Help with research paper...Why Michigan is struggling so much. (Detroit: mortgage, loans)

[pistonsfan70]

I just found this board while browsing the internet on topics about why Michigan is struggling so much and I've decided to focus on the auto-industry, the government and the housing market.

I've read many, many opinions on here and would love to incorporate them into my paper but I need references, so any help would be great. I do not follow politics as well as I should but any help on where most of you get your sources from so I can browse there would be of great help.


Thanks

[burgler09]

Ok where to start.... ahhhh Well put it this way, with the auto industry basically you have GM employing most of Flint and Detroit. Everybody relied on these jobs and they pretty much fueled the city, not only could the workers have money to spend on themselvers, they spent money at the store, furniture, carpet, etc.... which fueled the rest of the economy. When the auto jobs went away in these cities due to the companies making much more profit in mexico and china the workers coudl not afford to buy new goods for themselves which hurt all of the neighboring businesses. Not only did the workers themselves get hurt but all of the other businesses were effected which just caused a downward spiral.

The housing isn't a Michigan problem, this is a nationwide problem, and is really being seen in southern florida and california. The problem with the housing market right now has to do with the banks. For the last few years the banks have been giving loans out to about everyone, on a variable interest rate, well now you see these people start paying their loans and then their interest rate goes up and suddenly they can't afford the house anymore and they now have to get rid of it. Eventually the housing market will even itsself back out and the prices of houses will go back up and it will turn into a sellers market. Everything with the American economy is based on waves and just getting through the high and low times.

[Sparrow_temp]

I'm not sure how much the housing crisis has to do with the variable interest rates. How much have interest rates fluctuated? In Michigan it may have to do more with people losing high paying jobs and either being unemployed or underemployed. In some other parts of the country -- it was because people were speculating on the housing market and buying more than 1 house and selling it a short time later for obscene profits. This practice came to and end when new buyers disappeared and housing values went down rather than up.

Some people also got caught in the trap of buying too much house for their income to support with the thought that it would be appreciating in value and the capital gains woud offset the premium they were paying. When they discovered that the house was now worth less -- the scheme backfired. They were trapped and any interest rate increase could lead to foreclosure.

I look at housing prices in some areas of the country versus average incomes and wonder how the people can afford to live there. It appears that they really can't and prices could/should fall a lot more.

[Dr.Jim]

Sparrow - NOT variable interest rates like you are thinking.
It is referring to the sub-prime market making ARM loans to people.
ARM loans adjust from a low interest rate, to a prime or prime + rate after a set # of years.
So alot of people bought more house than they should, using the initial low interest rate of the ARM to get in,...and then later in 3-5 years when the loan reset, they could not afford the new, much higher payment.

That is what is the main underlying factor of the foreclosure/housing crisis we face.
Local situations, and different markets will have other factors ofcourse, but as a general primary cause, the above is it.

[pistonsfan70]

Thanks for the help but a resource link on all of your statements would be great. I would love to put "Dr. Jim" in my works cited page, but I don't think my professor would be too happy lol.

But I do appreciate the help.

[deslok]

Agreed, a lot of people bought too much house then they were able to afford. It isn't the big bad banks fault for giving out loans, it is the people that took the loans to begin with not planning for the future correctly. There are plenty of articles out there now about how the Detroit economy is being positively impacted by the Tigers, and events like wrestlemania/the superbowl. It seems like though one step forward with those, one giant step back with the likes of Kwame, or Granholm.
For fun, check out other newspapers forums, like the Battle Creek Enquirer. You will see the problem is really in a lot of the residents thinking. Too many folks in MIchigan instead of fighting for a job at this time, just feel they should be entitled to anything they want. ( a house, a car, a job)
http://http://www.opinionjournal.com.../?id=110009763

[deslok]

That other link will work if you type it out. This one should be fine. If not, I'm sorry. This is completely unbiased here and is data compiled. Read it over and make your own determination as to what is the problem with Michigan. This covers a lot of ground.
http://www.senate.michigan.gov/sfa/P...tlookMay07.pdf

[whitechocolate86]

Originally Posted by burgler09

Ok where to start.... ahhhh Well put it this way, with the auto industry basically you have GM employing most of Flint and Detroit. Everybody relied on these jobs and they pretty much fueled the city, not only could the workers have money to spend on themselvers, they spent money at the store, furniture, carpet, etc.... which fueled the rest of the economy. When the auto jobs went away in these cities due to the companies making much more profit in mexico and china the workers coudl not afford to buy new goods for themselves which hurt all of the neighboring businesses. Not only did the workers themselves get hurt but all of the other businesses were effected which just caused a downward spiral.

The housing isn't a Michigan problem, this is a nationwide problem, and is really being seen in southern florida and california. The problem with the housing market right now has to do with the banks. For the last few years the banks have been giving loans out to about everyone, on a variable interest rate, well now you see these people start paying their loans and then their interest rate goes up and suddenly they can't afford the house anymore and they now have to get rid of it. Eventually the housing market will even itsself back out and the prices of houses will go back up and it will turn into a sellers market. Everything with the American economy is based on waves and just getting through the high and low times.

Are you not supposed to drive a GM Vehicle if you live in the Detroit-Flint area because of the damage that company did to the economies of both towns?

[Bluefly]

Look at China today - there are entire large cities that build one thing, such as telephones, just like Detroit built one thing - autos - when industrialism was here.

Now it's gone. People want it back because they don't understand that capitalism seeks the lowest point, just like water. It's not coming back. Those Chinese cities will be in the same predicament if they remain committed to one industry when industrialism becomes too expensive there.

[Sparrow_temp]

It's the individual's fault for getting suckered into these ARM's but the banks were really pushing people to take them. When I told them I wanted a traditional fixed rate mortgage 4 years ago it was like I insulted their kid or something.... It may have actually been the better route for me since I'm serously looking at selling and getting out of MI. Part of the sales pitch was that it was always expected that your income would be going up as would your property value so the message was to buy as much house as you could get financing for. This would enable you to make more money if you sold and you'd be able to afford higher payments later when your income went up. Sounded logical -- but incomes and housing values don't always go up.

Originally Posted by deslok

Agreed, a lot of people bought too much house then they were able to afford. It isn't the big bad banks fault for giving out loans, it is the people that took the loans to begin with not planning for the future correctly.