Almost 700 homes in foreclosure will be auctioned off in Detroit later this month. Most of the buyers will probably be investors who have no intention of ever moving in.
The homes will go for rock bottom prices, so the auction is likely to further depress prices in the neighborhoods where the properties are located.
For some sections of the country, that is where the real estate death spiral begins. One set of foreclosures pushes down prices making it harder to sell homes in the same region. The next set of home owners who want out find they they cannot afford to part with their homes, and they go into foreclosure.
All of this is an indication that the mortgage problems are in their earliest stages and could last for several quarters. When defaults and subsequent sales where fairly isolated the panic of seeing hundred of homes on the block over a two day period had not set in.
That is over now.
Douglas A. McIntyre
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