A handful of non-number-based stories about foreclosures have popped up lately that I thought might be interesting to highlight here for discussion.
First up, Diana Olick with CNBC: Vacant Homes Will Drown Housing Recovery
A real estate source I knew recently told me about a guy he knows in Atlanta who has been hired by several different banks to winterize their REO’s (real estate owned, i.e. the bank-owned foreclosures).
The homes are abandoned and empty, and clearly the banks think they’re going to stay that way for a while.
The winterizer didn’t want to do an interview, for fear he would lose his clients, the banks, who might not want us all to know about this.
Interestingly, I had actually heard that exact story through the offline grapevine before reading this article. It’s not hard to see why banks might already be shuttering thousands of homes for the winter, at least in Atlanta.
Take a look at any recent Case-Shiller release for Atlanta, and you’ll see that low tier home prices have dropped like a rock in recent months. I’m not talking about three or four percent a month. Try seven to ten percent per month drops—in five of the last nine months.
Or just go do a search for Atlanta foreclosures on Redfin. Just within the city limits right now there are over five hundred foreclosures active on the market (with nearly half priced under $50k), and another four hundred or so unlisted.
And Atlanta’s not even the worst market. Obviously Phoenix and Las Vegas are bad, but even Baltimore, just a short drive from the gravity-defying DC market has over a thousand unlisted bank owned homes. Yikes.
Article number two by Daniel Indiviglio at The Atlantic touches a similar theme: Are Ugly Houses Preventing a Home Market Recovery?
Maybe Americans aren’t avoiding buying homes right now — maybe they’re just avoiding buying ugly homes. The housing market may be splitting into two sub-sectors: well-kept, good-looking homes and run-down, torn-up homes. Could the latter group be preventing the housing market from stabilizing?
The disparity between these two groups of homes matters, because Lichtenstein has seen prices of the good properties remain relatively strong recently, as prices of worse properties have declined. This means that it’s those run-down, dilapidated foreclosed homes and short sales that will disproportionally bring down aggregate home prices, while well-kept homes should see much smaller price declines, or even appreciation.
It seems like we’ve been hearing these claims a lot lately, that non-distressed homes are somehow immune to the effects of foreclosure sales. Obviously non-distressed homes won’t sell at as much of a discount as foreclosures, but I think it’s rather naïve to think that there really exists two completely separate, distinct housing markets.
Finally, here’s a piece from Rasmussen. According to their latest survey, 62% Say Troubled Homeowners Should Buy Cheaper Houses
The federal government Friday extended its deadline to apply to the Emergency Homeowners Loan Program, but most Americans believe troubled homeowners should sell their homes rather than receive government assistance to keep them.
The latest Rasmussen Reports national telephone survey of American Adults shows that 62% believe it’s better for homeowners who can’t afford to make increased mortgage payments to sell their homes and find less expensive ones. Twenty-five percent (25%) think it’s better for the government to assist those homeowners in making their payments. Thirteen percent (13%) are undecided.
These results have changed little in surveys since late 2007.
And yet, the government continues to come up with new programs designed to keep people in homes that they fundamentally cannot afford (and in many cases never could).
It’s a problem of perspective. Foreclosures are not the problem. Foreclosures are the solution.