Alfords are hoping just to break even on the property,

located six miles from Ford's world headquarters in Dearborn. Until

they sell, Todd Alford is commuting five hours by car to his new

job as a marketing executive with Honeywell International Inc. in

St. Charles, Illinois, staying with local relatives during the

week.

A job loss isn't the only cause of a real estate crisis for

prime borrowers, said Maupin, who teaches a class on property

investing at Wayne County Community College. A transfer can mean

trouble, too. A few weeks ago one of his students told Maupin he

had been transferred to California and was worried he won't sell

his suburban Detroit home for enough money to pay off the mortgage.

``Falling prices and foreclosures affect everybody, they're

not discriminating,' said Maupin. ``There's fear in the market

because tomorrow your neighbor could go into foreclosure and there

goes your value. If you need to sell for one reason or another, you

can't.'



Oak Tree



On Wildemere Street in the northwest corner of Detroit, where

properties sell for double the city's median price, Tudor-style

homes with two-car garages line the street. About a quarter of the

houses stand empty, many with signs announcing foreclosures and

pending auctions.

Freddie Mac, the second-largest U.S. mortgage buyer, in

February foreclosed on a brick home on the street, near the private

Detroit Golf Club where Edsel Ford, former head of Ford Motor, once

played. The two-story brick house was purchased in 2005 for

$275,000. Now it stands empty and old Christmas decorations hang

over the front door.

There's an oak tree in the backyard that has a swing hanging

from its thickest bough. Next to the back door is a sign made to

look like a two-foot-high gravestone, with a hand-drawn skull at

the top. It has lettering that says: ``As you are, so once were we.

As we are, so shall you be.' The former owners didn't return

messages left with their lawyer.



Gutted Homes



While foreclosures have only begun to sap the value of

Detroit's more expensive neighborhoods and the suburbs where white-

collar auto executives live, they've already gutted many lower-

income areas, such as the blocks around 30th Street, about two

miles from the city center. Rows of foreclosed houses, many with

plywood-covered windows, stand with both their front and back doors

wide open.

Wells Fargo & Co., the fifth-biggest U.S. bank, owns a 30th

Street house it foreclosed on in October, nine months after its

owner refinanced the property using a subprime mortgage that

adjusts every six months, according to the deed and mortgage

records.

The 1,149-square-foot Victorian, its white clapboards marred

with graffiti, sits on a corner lot. The open back door reveals a

kitchen with bead board wainscoting and a peeling linoleum floor.

Like most of the empty houses on the block, thieves have stripped

it of its pipes, electric fixtures, and anything else of value.



Lending Standards



``It's amazing what people will steal from empty houses,'

said Jon Werner, a real estate investor from Livonia, Michigan, who

buys foreclosed properties, fixes them up and rents them. ``They'll

even take the wiring out of the walls. If you find a foreclosed

house that still has its furnace, that's a big plus.'

Tighter lending standards may slash subprime mortgage sales in

half this year and cut by 25 percent so-called Alt A mortgages lent

to people who have close to a prime rating, estimates Ivy Zelman, a

New York-based analyst at Credit Suisse Group, who covers

homebuilders. The new requirements will force some prospective

homebuyers to save more money for a down payment or pay off some of

their debt before they can secure credit.

That's worrisome to sellers like Alford, who's eager to move

out of Detroit to be closer to family in Illinois.

``A couple of years ago, we would have expected to make money

on the sale of our house,' said Alford, interviewed as he packed

on Sunday afternoon for the drive to Illinois. ``Now, we'll be

happy just cover the mortgage and what we put into it.'