Wednesday, April 20, 2011

Home sales up, but...

An article in the Detroit Free Press notes that there was a 3.7% increase from February to March in home sales in the U.S. This is not yet at the levels most economists say are necessary for a healthy economy, but increase is good, right?

Unfortunately, this is a case where the whole story is very different from those first numbers. 35% of those homes sold were paid for in full, in cash...Home sales rose 3.7 NATIONALLY, but that breaks down into an 8.2% increase in the South and only a 1% increase in the Midwest... This means that a large % of those encouraging home sales are actually investments and not homes being bought by individuals or families.

Even beyond that, these statistics admit they don't take homes sold in bulk into account, meaning that large private investment firms buying up large numbers of foreclosed properties need to be added on to these totals.

So, home sales are up, but... more as economic opportunities manifesting for people and organizations who are already wealthy, as opposed to for individual Americans pursuing the "American Dream" of owning a home.

So, is this good? It certainly isn't a bad thing that home sales are going up and stimulating the economy. But is it bad for individual owners? Large numbers of sales of foreclosed homes drive down the price of all homes, hurting owners who avoided foreclosure by reducing the value of their investment.
Also, this increase is very heavily weighted toward the areas of the country where foreclosure hit hardest- is that good because it is helping the hardest hit areas, or bad because it is simply outside business taking advantage of a bad situation?

10 comments:

  1. I think this is an interesting post.

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  2. In regards to the last question asked about whether business are taking advantage of a bad situation, I believe any improvements to foreclosed and unmaintained properties is a positive thing regardless of the source. Even though investors may be accumulating properties rather than families trying to buy a home to live in, the sales are still being made and someone is taking the responsibilities that comes with maintaining the property so it does not become a nuisance to the community. In chapter one of Bringing Building Back, Mallach mentions all of the problems abandoned home can cause. If someone is stepping in to take responsibility of an abandoned home, it is going to be a great thing for the community. Investors are just going to end up selling the property for someone to live in it anyway. Since the housing crisis was in part onset by people not being able to pay their mortgage loans to the banks, it might be a good thing for investors to start buying up homes first since they have the resources to fully maintain the property while the market is still down.

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  3. I agree with Bianca - if improvements to buildings are being made, so are positive changes in communities and hopefully in the overall economy.

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  4. I also agree that any improvement is a positive thing. Most of these homeowners owe more on the house than it's currently worth, so if someone is willing to do something to raise the value of the house, it can be put back on the market at a competitive price. Even though this doesn't help the homeowner who was foreclosed upon, it will help future owners of the house and also the owners of surrounding homes.

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  5. From an investors standpoint homes are at a low, there is speculation that they have not bottomed and there is also speculation that they will not again begin to increase in value for another 3-5 years. For some, now is a great opportunity to look at the housing market as a potential investment. Personally I dont see any difference between who is buying the home, investor or otherwise, because both will be looking to maintain the house and increase its value.

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  6. I agree that improvement is good as well however the amount of improvement being measured needs to be taken in to account. As the numbers and data explain, most of the property bought was for investments. Even though investing is a sign of improvement, I believe that everyone in this nation is looking for a different type of improvement.

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  7. Totally agree with both comments about taking investment as a good thing. Seems like we're being pretty picky beggars if we turn away investment at a time like this. Although this may hurt our country from an equality standpoint, I do think that this bust has proved that not everyone is suited for home ownership.

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  8. Honestly I largely agree that anyone buying and maintaining these properties is a good thing; I also agree with Zach that it sounds harsh but realistically some people messed this up for themselves and don't deserve a free pass.

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  9. I know that foreclosure is impacting a lot of people. Well, let's just hope that the banks lost someone's promissory note. |o| If this happens, then contact your attorney, and this would definitely avoid foreclosure.

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  10. I think there has been a recent trend of wealthy families purchasing second or vacation homes due to extremely low home values in the current real estate market.This could contribute to the rcent increase in home sales

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