Soon-To-Be Ghost Towns Under The Bulldozer

The open market is supposed to be the best possible means for a society to allocate resources, but sometimes even the best systems break down at the extremes.  There are many who believe that superfluous developments in the so-called exurbs must be razed for housing supply to return to anything like sustainable levels. You know that real esate is out of favor when banks start to tear down brand new homes because it is the most efficient way to deal with them.  When a bank rips down a newly built home it is not a total loss, because the land on which the home was built certainly has some value, but if you think about it; what would anyone who buys that land do with it except build a new house on it?

Ironically, all this comes as homelessness is on the rise, up 50% in many cities.

A bank in Texas is bulldozing four brand new homes and twelve nearly finished homes in Victorville city, California, about 85 miles northeast of Los Angeles. Guaranty Bank of Austin acquired the homes in foreclosure and is destroying them, reportedly, to provide a "safe environment" for the neighbors.

The very same thing is happening in other areas; in fact this guy says the bulldozer operator told him he's got twenty other homes to knock down in a community about an hour away from there. In fact, federal lawmakers have put aside $6 billion in the last year for local governments to either rehab or raze foreclosed and abandoned homes. But it seems unlikely that's enough. An analysis by AP news finds that as of March 31 there are about 4 million homes in the U.S. that have been empty for more than 90 days. That's about 3 percent of all U.S. homes.

Some hard hit areas are of course in the rust belt, and out West in the former bubble states, but also in Buffalo, NY, where there are reportedly 10,000 vacant homes. Most are existing homes, but many are brand new. One development in Albuquerque, NM is about to be smashed as well, or at least several unfinished homes in it are. The homes were abandoned by the Las Vegas builder who can't refinance the construction loans, and then subsequently vandalized. Thieves took everything, including the kitchen sinks. And these were nice homes, valued at $300,000.

Bulldozers tore through a small housing development this week in San Bernardino County, Calif., demolishing 16 homes. These were not dilapidated houses that had become an eyesore. They were brand new. Four were ready for buyers , and had all the extras, like granite counter tops and a Jacuzzi.

The number of abandoned homes scattered throughout the nation's 65,000 neighborhoods concerns federal officials because of the potential to prevent the economy from recovering. Empty housing feeds upon itself. Experts say as more houses stand vacant, property values and tax revenues drop. The drop in property values leads to fewer buyers, which leads to more vacancies.

"It becomes a vicious cycle," said Jennifer Vey, a researcher with the Washington-based Brookings Institution. Vey said people have been shoved out of the Rust Belt by the collapse of the manufacturing economy for more than a generation now, and drawn to the temperate Sun Belt by more jobs and a lower cost of living.

Last summer, Congress appropriated 4 billion dollars in emergency funds for cities to acquire and rehab foreclosed properties.  An additional $2 billion will be available under the recently enacted economic-stimulus package.  The legislation was labeled the Neighborhood Stabilization Program, but Cleveland and a handful of other cities had to lobby hard to convince Congress that “stabilization” in their cities meant tearing down houses, not renovating them.

Last month, Cleveland said it planned to use more than half of its $25 million allotment to destroy 1,700 houses.  This presents an opportunity to redo the whole city, to erase the obsolete and provide a space for the new.  Cuyahoga County is also establishing a land bank, a public entity that can acquire distressed properties and hold on to the land until improved economic times allow for redevelopment.

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