The New Real Estate Market

Posted on March 31st, 2008 by saman

The ever increasing number of foreclosures has created a new real estate market. Like it or not there is a new reality when it comes to housing. Mega-auctions are now being held by real estate agents so they can sell off foreclosures before housing prices drop more than they already have.

Because of the frighteningly high number of foreclosures, many neighborhoods once full of life are now ghost towns. There are large tracts of empty homes that have lost their value. These neighborhoods are slowly becoming home to crime and drugs. Across the U.S. thousands of homes are empty and this contributes to a massive foreclosure nightmare in communities all over.

There are established neighborhoods and whole subdivisions of new houses where you will see, not families but pigeons, wandering dogs and squatters. Home owners are walking away from their homes, homes that are now have lost their value. The mortgage they have to pay is more than the home is actually worth. Abandoned and foreclosed homes are continuing to drag down values of the other houses around them. For every foreclosure, the homes near it decrease in value. This is causing a panic in some city and state governments as the tax base decreases.

Even those who are not at risk for foreclosure are still affected by those foreclosures. Numerous foreclosures have been linked to increasing crime and vandalism in neighborhoods.

The real estate industry is changing and so are neighborhoods across the nation. “Fire sale” auctions are held to get rid of the numerous empty homes. These properties are being targeted by those who want “adverse possession” of the home.

Adverse possession

is when someone can acquire property of someone else and gain the title. If a squatter is continually on someone else’s property, and the true property owner has left or abandoned the property, the squatter gains legal possession of it. With so many foreclosed properties available, a squatter can move into a house and claim it after a few years. Banks will not likely be willing to spend money to secure the millions of homes that are now on the market due to foreclosure.

Since there are so many homes available due to foreclosures, you will find that many banks are now auctioning of thousands of homes at a singular action. There have been reports that 119 homes that were up for auction received over one thousand bids. In the city of Detroit, the large number of foreclosed home led real estate agents to plan to put 500 homes up for auction.

There are a few markets where the economy is doing so poorly that no one comes to these types of auctions. The truth of the matter is that with the current economic problems, real estate is no longer the latest hot property.

Real Estate investors are even getting picky. Investors usually do not buy in neighborhoods where there are many foreclosed homes. It is simply not a good idea to buy a foreclosed home where there are several houses for sale. Investors go after the good deals that are in neighborhoods that are a little more stable and solid.

Unfortunately, the wave of foreclosures will probably get worse. This will drive down prices of real estate and minimize tax bases. Homeowners will be paying more for a house than it is actually worth. This will cause many, if not most of them to pack their things and walk away.