Modern Day Ghost Towns of Abandoned Real Estate
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It may have seemed inevitable given the mortgage meltdown, but it is still shocking when you drive through a neighborhood that seems to be entirely filled with ‘For Sale’ signs. The cities here aren’t entirely deserted, of course, but they are examples of the cities that have been hit hard enough to lead residents to abandon their homes.
Detroit
Detroit’s economy has been hit hard in the last six months, with the Big Three automotive producing companies on the brink of bankruptcy and failure, and in need of government assistance. Due to the manufacturing industry, many experts estimate that the unemployment rate of the Detroit metropolitan area is at a generation-high 21%. Not surprising when 14% of automotive industry workers have been laid off in the last year. As a result of this highly localized recession, there are over twelve thousand abandoned homes in the Detroit area.
Riverside County, California
The last two decades have seen a surge of growth for the Inland Empire (better known as Riverside County), which had a population of 2.6 million in 1990; in 2007, the population was estimated to be 4.1 million. This massive eastern exodus from the more urban Los Angeles and the high prices of Orange County had a number of implications for the region. First of all, the move eastward drove up the demand and development of housing in the area, which steadily increased throughout the past decade. Secondly, these houses were purchased by many people who wanted to buy bigger homes for the buck than they could get in LA and the OC, which of course led to an increase in speculative building and investing. It is estimated that in 2005, only 15% of area homeowners could actually afford their houses, with the remaining 85% living beyond their means or in adjustable rate mortgages that had not yet adjusted. The latter, once adjusted, would then prove to be unaffordable.
It is also important to note that this area was a known hub for building up Southern California’s rapid suburban sprawl – not only was this one of the state’s regions with the most expansion, but it was also an area that furnished many of the construction companies with cheap labor that made surrounding communities’ growth possible. By August of 2008 alone, the foreclosure rate for the county was over 4,700 houses, up over 174% from August 2007. By the end of 2008, the median price of a home in Riverside county dropped to $220k, the first time it had dipped under $300k since the 1990s. In some Riverside County neighborhoods, as many as 20% of all homes are have been foreclosed and now sit vacant.
Stockton, California
Currently, 90% of all sales in the greater Stockton region are either foreclosures or short sales. The median house price dropped to $237K by December 08, the lowest it has been since February 2003. It is estimated that housing prices in former boom markets are more than 40% off what they had been leading up to 2007.
Las Vegas
Las Vegas and its surrounding suburbs are home to the nation’s third highest foreclosure rate for a metropolitan area, with 1 in 44 at some stage of foreclosure. By end the end of 2008, median housing prices deflated by $20,000 to the lowest since 2005. Housing inventory would also skyrocket to 30,000 in Q3 2008, with the pace of housing sales having declined 34% from the year prior. This volume is equal to 14-16 months of inventory of homes for sale, well above the national average of six to seven months.
Just over a year ago, the Greater Las Vegas Board of Realtors calculated that 45% of the 22,000 single-family houses for sale at the time were actually vacant. Most all of these were houses abandoned by new area residents, or investment properties by the area’s thousands of speculators who were drawn to the region because of its recent track record of housing price increases. Squatters are increasingly seen occupying the abandoned properties.
North Los Angeles County, California
With the vision of urban sprawl connecting Los Angeles to Bakersfield and the plans for a train connecting the two, builders began winding through the hills to the north from LA. Today, in Antelope Valley, for example, it is not unusual for long-term rental property owners to have to deal with tenants who recently lost their own home to foreclosure and are having difficulty getting back on their feet. In some cases, tenants do everything from the typical stripping of copper wire to be sold to the more bizarre use of cabinets for firewood. Abandoned investment properties are on the rise.
Miami, Florida
Miami-Dade and neighboring Broward counties have experienced an extremely high rate of foreclosures over the past two years. It is estimated that 143,000 homes were voluntarily given back to the bank, or foreclosed upon. In Miami-Dade County alone, there are currently 38,000 new condos that are recently completed, or near-completed that are vacant and show no prospects of immediate sale. The MLS for the country shows over 25,000 condos for sale in the county, which equate to a 4.5 year inventory. This of course, does not include unfinished units.
Many experts suggest that the housing market in Miami will witness a further devaluation in 2009 of over 20% of the median housing price. The biggest reason for this is arguably the over-development of medium and high-end condo constructions in the area, many of which are second or vacation homes. It is an extreme case of the common sense knowledge that second homes and investment properties are the most likely to be abandoned in favor of the owners’ primary residence when times get tight.
Phoenix, Arizona
Arizona ranks 48th in New Job Creation. Developers spread to the west to Phoenix and as far out as Buckeye and foreclosures are currently at a record high, which has resulted in plummeting housing prices. This is a hard pill to swallow for many recent first-time buyers, who are witnessing a sharp increase in their monthly mortgage payments, against the background of a house with a drastically decreasing value.
Of the 6,150 houses sold in the Phoenix metropolitan area in September 2008, an astounding 78% of these were vacant when sold. There are currently 55,000 homes for sale in Phoenix, of which 40% have been abandoned and are presently vacant. Most of these are currently bank-owned properties and are being sold at liquidated prices. According to area investor and resident, Donna Butera, this massive departure and house abandonment in Phoenix has had other implications in the community. Understandably, home owners are deciding to walk from their mortgages if the home they just agreed to buy for $350,000 is now only worth $270,000. As a result of the frustration, homeowners are removing everything they can from the homes before they abandon them, selling appliances, cupboards and virtually everything else, including the kitchen sink. As a result, it is not unusual to drive down a street in what was once a nicer suburban neighborhood in Phoenix and now see a majority of windowless abandoned homes.
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33 Comments so far
leave a commentnice article… hard to believe that there are sooo many place in and around America that are looking like modern day ghost towns.. it’s sad but yet at the same time that is what happens when you involve greed and the mighty dollar (just my opinion)
A part of me believes that we have only begun to see the fall out from the national lending crisis. With the financial markets going down the tubes and bank owned properties affecting housing prices; the condition can only worsen before it gets better. The bank owned properties have to be absorbed in my opinion before a normal real estate market returns.
Detroit should use this time (if they had money) to tear down those abandoned areas, especially those outside of the city. It makes no sense to let them linger if not used and not planned to be used, although environmental concerns might be a huge issue…
Very Sad
You need to blame this on the banks and not the goverment. The banks gave people loans that they new could not afford it, that drove the price up and that made all other houses too expensive.
Unfortunately the banks were forced by Our illustrious legislators to offer marginal loans. The banks are not Completely to blame
I disagree – It was the government that made it legal for banks to give loans to people that didn’t/shouldn’t qualify. One word – Acorn.
The sad thing is if you cut the price of a home in California by 50% it’s just getting to the place were it should have been all along. We saw 20%+ yearly increases in home values for many years. Who really thought that could keep going forever.
One small correction. “Abandoned” is the wrong choice of word. “Thrown out” is a better selection.
With interest rates well in excess of 100% go figure.
My local bank has a 30 year fixed ARR of 6.7% after crunching 30 years of payments that is an ACTUAL interest rate of 116% that means if you bought a $200,000 home it would actually cost you $432,000 at the end of 30 years. And we wonder why this is all so FUBAR’d
Where do they get off charging interest of 116% with ZERO risk to themselves (self inflicted risk does not count) ?
They CONJUR the money into existence out of thin air (literally) ie they are leveraging NONE of there own money.
They can take the home back if you default and the home is covered by mandatory insurance that if you let lapse they will PLACE on the home and charge you for anyway.
So where is the “risk” to the bank to justify 116% interest
I can not think of ANY RISK ON EARTH that would justify charging 116% interest !!
These ghost towns a triumph of the bankers.
It’s ingenious how through pure usury, they can end up owning real estate. In other countries, they have taken possession of vital water utilities and such.
Ghost towns, wars, devalued currency and poverty are the inevitable results of central banking and fiat currencies.
It’s clear that the third central bank of the USA has been no more successful than the first two were. All three have been unconstitutional. We need to rid ourselves of the scourge of the privately-owned franchise known as the Federal Reserve, which is neither Federal, nor does it contain any reserves.
Very sad sight.
A lot of this nonsense is still preventable. Make the homeowner responsible for damages and push banks to assume a more active role in the foreclosure process. If 20% of the homes are vacant in a neighborhood, I’m guessing the banks were unwilling to negotiate rates and owners simply shrugged their responsibility in most cases. For the true hardship cases, a tennant paying half is better than a vacant asset. Banks are also too reliant on FICO scores and outrageous fees to make money instead of acting like a community business partner.
* There are 19 million vacant homes in the U.S.
* 1 in 10 homes are in default or foreclosure.
* This so-called “stimulus” bill just passed will spend about $290,000 per job, to save or create 3 million jobs – but most of the jobs saved or created will be government jobs.
* California’s state budget doubled over the past 10 years though California’s population only grew by 10 percent in the same time. Rather than cut down on bloat, the state has continued deficit spending fueled by greedy politicians and stupid voters who keep voting for bond measures to publicly fund things like $4 billion for stem cell research.
* Faced with a $40 billion budget short fall – California’s state government, rather than lay off workers, has now decided to raise sales tax another percentage or two, and raise income tax another 2 to 5 percent, and raise the tax on gas by some 12 cents more per gallon.
* California spends $40,000 per year to keep one inmate in prison. Florida spends $20,000 per year per inmate. Even the Federal government only spends $26,000 per year per inmate. California’s prison guards make $90,000 per year on average. In other states, prison guards may make $36,000 on average.
The more you know, the more you get disgusted.
I hope that people look at their neighborhoods as a whole, get to know their neighbors, throw house payment parties, start growing food together, have potlucks and block parties…We can go down alone or learn to float together!
LizM
Hyperlocavore – A Yardsharing Community
Because everyone loves a homegrown tomato!
This is the same news recycled but its always nice to hear whats going on in the ground.
I think one item that is missing from the analysis is how the lack of immigration (particularly illegal immigration) has contributed to the downturn in our economy.
Since we dont have so many ‘new’ people showing up ready to rent a apartment or home that has eliminated the “extra” demand for housing especially in Cali, Ariz, and Florida.
Of course without jobs immigrants (including illegal ones) are not going to come to the USA.
Also i have a few friends who could not find work in the USA but found great jobs abroad so that is also contributing to the lack of demand for housing.
Bakersfield is in Kern county, not Los Angeles.
We can thank Barney Frank and Chris Dodd for this mess. Obama, Reid and Pelosi are clueless about how to help yet hell bent on spending our way into Socialism, Depression and Disaster.
Why any sane person would vote for these tax and spend Socialist politicians boggles my mind. Well those who voted for these liberals have made their bed…now they (and the rest of us) must sleep in it. As Betty Davis once said, “Fasten your seatbelts, it’s going to be a bumby night”.
Welcome to Reaganomics and Bush’s policies. It actually takes a half-year, at least for the new administration to have any effect on the economy. But with all Americans yelling “bomb this!” and “bomb that!” and not realising that making bombs takes money away from infrastructure, and dare I say it – housing. You can spend a dollar building roads, or making a bomb, but a dollar is a dollar and cannot be in two places at once. Add to that the corruption of the Neocon regulators, or rather non-regulators, and you get what you get. Deregulation failed California, and yet Californians impeached Davis, and elected The Terminator instead. Well your neighborhoods were terminated. Hey, let’s invade Iran and see how well our economy takes that.
The solution is politically incorrect so therefore it will never be implemented. http://paleoconservatist.blogspot.com/2008/05/solving-californias-budget-crisis.html
I have lived in several of these cities – Detroit, Dayton, Tampa. In the case of Detroit and Dayton it is a true crime to see how these once great cities have been left to crumble.
The sad thing is that we saw this coming long ago. Even just a few years after the whipped-up .com fiasco proved the ridiculousness of “New Economy” thinking, bulldozers were showing up 50 miles outside of city limits and creating new towns of McMansions.
Can you right wing zealots stop whining about socialism? If you feel so strongly about it, then why don’t you tell your grandparents to give back their medicare, medicaid & social security. These are all “socialist” ideas that even the most conservative old coot gladly takes.
Learn about what socialism means and where your taxes go before you open your mouth on this board & look like an idiot.
This problem is mainly a result of so-called conservatives not following their free market principles. By artificially suppressing interest rates in 2002 in order to ward off a necessary recession, Greenspan and the other geniuses gave the kids in the candy store way too much sugar.
If you ever want to out-Republican a country club Republican and shut them the hell up, just tell them how their half-baked “conservative” economic policies failed America — and how real conservatives would not have pursued foolish, destructive monetary policy in the interest of pleasing constituents by making them homeowners at all costs.
I dont usually comment, but after reading through so much info I had to say thanks
I also see the same thing here in Summit County, CO where many of the homes here are vacation or rental homes http://www.kellisells.com, many people shed these first before losing their main home. It’s unfortunate what is going on in America and quite frankly it scares me some because when will it all end, like someone else mentioned it has to get worst before it gets better.
Relax. Home prices are coming down as we speak, and you yell.
This is the perfect example of de-leveraging causing an economic contraction. If our currency wasn’t fiat currency based completely on debt, none of this would be happening, since there would be no leverage to unwind or collapse.
We need to solve this problem at its source – our fractional reserve system, and the Federal Reserve corporation in particular.
Yes the mortgage lenders are making over 100% return if you go a full 30 years on your home loans. And foreclosures net them even more since all of your interest is paid up front in the first years of your mortgage.
So if they foreclose and resale the home they get to make the interest all over again, and again and again….depending on how many times they foreclose on one given house. So it does make you wonder why they were so quick to throw people out on the street, I say people but I mean your countrymen and women and children.
However, it appears to be backfiring on them and their own greed has come home to roost. Not enough buyers to keep repurchasing homes, not enough money, economy etc.
You simply can’t keep selling homes like shoes, throwing them out and selling new ones, and building more and more.
It’s absolutely ridiculous! And I’m glad people are squatting. They should have been given the homes to keep them off of the streets and keep families together. The stimulus money should have gone to pay the mortgages and save families and not the greedy individuals who got us here. Because all the greedy individuals will do is set up the whole scenario and do all again and again to keep lining their pockets!
Its worrying that its easier to get a car loan than a mortgage these days. Why cant the banks do more to get people in these houses just like the auto industry is doing to get more of the cars out of the showrooms.
Real Estate in some part of the United States is hurting. New Mexico is starting to come back with Rio Rancho home sale increasing buy 33%.
I hope everyone reading this is taking action to secure their own future. My friend is involved in a company called Wealth Masters International and is profiting off this down slide.
I’m sure that across the country there are thousands of people like myself. We have the skills, but, we are denied the opportunity to buy some of these unfinished properties and complete them ourselves. Not for a profit but for a primary residence. They say it has to do with contractor liabilities. I’m sure that a simple contract could spell out the contractor liability liimitations quite clearly. As always it has to do with M O N E Y. The profiteers just can’t make themselves take a good look and realize it is them that got us here. They want to reap a profit from a taxpayer bail out of their poor judgement. The culture of greed lives on while the number of homeless Americans goes up. What is wrong with these people?
In the state of PA where I live, legislation is being implemented to deal with blighted properties. The Act allows a municipality to initiate an action against an owner of “blighted property” and for the attachment of liens after judgment.
Also, the Act places the onus of dealing with blighted properties onto mortgage lenders once the property has been foreclosed upon, unless the lender properly assigns the property within the limitations of the Act. All I can say is, “Thank God!”
My clients are shocked when we first look at homes here in Vegas. Then they get used to it after the 3rd foreclosure.
We see ceiling fans and light fixtures missing, kitchen cabinets and countertops missing, sometimes the whole kitchen missing, toilets missing, and even stair rails missing!