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You're assuming that these houses will be left vacant. Many will be left vacant for some time. Foreclosure is a slow process, even when the mortgage holders ar

You're assuming that these houses will be left vacant. Many will be left vacant for some time. Foreclosure is a slow process, even when the mortgage holders are not fighting you every step of the way. In almost every case (outside Detroit) there are plenty of people who would be willing to pay for those houses at the right price. Why shouldn't we let them do so? According to the statistics compiled by CalculatedRisk, that seems unlikely [1]. Many housing markets (not just Detroit) are still very sluggish. There may be tons of buyers for properties in hip urban areas where most HNers live/work, but most foreclosures have been happening in suburban/exurban areas whose real estate markets are still in the toilet. The national housing market has a very large stock of uncleared inventory, so vacancy should be the default assumption until that inventory returns to normal. This article [2] suggests that you're wrong regarding homes in Ohio. If there were really "plenty of people who would be willing to pay for those houses at the right price", then I don't we'd be seeing banks walk away from foreclosed properties and abandon them. [1] http://www.calculatedriskblog.com/2010/05/existing-home-sales-inventory-increases.html http://www.calculatedriskblog.com/2010/05/existing-home-sale... [2] http://www.cleveland.com/news/index.ssf/2009/07/bank_walkaways_from_foreclosed.html http://www.cleveland.com/news/index.ssf/2009/07/bank_walkawa...

anamax 16y ago
The CalculatedRisk stats say that houses aren't moving at current prices. That says nothing about what they'd do at lower prices. Even if all that happens is "move up", things are better for the folks who got to move up. (And there's less net economic loss if we lose the inexpensive places than the more expensive ones.) More likely, you'll get smaller and more households, as the run-up to the burst had people living together for economic reasons. Since I said that Detroit wasn't an exhaustive list, it's curious that another member of the list would be considered disproof. Note that Ohio's proposal, forcing banks to offer for sale, does what I suggested - it puts things on the market. Note that banks walk away because they let the real liabilities grow while they kept thinking that their book value mattered. Wipe out the liabilities and stop them from growing, as the Ohio proposal does, and there's something there. More to the point, there's more there the sooner that happens. I'm sure that there are some places that won't get a bid even at 0 reserve and no liabilities. However, I see no reason to treat everything that way because most will get a bid. (I know folks who wanted to buy blocks of Detroit for the right price, but weren't willing to take the liabilities.)

anamax 16y ago

The CalculatedRisk stats say that houses aren't moving at current prices. That says nothing about what they'd do at lower prices. Even if all that happens is "move up", things are better for the folks who got to move up. (And there's less net economic loss if we lose the inexpensive places than the more expensive ones.) More likely, you'll get smaller and more households, as the run-up to the burst had people living together for economic reasons. Since I said that Detroit wasn't an exhaustive list, it's curious that another member of the list would be considered disproof. Note that Ohio's proposal, forcing banks to offer for sale, does what I suggested - it puts things on the market. Note that banks walk away because they let the real liabilities grow while they kept thinking that their book value mattered. Wipe out the liabilities and stop them from growing, as the Ohio proposal does, and there's something there. More to the point, there's more there the sooner that happens. I'm sure that there are some places that won't get a bid even at 0 reserve and no liabilities. However, I see no reason to treat everything that way because most will get a bid. (I know folks who wanted to buy blocks of Detroit for the right price, but weren't willing to take the liabilities.)