Many communities around the country have been at odds with real estate speculators who’ve abandoned their properties.
In some areas, they’ve become a new class of absentee landlords who often live out of the state or overseas. Comments from community officials in news reports indicate quite a few of these landlords have either slowed progress in redeveloped neighborhoods or reverted gains made.
“In some cities, speculators and vacancies essentially have turned the clock back on previous development successes, noted Harold Simon, executive director of the National Housing Institute,” in the Colorado Independent.
Real estate speculators struck while the market was hot and helped to drive up prices during the housing boom. Some presumed the growth wouldn’t end. Condominiums were overbuilt in Florida driven by the speculators’ fervor. Also, the Financial Times described how some speculators were reeled in by “low” teaser rates.
“Prior to 2007, the underlying assumption was, build it and they will come,” Jeff Hardcastle, Nevada state demographer told the New York Times.
“California, Nevada, Arizona and Florida were among the states with the fastest home price appreciation over the last five years. This…attracted both speculators and home builders, a volatile combination that led to an over-supply of homes that was beyond the capacity of the local populations to support,” explained Doug Duncan, the Mortgage Bankers Association’s former chief economist in a statement.
“The market got overheated through speculative buying, because of the easy money that was available,” Larry Catlett of Liberty Realtors indicated in a Canwest News Service article. “You had people buying more house than they could afford.”
Ways of Abandonment
Some confident speculators acquired multiple unit apartment buildings or purchased more than one house. They’d flip the property to another speculator for a profit. When the rates reset to high levels, defaults rose.
“When this over-supply became apparent and prices began to fall, many of these investors simply walked away from their mortgages,” said Duncan.
Others acquired bank-owned foreclosed homes on eBay, through get-rich-quick companies or massed on courthouse steps during foreclosure auctions. Once the property was acquired, these speculators tried to flip them or rent them out before abandoning them.
Instead of abandoning the property, some speculators have kept the homes awaiting a change in the market but haven’t kept the property “habitable” or decorated.
Abandoned homes and dilapidated property can bring down property values and stimulate crime.
“For cities and counties, the problem is this: Foreclosed houses are accumulating and becoming blighting influences. Oftentimes, the houses sit vacant. They quickly deteriorate and attract ‘broken window’ problems that can drag down a neighborhood — the sort of problems that redevelopment agencies are often charged with solving after the fact,” the California Redevelopment Association stated.
Real estate speculators are among those blamed for interfering with redevelopment efforts in some Detroit neighborhoods.
“Public ownership of land alone isn’t enough to make redefining Detroit easy,” Mike Wilkinson of The Detroit News reported. “So many speculators have jumped into so many neighborhoods and picked up parcels for $500 or less that redevelopment could cost taxpayers millions of dollars to buy them out.”
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