Foreclosed upon homes deep bruises for neighborhood, carry stigma
A recent Federal Reserve study out of Cleveland has found that homes sold at foreclosure auctions are harmful to the reputations of neighborhoods, depressing local market value of all homes, and carry a real estate ‘scarlet letter' for years to come.
The federal study concluded that foreclosed upon homes are more likely to stand unoccupied years after they are sold at auction. Though there many contributing factors to this phenomenon, the most significant is a stagnant national housing market overloaded with supply. This supply problem is exacerbated because many first time buyers look for new homes or existing homes in neighborhoods that aren't losing value.
Foreclosed homes cast long shadow on surrounding neighborhood
In what is a haunting specter of things to come for residents in hard hit areas, empty homes bought in foreclosure auctions begin to depress neighborhood value by first falling into neglect and disrepair. This drives down the average home value in the area. For the many people already in an underwater home—where they owe more on a loan than it's worth—this is a nightmare scenario. Foreclosed upon homes in disrepair are a burden on the whole neighborhood, and leave residents living there with an eyesore and a hole in their pocket.
Reduced spenders in hard hit neighborhoods have less consumer confidence
Residents whose home value is eaten up by the foreclosed upon homes around them are reduced spenders. Because they find it harder to refinance their home loan in a depressed neighborhood, they no longer have access to new and flexible credit lines. As this affects the entire neighborhood, one or two foreclosed homes send shockwaves that eventually shake consumer confidence in that area.
As if reduced home value and depressed consumer confidence wasn't enough, these ‘damaged goods' homes, left unoccupied, can become centers for crime and drug use. The list goes on.
In effect, whole neighborhoods will bear the bruises of home foreclosures in the area, sometimes for decades. Some residents have rejoined this debate angrily and assert there must be other solutions.
Indeed, some neighborhood groups have volunteered to take care of the primary needs of the foreclosed upon houses—a coat of paint and weekly lawn care go a long way.
Slumlord investors?
Some may be asking why these houses stand empty for so long—wasn't there a buyer? Yes, but he or she doesn't see making cosmetic investments or doing general upkeep cost effective in this market.
The US government is, in fact, the largest holder of foreclosed home notes, as it has underwritten a significant portion of bad debt loans and mortgages. Second to the government are banks. Lastly are private investors. Because there are few people hurrying to snatch foreclosed homes, private investors and banks are happy to sit on their auction-priced purchases. Very simply, if a buyer doesn't intend to live there after the sale, she probably is an institution. Institutions have a habit of keeping things cost effective.
For more information visit: http://leefinancialhelp.com
The federal study concluded that foreclosed upon homes are more likely to stand unoccupied years after they are sold at auction. Though there many contributing factors to this phenomenon, the most significant is a stagnant national housing market overloaded with supply. This supply problem is exacerbated because many first time buyers look for new homes or existing homes in neighborhoods that aren't losing value.
Foreclosed homes cast long shadow on surrounding neighborhood
In what is a haunting specter of things to come for residents in hard hit areas, empty homes bought in foreclosure auctions begin to depress neighborhood value by first falling into neglect and disrepair. This drives down the average home value in the area. For the many people already in an underwater home—where they owe more on a loan than it's worth—this is a nightmare scenario. Foreclosed upon homes in disrepair are a burden on the whole neighborhood, and leave residents living there with an eyesore and a hole in their pocket.
Reduced spenders in hard hit neighborhoods have less consumer confidence
Residents whose home value is eaten up by the foreclosed upon homes around them are reduced spenders. Because they find it harder to refinance their home loan in a depressed neighborhood, they no longer have access to new and flexible credit lines. As this affects the entire neighborhood, one or two foreclosed homes send shockwaves that eventually shake consumer confidence in that area.
As if reduced home value and depressed consumer confidence wasn't enough, these ‘damaged goods' homes, left unoccupied, can become centers for crime and drug use. The list goes on.
In effect, whole neighborhoods will bear the bruises of home foreclosures in the area, sometimes for decades. Some residents have rejoined this debate angrily and assert there must be other solutions.
Indeed, some neighborhood groups have volunteered to take care of the primary needs of the foreclosed upon houses—a coat of paint and weekly lawn care go a long way.
Slumlord investors?
Some may be asking why these houses stand empty for so long—wasn't there a buyer? Yes, but he or she doesn't see making cosmetic investments or doing general upkeep cost effective in this market.
The US government is, in fact, the largest holder of foreclosed home notes, as it has underwritten a significant portion of bad debt loans and mortgages. Second to the government are banks. Lastly are private investors. Because there are few people hurrying to snatch foreclosed homes, private investors and banks are happy to sit on their auction-priced purchases. Very simply, if a buyer doesn't intend to live there after the sale, she probably is an institution. Institutions have a habit of keeping things cost effective.
For more information visit: http://leefinancialhelp.com
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