The Vacant Dead: One In Five Foreclosed Homes Is A Vacant Zombie

Tyler Durden's picture




 

The latest foreclosure news out of RealtyTrac is out, and provides the latest proof that if there is a housing recovery somewhere, it sure isn't in the US, where the dislocations in the supply/demand for real estate are so profound that one in five homes in the foreclosure process has been vacated by the distressed homeowner. To wit: "As of the first quarter of 2014, a total of 152,033 U.S. properties in the foreclosure process (excluding bank-owned properties) had been vacated by the distressed homeowner, representing 21 percent of all properties in the foreclosure process." This means that neither the distressed homeowner or the foreclosing lender taking responsibility for maintenance and upkeep of the home, leading to a veritable army of Vacant Dead housing units that are spreading like zombies across the nation in the most improbable housing "recovery" of all time.

Quote Daren Blomquist, vice president at RealtyTrac:

"The biggest threat from foreclosures going forward is properties that have been lingering in the foreclosure process for years, many of them vacant with neither the distressed homeowner or the foreclosing lender taking responsibility for maintenance and upkeep of the home — or at the very least facilitating a sale to a new homeowner more likely to perform needed upkeep and maintenance.

 

“One in every five homes in the foreclosure process nationwide have been vacated by the distressed homeowner, but it is closer to one in three foreclosures in some cities,” Blomquist added. “These properties drag down home values in the surrounding neighborhood and contribute to a climate of uncertainty and low inventory in local housing markets.”

Some other findings:

  • States with the most owner-vacated foreclosures were Florida with 54,908 (36 percent of the national total, Illinois (15,512), New York (10,880), New Jersey (8,595), and Ohio (7,780).
  • States with the highest foreclosure rates in February were Florida, Maryland, Nevada, New Jersey and Illinois.
  • Nine of the top 10 metro foreclosure rates in February were posted by cities in Florida, along with Atlantic City, N.J., where overall foreclosure activity increased 254 percent from a year ago.
  • Among the nation’s 20 most populated metro areas, the highest foreclosure rates were in Tampa, Miami, Baltimore, Riverside-San Bernardino in Southern California, and Chicago. Only four of the 20 largest metro areas posted annual increases in foreclosure activity: New York (up 77 percent), Philadelphia (up 20 percent), Washington, D.C. (up 19 percent), and Baltimore (up 14 percent).

And visually:

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Thu, 03/13/2014 - 10:36 | 4542780 Canadian Dirtlump
Canadian Dirtlump's picture

We laugh at immaculate ghost cities in china while ignoring increasing houses and neighborhoods rotting across the continent. LMAO.

Thu, 03/13/2014 - 10:49 | 4542850 Rainman
Rainman's picture

Doctor Bubble says : " Canadian housing debt ratios make the USA look like a frugal uncle. "

Prices up 80% in the last decade.

http://www.doctorhousingbubble.com/wp-content/uploads/2014/03/canada-home-prices.png

Thu, 03/13/2014 - 10:55 | 4542860 MillionDollarBonus_
MillionDollarBonus_'s picture

Let's just step back for a second and look at the big picture. The world's population is increasing by 80 million people every year. Over the next few decades America is going to need tens of millions of immigrants to fuel our growing eoconomy. Where are these people going to live? As a country we simply do not have the capacity to house our ever growing population. Countries like China are building ahead of the curve in preperation for this eventuality. If our government doesn't start investing in contruction projects soon, we may find ourselves with a serious housing shortage in coming years. 

Thu, 03/13/2014 - 10:58 | 4542890 MillionDollarBonus_
MillionDollarBonus_'s picture

Owning a house is an investment. My financial advice to young people is to get a mortgage as early as possible and start paying it off. You don't want to be paying off someone else's bond. You want to be investing in your future by paying off your most valuable asset.

Thu, 03/13/2014 - 11:19 | 4543006 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

MDB, please tell me your responses are satire.

Thu, 03/13/2014 - 11:52 | 4543173 dryam
dryam's picture

MDB / Fed surrogate,

A house is a depreciating asset

Houses in the U.S. are too big for what a real economy can support.  In the future people will live in much, much smaller housing units and they will be living with multiple (generational) family members under one roof.

 

Thu, 03/13/2014 - 11:53 | 4543202 Ignatius J Reilly
Ignatius J Reilly's picture

What do you mean "future"?

Thu, 03/13/2014 - 13:01 | 4543618 johnQpublic
johnQpublic's picture

a house is a liability

end of story

it is neither an asset nor an investment

and on the subject of abandoned foreclosures, NY state has a law forcing local municipalities to maintain them

http://www.osc.state.ny.us/localgov/pubs/research/foreclosure.pdf

law is mentioned in this report

Thu, 03/13/2014 - 12:02 | 4543245 Okienomics
Okienomics's picture

"A house is a depreciating asset."

 

Dryam, a house is an income-producing asset and the depreciation is a write-off.  Come to think of it, the category of depreciating assets also includes machine tools, farm equipment, extruders, steel mills - are you advocating 'purely financial' non-depreciating assets as the way to go?  If so, would that be Wall Street or metals? I own some of each and am glad to have income-producing real-estate in my portfolio to enable a bit of extra stacking.  Unfortunately, (insert boating accident text here).

Thu, 03/13/2014 - 12:29 | 4543409 Ironmaan
Ironmaan's picture

Anything you can rent is an income producing asset, but the house you live in is anything but income producing. It is an "asset" that continually siphons money out of your wallet. Taxes, mortgage, maintenance, time, insurance, HOA. You will never recoup your expenses relying on appreciation. Just add up all the tools you buy for up keep. Lawnmover, shovels etc.. Its a complete money pit.

Thu, 03/13/2014 - 14:39 | 4544203 balanced
balanced's picture

What Ironmaan said. The house in which you live is a liability. Obviously rentals are different. As the Rich Dad, Poor Dad guy says, If it generates income each month, it's an asset. If it costs you money each month, it's a liability.

Thu, 03/13/2014 - 16:24 | 4544742 Offthebeach
Offthebeach's picture

Third generation builder.

Houses are stupid big.

Many have two or one person in them. Few people have the skill to maintain them. Heck, half dont even mow their own lawns.

Garages used to have work benches with a vice. Now, unused his and hers Chinese mountain bikes.

I do a fair amount od post auction buff ups for future sales. Most os the houses have significant black mold, rodent infestation, destroyed heating systems from 4-5 years of New England weather. $20-30k damage because the bank didnt want to spend $500/yr in heat. The so-called winterization is a scam.( a good job done has cut pipes allowing full blow outs and natural evaporation of residual water. Its easier to tourch couplings then punching holes everywhere.)

Lastly, what ever happened to small is beautiful?

Thu, 03/13/2014 - 16:43 | 4544845 Iam_Silverman
Iam_Silverman's picture

"Garages used to have work benches with a vice. Now, unused his and hers Chinese mountain bikes."

Well, my workbench has a vise.

I'm the one with a vice (or two).

Heh.

Thu, 03/13/2014 - 14:04 | 4543993 tiger uppercut
tiger uppercut's picture

Please tell me you're not really asking this.

Thu, 03/13/2014 - 11:26 | 4543043 TheFourthStooge-ing
TheFourthStooge-ing's picture

That is sound, accredited advice. With interest rates so low, this is also the very best time to buy.

Young people should also buy more than one house whenever possible, as nothing beats rental properties for long term investment.

Don't listen to the gloom-and-doomers whose denigration of the recovery is growing tiresome. That's just ignorance. The increase in automobile inventory is the result of a renaissance in US manufacturing which cannot be denied. We're in the middle of one of the biggest peacetime economic expansions in history.

Young people take note: the only people who will warn you away from this opportunity are your elders. Even if they mean well, it is just a subconscious expression of their jealousy of never having had such an opportunity for prosperity in their youth.

Real estate is the train to riches, and the conductor has just yelled, "all aboard." Don't be left standing at the station of regret.

Thu, 03/13/2014 - 12:04 | 4543264 N2OJoe
N2OJoe's picture

I would also note that there is no safer investment than .gov bonds and if you have an appetite for slightly more risk(though not really) you can get even  biggerer returns if you just BTFAH on the S&P!

Of course, the only way to get that much capital is to load up on non-dischargable student loan debt, before you load up on mortgage debt, before you load up on car loan debt, before you load up margin debt.

Then, and ONLY THEN, you will be living the Murican Dream!

Thu, 03/13/2014 - 14:24 | 4544102 RaceToTheBottom
RaceToTheBottom's picture

Debt should be treated as an asset to be maximized.......

Thu, 03/13/2014 - 11:49 | 4543162 Okienomics
Okienomics's picture

Satire or not, the alternatives are living with Mom & Dad or adding to someone else's equity.  If you're going to spend the money anyway, it does make sense to build your own equity.  Yes, we now know home prices can decline, and with the Fed pumping trillions into buying MBS, it's possible home values will drop when they stop (will they ever stop?).  But those same risks are present whether you own $, Au, Ag, equities or (insert your investment of choice here).  Read Ferfal; owning real property was an income source in Argentina during their prior monetary crisis.  During the 'great recession' the rental property we owned stayed occupied and I don't know and didn't much care whether valuations were up or down - the rent checks kept coming.  So I'll add this advice to MDB's... if you do buy a house, make it one you can keep after you move out.  Of the houses I've bought over the years, the only regret I really ever had was the one that I sold. Had I kept it, both my income and my personal balance sheet would be higher today.  Slow and steady wins the race, boys, and you gotta live somewhere.

Thu, 03/13/2014 - 13:07 | 4543643 johnQpublic
johnQpublic's picture

tumbleweed tiny houses

other than that, buy a rental or get a modest little house where the taxes are low

exactly 30 days from today, i move to my little home in the middle of nowhere with combined school and property tax of 361 dollars a year

so close i can taste it

Thu, 03/13/2014 - 13:16 | 4543680 Harbanger
Harbanger's picture

That's why you the boss Okie.  If you wanna hedge you can sell one property and buy more PM's than most can stack in a lifetime.  After the reset you'll be an even bigger boss.

Thu, 03/13/2014 - 12:31 | 4543415 Rukeysers Ghost
Rukeysers Ghost's picture

You want to be investing in your future by paying off your most valuable asset.

 

Ever hear of taxes and upkeep? You never pay off your house because it will still be costing you money after the bank note is payed off. It is just a more economical alternative for housing than renting in most cases.

Now income properties are a whole different deal. They generate income while paying all these endless costs.

Thu, 03/13/2014 - 11:00 | 4542910 r101958
r101958's picture

......aaaaah, the reason for the big push by the pols for the blanket amnesty program. Now I get it.

Thu, 03/13/2014 - 11:02 | 4542920 PartysOver
PartysOver's picture

You are asuming our economy is growing fast enough to support the need for immigrants.    I am not in that camp.  You are also assuming that the income of these potential immgrants will quailify them for a mortgage with now stricter underwriting guidelines.  I am not in that camp.

If I were to purchase a second home it damn sure would not be in the US!!!

 

Thu, 03/13/2014 - 11:11 | 4542971 Canadian Dirtlump
Canadian Dirtlump's picture

speaking of which. I'd be interested to know ( in addition to the private equity firms ) just how much the chinese and russians ( whom it seems the political class in the US have unbridled disdain for ) through their wealthy offshoring their wealth have served to buttress real estate values in the US.

Thu, 03/13/2014 - 11:31 | 4543083 Osmium
Osmium's picture

There would be serious consequences to the Government in the USA building housing.  Can you say "Cabrini–Green"?

Thu, 03/13/2014 - 13:46 | 4543874 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Well, there's certainly consequences to build housing and allowing people to live in it who don't bother to do anything but sit on their butts, smoking weed and collecting various gubmint checks. 

Thu, 03/13/2014 - 14:03 | 4543984 reTARD
reTARD's picture

MDB, if "we" build it "they" will come and fill it even if they have no money. Call it sub-prime living, LOL.

Thu, 03/13/2014 - 10:53 | 4542870 Canadian Dirtlump
Canadian Dirtlump's picture

Read it yesterday. No one wants the canadian housing market to shit the fucking bed while having a grand mal seizure more than I do man.

Thu, 03/13/2014 - 12:22 | 4543376 JLee2027
JLee2027's picture

Too many homes were built. All results of the artifical credit boom caused by Fiat currency. We are now in the early bust stage.

Thu, 03/13/2014 - 10:37 | 4542782 BobPaulson
BobPaulson's picture

Squatter's heaven.

Thu, 03/13/2014 - 10:38 | 4542789 Racer
Racer's picture

The greatest con the banksters ever pulled:

Convincing people to 'buy' a house, when in fact they do not own it at all, the bank owns it and has forced the responsibilty for its upkeep and all the bills over onto the moronic slave

Thu, 03/13/2014 - 10:41 | 4542805 Ironmaan
Ironmaan's picture

Not to mention you then become even more of a tax donkey for the state.

Thu, 03/13/2014 - 10:49 | 4542848 CheapBastard
CheapBastard's picture

Not to mention the insurance on a vacant house is 3x-to-5x higher then an occupied one.

"House Flipping Gone Bad," is the new TV series coming later this Spring.

Thu, 03/13/2014 - 10:48 | 4542844 yogibear
yogibear's picture

In places like NJ and Illinois around the cities the property taxes are so high it's getting to be like a mortgage payment. Trying to find a sucker to buy your property can be tough so they'll be stuck with ever increasong higher taxes.

You don't own the property, the local county owns it.

Thu, 03/13/2014 - 10:58 | 4542889 richsob
richsob's picture

So what's the alternative?  Live in a cave?  People want a house, they borrow money to buy it and pay for the damn thing....preferably as fast as they can so the banker earns less interest on the loan.  Nothing wrong with that unless someone is too stupid to buy what they can afford.

Thu, 03/13/2014 - 11:21 | 4543015 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

RS, it is called renting. I am a proud renter and do not worry about the issues mentioned above.

Thu, 03/13/2014 - 11:52 | 4543192 richsob
richsob's picture

And I am a proud home owner who took out a mortgage, paid it off 18 years early and now enjoy my home debt free.  We ALL pay real estate taxes....even renters who pay them as part of their rent payments.  

Thu, 03/13/2014 - 12:28 | 4543419 JLee2027
JLee2027's picture

Except, even you, don't really own it. You only "rent it" as well by paying real estate taxes. 

Personal property, aka. real estate taxes should be outlawed as well as the ability of homeowner associations to put liens on you. If you "own" it, you "own" it, and no entity can or should ever change that. 

The Government, state, local, federal should only be permitted to levy and collect a consumption tax at time of sale. No other tax should be permitted because it always leads in one direction - abuse. Might return Congress to the part time job it was supposed to be in the first place.

Thu, 03/13/2014 - 13:08 | 4543644 Pinefox
Pinefox's picture

Why we ever allowed ourselves to be taxed on an unrealized gain is beyond me.  Dumb.

Thu, 03/13/2014 - 13:34 | 4543796 Iam_Silverman
Iam_Silverman's picture

"Except, even you, don't really own it. You only "rent it" as well by paying real estate taxes. "

That is a true statement - you cannot argue against it.  But (and there is always a but), if you choose an area where the taxes are low and your property is not subject to the typical boom/bust cycle (typically those places are one and the same) then owning a home can be a winning proposition.  I paid for my acreage in five years (45 ac.).  I then paid cash for a repo'ed doublewide that had not been lived in (not even delivered).  I pay cash for all improvements (3 car 2 story garage, 2 barns, fencing, etc.) and all of my vehicles and tractors/other farm equipment and cattle.  My taxes on all of this are less than $1k per year (about $924 in 2013).  So, if I decide to sell in a few years, I can at least break even.  By that, I mean subtract all taxes paid during the time I owned it, minus depreciation on the structures, minus the little bit of interest paid during the five years I financed, repairs, etc.

Now, how much return can you get  when you choose to move to another leased property?

The key here is to be realistic and live within your means.  We had a five-year plan to be debt-free and implemented it.  That was 15 years ago.......

Thu, 03/13/2014 - 11:58 | 4543234 El Diablo Rojo
El Diablo Rojo's picture

I too rent. However, this is my hot button topic here on ZH.  I would love to be able to buy a home at a reasonable price, where my mortgage payment is lower than my rent.  This unfortunately will not happen in Temecula, Ca. (mentioned above in the article Riverside County CA).  The nice houses are purchased by cash buyers, and are flipped within 6 months with at least 100K bump.  No matter how quick I am to put an offer on a listed property in the last 2 years, within momemts of it being listed it has a sale pending notification. This is Absolute utter insider private club bullshit.  The banks are on the take.

I fuck'n hate these guys.

Thu, 03/13/2014 - 13:32 | 4543787 object_orient
object_orient's picture

I had the same problem in San Bernardino county in 2009-10. You might get lucky eventually but probably not. Get to know the smaller investment groups and arrange a deal where they quickly flip to you, without doing any work, for a modest fee - say 15-20k. That's a nice take for sitting on a house until your escrow closes. Arms length transactions are so antiquated. Everybody cheats now. Fun times.

Thu, 03/13/2014 - 10:41 | 4542791 Payne
Payne's picture

The FED owns most of the REOs and the yet to be foreclosed properties it an attempt to lift Real Estate markets.  It is working, sort of, don't expect it to last.

I have lists of people living in homes for 2-5 years with no attempt to Foreclose anymore, can't get them to sell short or otherwise.  Homeowners Associations have a 20% default rate on dues the only way they get the Banks to foreclose and start paying the bills it by going through Foreclosure themselves which is just added expenses.

Thu, 03/13/2014 - 10:59 | 4542885 Almost Solvent
Almost Solvent's picture

I know a single mom that hasn't made a mortgage payment since 2009. FIVE YEARS.

 

And it's a relativley nice suburb - not some inner city junk.

 

The "Pass Through Certificates" plaintiff started a forecloure action in 2011 - hasn't followed up and I think the lis pendens is expiring.

 

She pays the property taxes each year since the County is still foreclosing on people that don't pay their taxes.

Thu, 03/13/2014 - 11:29 | 4543060 saltedGold
saltedGold's picture

My friend almost made it 3 years without paying his mortgage.  Started when he lost his job and was out of work for 8 months.  Once he got a new job, he tried to work with the bank to renegotiate terms so he could afford to keep paying, but they wanted nothing of it.  So he just worked and lived until they kicked him out.  He kept the place clean and well maintained, so when the bank finally evicted him, they paid him $3,000 for keeping his place nice and an incentive to move out by a particular date. 

Thu, 03/13/2014 - 12:31 | 4543435 JLee2027
JLee2027's picture

This. Massive system breakdown underway. 

 

I have lists of people living in homes for 2-5 years with no attempt to Foreclose anymore, can't get them to sell short or otherwise. Homeowners Associations have a 20% default rate on dues the only way they get the Banks to foreclose and start paying the bills it by going through Foreclosure themselves which is just added expenses.

Thu, 03/13/2014 - 10:39 | 4542793 auntiesocial
auntiesocial's picture

the fine print- EXCLUDING REO's - that is why buying in Orange County and other affluent areas is a farce right now. 

Thu, 03/13/2014 - 10:40 | 4542795 Ironmaan
Ironmaan's picture

So when is the bust going to happen? Prices in Florida are still rather high.

Thu, 03/13/2014 - 10:53 | 4542864 Droid Fuel
Droid Fuel's picture

FL homebuilding is exploding right now.  There is not enough labor to keep up with demand.  I left commercial construction to get back into home building and ride this wave as long as it will last.   There are currently waiting lists for our communities so don't expect the prices to go down any time soon.

Thu, 03/13/2014 - 11:05 | 4542936 Itchy and Scratchy
Itchy and Scratchy's picture

Houses are exploding in Harlem too!

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