Looming shadow inventories
The eternal threat of shadow inventory plagues the real estate sector as the market continues to struggle and the impact of vacant homes is an issue that is equally concerning.
According to the Cleveland Federal Reserve, today’s foreclosures stay vacant far longer than the historical norm. CNBC reports, “Studying one Ohio county, Stephan Whitaker found, ‘foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure.’ The higher the poverty rate in the area, the longer the property stays vacant.
“Foreclosed homes obviously lower the value of surrounding homes, but Whitaker says the damage can go on much longer than we might think. “The data suggest that foreclosure may permanently scar some homes,” he writes in his research.”
Pinning hope on dropping foreclosure rates
Some mistakenly look to the dropping foreclosure rates for hope. With RealtyTrac reporting that foreclosures in 178 cities in America dipped in the first half of 2011 compared to the first six months of 2010, it appears to be healthy news. With closer analysis, it is clear that foreclosure numbers have slowed due to processing given mortgage layoffs, pending lawsuits with the banks from homeowners, state agencies and federal agencies.
Several banks are trying out a new method of clearing their books of vacant foreclosures- bulldozing them and donating the land to the city. No more taxes on the land, no more toxic asset on the books and the city gets some green space, everyone but the homeowner wins.
Good news: there are fewer vacants now
Despite the negative impact of vacant houses sitting on the market, the WSJ reports that “fewer homes in the U.S. are sitting empty than earlier in the year. Residential vacancy rates ticked down during the second quarter from the first quarter as well as the year-ago period, to 9.2% for rental properties and 2.5% for privately owned homes. Both are below their recession-era levels but reflect continued weakness in the housing market.”
While 2011 doesn’t look to be the year of housing recovery and 2012 isn’t likely either, perhaps it will help to have a nation of well informed agents that know the impact of vacants and the realities on the ground of those numbers.