It may have seemed inevitable given the mortgage meltdown, but it is still shocking when you drive through a neighborhood that seems to be entirely filled with ‘For Sale’ signs. The cities here aren’t entirely deserted, of course, but they are examples of the cities that have been hit hard enough to lead residents to abandon their homes.
Detroit’s economy has been hit hard in the last six months, with the Big Three automotive producing companies on the brink of bankruptcy and failure, and in need of government assistance. Due to the manufacturing industry, many experts estimate that the unemployment rate of the Detroit metropolitan area is at a generation-high 21%. Not surprising when 14% of automotive industry workers have been laid off in the last year. As a result of this highly localized recession, there are over twelve thousand abandoned homes in the Detroit area.
Riverside County, California
The last two decades have seen a surge of growth for the Inland Empire (better known as Riverside County), which had a population of 2.6 million in 1990; in 2007, the population was estimated to be 4.1 million. This massive eastern exodus from the more urban Los Angeles and the high prices of Orange County had a number of implications for the region. First of all, the move eastward drove up the demand and development of housing in the area, which steadily increased throughout the past decade. Secondly, these houses were purchased by many people who wanted to buy bigger homes for the buck than they could get in LA and the OC, which of course led to an increase in speculative building and investing. It is estimated that in 2005, only 15% of area homeowners could actually afford their houses, with the remaining 85% living beyond their means or in adjustable rate mortgages that had not yet adjusted. The latter, once adjusted, would then prove to be unaffordable.
It is also important to note that this area was a known hub for building up Southern California’s rapid suburban sprawl – not only was this one of the state’s regions with the most expansion, but it was also an area that furnished many of the construction companies with cheap labor that made surrounding communities’ growth possible. By August of 2008 alone, the foreclosure rate for the county was over 4,700 houses, up over 174% from August 2007. By the end of 2008, the median price of a home in Riverside county dropped to $220k, the first time it had dipped under $300k since the 1990s. In some Riverside County neighborhoods, as many as 20% of all homes are have been foreclosed and now sit vacant.
Currently, 90% of all sales in the greater Stockton region are either foreclosures or short sales. The median house price dropped to $237K by December 08, the lowest it has been since February 2003. It is estimated that housing prices in former boom markets are more than 40% off what they had been leading up to 2007.
Las Vegas and its surrounding suburbs are home to the nation’s third highest foreclosure rate for a metropolitan area, with 1 in 44 at some stage of foreclosure. By end the end of 2008, median housing prices deflated by $20,000 to the lowest since 2005. Housing inventory would also skyrocket to 30,000 in Q3 2008, with the pace of housing sales having declined 34% from the year prior. This volume is equal to 14-16 months of inventory of homes for sale, well above the national average of six to seven months.
Just over a year ago, the Greater Las Vegas Board of Realtors calculated that 45% of the 22,000 single-family houses for sale at the time were actually vacant. Most all of these were houses abandoned by new area residents, or investment properties by the area’s thousands of speculators who were drawn to the region because of its recent track record of housing price increases. Squatters are increasingly seen occupying the abandoned properties.
North Los Angeles County, California
With the vision of urban sprawl connecting Los Angeles to Bakersfield and the plans for a train connecting the two, builders began winding through the hills to the north from LA. Today, in Antelope Valley, for example, it is not unusual for long-term rental property owners to have to deal with tenants who recently lost their own home to foreclosure and are having difficulty getting back on their feet. In some cases, tenants do everything from the typical stripping of copper wire to be sold to the more bizarre use of cabinets for firewood. Abandoned investment properties are on the rise.
Miami-Dade and neighboring Broward counties have experienced an extremely high rate of foreclosures over the past two years. It is estimated that 143,000 homes were voluntarily given back to the bank, or foreclosed upon. In Miami-Dade County alone, there are currently 38,000 new condos that are recently completed, or near-completed that are vacant and show no prospects of immediate sale. The MLS for the country shows over 25,000 condos for sale in the county, which equate to a 4.5 year inventory. This of course, does not include unfinished units.
Many experts suggest that the housing market in Miami will witness a further devaluation in 2009 of over 20% of the median housing price. The biggest reason for this is arguably the over-development of medium and high-end condo constructions in the area, many of which are second or vacation homes. It is an extreme case of the common sense knowledge that second homes and investment properties are the most likely to be abandoned in favor of the owners’ primary residence when times get tight.
Arizona ranks 48th in New Job Creation. Developers spread to the west to Phoenix and as far out as Buckeye and foreclosures are currently at a record high, which has resulted in plummeting housing prices. This is a hard pill to swallow for many recent first-time buyers, who are witnessing a sharp increase in their monthly mortgage payments, against the background of a house with a drastically decreasing value.
Of the 6,150 houses sold in the Phoenix metropolitan area in September 2008, an astounding 78% of these were vacant when sold. There are currently 55,000 homes for sale in Phoenix, of which 40% have been abandoned and are presently vacant. Most of these are currently bank-owned properties and are being sold at liquidated prices. According to area investor and resident, Donna Butera, this massive departure and house abandonment in Phoenix has had other implications in the community. Understandably, home owners are deciding to walk from their mortgages if the home they just agreed to buy for $350,000 is now only worth $270,000. As a result of the frustration, homeowners are removing everything they can from the homes before they abandon them, selling appliances, cupboards and virtually everything else, including the kitchen sink. As a result, it is not unusual to drive down a street in what was once a nicer suburban neighborhood in Phoenix and now see a majority of windowless abandoned homes.