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An End to the Housing Crash: Bailed Out Banks Demolishing Foreclosed Homes?

Filed in Financial Crisis , Real Estate 9 comments

Who would have thought during the peak of the housing crisis that we would witness such a sight as this?

Brand new homes located in a suburban California neighborhood being demolished because they were costing Guaranty Bank (a TARP recipient of bailout funds) too much money in fines to allow the homes to remain standing.

What does it say about us as a capitalist culture?  Take your pick:

  1. Blind Greed?  Are we so greedy that we’ll cause the largest real estate bubble in our nation’s history just to make a lousy buck?
  2. Homeless Shelters? Do we put profits, or lack of profit, above that of human decency to give these homes over to a charitable organization?  I’m sure some charitable organization would have forked over the money to Victorville’s Town Hall given the chance.
  3. Environmental Impact? Building a new home leaves a pretty big carbon footprint.  Doesn’t this dispel the old argument that economic sustainability was worth the negative environmental impacts?

I’m sure this won’t be the end of this argument, but in a sadistic kind of way, could this mean we’re nearing the bottom of the housing crash?

I generally try to find one positive in all things, but shouldn’t this be a great indicator that once we begin reducing excess inventory that the housing crash has finally began to stabilize?

The law of supply and demand has to kick in sometime.  Doesn’t it?

[RSS Readers please click through to see videos]

Hat tip to Vision Victory Manifesto for doing the legwork!  Great job!  We need more investigative reporting like this instead of the mindless stories about the Presidential dog.

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Posted by CJ   @   5 May 2009 9 comments
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9 Comments

Comments
May 5, 2009
9:26 pm
#1 SJ :

These aren’t new NEW homes right? It sounds as tho there’s work need still…

The use of literally is kind of annoying. Who should we place the blame? I mean, the banks have to pay an upkeep… it’d be nice if there were allowed to ignore them.

I am kind of surprised they couldn’t find any takers tho; I mean any sale should be more profitable than paying for demolishment (Tho I guess there are govt laws there?)

May 5, 2009
10:27 pm
#2 Matt :

Yeah they were new NEW homes. A few were unfinished homes and several dozen more (not seen in the videos) are scheduled to be torn down in the immediate future.

The grounds looked amazingly bad, so I’m curious why the “community” would want to improve the neighborhood. Unless they’re worried about squatters, etc. Which leaves to wonder why couldn’t they just setup temporary living dwellings for homeless shelters or something.

But for goodness sakes, get on the phone or something before tearing down perfectly good homes. Setup a lottery or something.

May 5, 2009
11:28 pm
#3 SJ :

I guess my point is you can’t blame the banks alone in this case…

I’m assuming there are certain govt. issues regarding giving/selling properties that aren’t completed. I think it was mentioned that there were things not all together finished, not up to code?

I am curious why the bank initially did foreclose; I guess the owner did the equivalent of abandoning the homes forcing the banks to take over. As they aren’t finished it makes more financial sense for them to crush them (lol)

I mean, the govt was charging fines, so in this case I feel there should have been more interaction on both parts.

Regardless, sucks. Government interference sucking things up.

May 5, 2009
11:45 pm
#4 Matt :

Understood, and I somewhat agree with you that an accord could have (should have) been arranged with the Victorville government to waive the penalties if the properties could be used for charitable purposes.

As a pseudo environmentalist, I just see this as another huge waste. Most of this stuff will get tossed into a landfill somewhere under the guise of growing GDP.

According to the videos, some of the houses were unfinished according and a few others were 100% finished. It’s possible a few could have been vandalized by copper thieves as that has been a common theme in the California market.

I saw reports of $500,000 homes being vandalized and later sold for $35,000 b/c the walls and floors were chopped up, and all the plumbing materials gutted just for the copper. A $465,000 savings is pretty good in my opinion… especially if you have a plumber that owes you a favor.

May 6, 2009
2:36 pm
#5 SJ :

Oh I completely agree that it’s a terrible waste what happened.

But I guess my point is we shouldn’t place all the blame on the banks; they made a bad loan and the collateral turned out to be a liability…

It just goes back to waste disposal. I can’t leave some semi-useable furniture out in the middle of nowhere and hope that someone will be able to find a use for it. Instead I have to either find somewhere that will be able to take it on or take it to a dump.

Regardless, this could be see as the beginning of a crash tho; this implies that demand has just fallen not people are overvaluing the housing costs. Let’s see what happens =)

Jun 14, 2009
12:10 pm
#6 Scott :

Victorville is in the high desert 64 miles from Los Angeles. Look around in the video. There’s no trees, no bushes, no nothing for miles.

Victorville is the story that never happens. For years, the next big thing. Our family bought a plot of land in what was hailed as the new downtown. Sat on it for more than 10 years and nothing ever came of it.

I’m disappointed by the waste of it. Still, you’re not going to get too many homeless people relocating to Victorville. No jobs, no services. According to bestplaces.net: “The unemployment rate in Victorville is 14.30 percent(U.S. avg. is 8.50%). Recent job growth is Negative. Victorville jobs have Decreased by 6.00 percent.” I’m sure unemployment is higher now in Victorville judging by the US average in the quote, now at 9.1%.

If anything, they created jobs for the demolition company. I’m waiting for videos of homes being torn down in some place worth living. Then I’ll be shocked.

Jun 14, 2009
12:45 pm
#7 Matt :

@ Scott

I agree with you that it’s a huge waste. Likewise with moving the homeless to Victorville since it would take some type of organized effort. Perhaps that’s my biggest beef with the whole situation.

We went through the trouble of building homes like these across the US, creating the hype around them, took as much sales as we could, and now no one really wants to do put the leftovers (e.g. homes) to good use. It’s just easier to tear them down and reduce inventory. Just seems like a huge waste in my humble opinion.

Jun 14, 2009
1:17 pm
#8 Scott :

@Matt:

There’s simply no way for the homeless to relocate so far from services. People are homeless for a reason: loss of job, illness, etc. Victorville is simply too far from Gov services and private charities that generally locate in larger cities. Those services may include job training, food assistance, and even medical care. You’re right! It would require a significant effort on the part of Gov and the willingness of the Victorville officials (and it’s obvious the locals are more concerned with the image of blight than the welfare of humans.)

Found this on Daily Kos. Review of a book which tells the story of the massive home building boom and bust: The Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream By John Wasik

http://www.dailykos.com/storyonly/2009/6/14/741862/-Book-Review:-The-Cul-de-Sac-Syndrome

Jun 14, 2009
8:57 pm
#9 Matt SF :

@ Scott,

Yeah being far away from the city makes my idea pretty difficult. Perhaps they could have been used as temporary shelter for the homeless and unemployed for anyone in Victorville at the time.

The Cul-de-Sac Syndrome book seems right on par. What most people don’t (or didn’t) get about the real estate market is that a home is essentially a trading vehicle just like equities. With all of the cheap credit available, it’s no wonder prices just kept getting bid up and up until it popped.

If you’re into the real estate bubble, check out this graphic on median income vs median home price. Pretty interesting stuff how the bubble manifested itself across some parts of the country, and undetectable in others.

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