The housing industry had been stepping on the accelerator for a few years at the beginning of the decade.  As big as it is, it gained momentum over those years.  But now that it’s been barreling along so fast for so long, it will take a while to slow down, even with both feet on the brakes and the parking brake on.  With the lightning-fast pace of construction in once-hot areas like California, builders are still building, and are still holding, new homes that would only fetch two-thirds of what they would have fetched a year ago.

On the other coast, some friends from our church live in a newer subdivision.  It’s not quite ghost-town status but there are quite a few vacant lots nearby.  A few are sold; some aren’t.  The houses are big:  4,000 square-foot-ish.  I suspect the prices will come down quite a bit before the rest are sold.  They’ll probably be sold one way or another, but until then, the neighbors next door are vacant.

Living in a ghost town is lonely, and things tend to rot and fall apart.

Very costly repairs like this will drag down housing prices further. The extent to which they’ll be dragged down depends on the effectiveness of the deterrence of such burglaries. (I’m not saying law enforcement will just stand by, but there may only be so much they can do.) Not only will owners be selling at a loss, they will be needing to repair the losing properties just to get them up to code so they can sell them, at any price.

The threat of vandalism is an extra cost of owning an illiquid asset like real estate, and this threat becomes reality more often if the home is vacant. Further, because the house is vacant, insurance costs go up, and for some types of insurance it can’t be purchased at all, like with fire insurance. (The insurance companies know the risks better than most, of course.)

I wonder if there will be a rise in the formation of companies dedicated to protecting vacant homes from vandalism. This would likely be costly, but it could fill in where insurance and law enforcement leave off.

As for slightly less-expensive homes, the increases in foreclosure filings were still daunting: 53% for houses $500k to just under $1 million, and 39% for houses $300k to just under $500k.

It’s still the case that most foreclosures are on lower-priced homes. The mean price of a home posted for foreclosure in the area during the first half of this year was $140,000.

I guess it stands to reason that since there were more high-priced homes purchased over the past few years at low, or even teaser, interest rates, and with less down, that the foreclosure rate for these high-priced homes should be going up. The overextended borrower will have the hardest time making the payments when variable rate mortgages reset, or when the economy turns and they lose their jobs.

To be continued …

Foreclosure bus tours, though, are doing just fine, thank you very much.

Someone was on the ball here. Why not do a little bit of leg work, assemble a list of foreclosed properties in a city, get a tour bus, and drive around would-be real estate investors so that they can check them out? Pretty clever, actually.

This kind of experience is a pretty low-priced introduction to foreclosed properties. The tour participants get to see them first hand, inspect them, and judge the kind of work and money that would be necessary to fix them up. It’s probably a very pleasant way to spend a few hours — in a slightly morbid kind of way.

These tours are for interested bargain-hunters. They’re an annoyance for the neighbors, and they poke at the soft underbelly of a huge real-estate boom. But is that bad? I don’t really think so. A foreclosure that’s bought is a problem that’s solved, even if just temporarily. I think the really successful and respected real estate investors will be the ones who will help the previous owners at the same time they make a profit. And if these bus tours alert them to houses that they didn’t already know about, they help to solve the problems of foreclosed homes.

Now, with the houses rotting away in varying states in the foreclosure process, these houses are now attracting black-market commodities dealers.  The houses are broken into and stripped of their copper pipes and wires.  Copper has quintupled in price over the past three years, making it worth the risk for thieves.

Needless to say, pulling out plumbing does not improve the chances that a house will be sold.

Parties responsible for the properties are aware of the problem and trying to prevent further reduction in the homes’ values by posting signs like “No Copper Only PVC” on the house.  This reminded me of a walk through New York City one time.  Some cars parked on the side of the road had signs like “No Radio — Thank You” in them.  (“Thanks for breaking into the car next to me.”)

“No Copper.  Thank you!”