Housing Market Collapses, Literally: Bank Pays to Destroy Unwanted Model Homes.
How to solve the real estate crisis? Bulldoze brand-new but unwanted homes! This video documents bank-hired wrecking crews destroying model homes in a Southern Californiahousing development that never filled with homeowners, when the economy collapsed and the developer went bankrupt.
The bank involved was fined by the city for each day the homes sat unoccupied, so the bank paid to wreck all the homes. Snip from the local paper's account:
The housing collapse is taking a literal form for one bankrupt housing development. Four model homes and 12 nearly finished spec homes at Bear Valley Road and Highway 395 are being demolished.Videos: Part 1, part 2, part 3, part 4, part 5. (thanks, Todd Lappin!)The developer filed bankruptcy about 18 months ago and the foreclosed property went to Guaranty Bank in Irvine. A Guaranty Bank official, Real Estate Officer Dean Smith, said they were facing daily fines from the city of Victorville if they didnt do something with the homes and property that not up to code. He said it was a choice of pumping their own money into property site improvements and additional money to bring the home up to code or tear down the 16 homes.
Smith said the bank is not in the building or land development business and because of the current housing market does not see anything happening with the property for at least five years. Our only option is to either proceed with putting more than a million bucks into the land, which weve already taken a huge hit on and lost a lot of money, or, we tear down the houses, Smith said.
Update: A commenter points us to the related WSJ story.
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Temecula or Victorville? They're in different counties and a good 90+ minute drive (without traffic) from each other.
a. Stupid City Officials
b. Stupid Real Estate Developers
c. Stupid Bankers
d. Stupid All of the above
What, were the homes too crappy even for squatters to come in and claim em?
Wall Street Journal had a good story and vid (clicky) about that a while back.
This falls on the same category of farmers who burning part of their crops to raise the price of produce.
Agreed with #1 this is just stupid!
Thanks, Anonymi #1 and #3 -- will correct error / update link.
Don't cry over spilt milk
Supply and demand: Houses aren't worth nowhere nearly as much as people are asking for thm, so people stop buying them. Prices fall, we have a glut of empty houses. Solution - let's start tearing all of the houses down! The fewer houses available, the more each house is worth!
Soon, we will all be living in tents.
Xeni:
Your story link only goes to the newspaper's site; story addy = http://www.vvdailypress.com/news/demolished-12162-homes-new.html
Not to defend the bank or developers, but there have been cases where banks have simply given the homes back to owners they'd foreclosed on--and then the owners discover that they're liable for any fines and code violations that happened in the meantime. At least this one is paying to deal with it, rather than sticking it to the homeowner. Again.
In Oregon, this is the only way to take care of this stuff. A lot of them have been left un-roofed for a year or more. With the rain sluicing down through the OSB sheeting and flooring, everything has been allowed to liberally soak with water. In the right places, you can find mildew an inch thick.
For all the rest that were properly closed up, bulldozing it is an indictment on humankind really only being coyote clever and not really that intelligent a life-form.
Just remember, your average bank doesn't have enough intelligence to figure out how to lease or rent homes. They are totally incapable of contracting with property management services to keep an income flowing to make up for the loss of interest payments, something they really need at the moment.
Not to defend the bank or developers, but there have been cases where banks have simply given the homes back to owners they'd foreclosed on--and then the owners discover that they're liable for any fines and code violations that happened in the meantime.
Banks are foreclosing but refusing to take title, leaving nobody responsible for the property. Note to banks: maybe you should have thought about limiting liability at the lending end of the deal rather than at the foreclosing end.
The buildings WERE NOT UP TO CODE???
Who the heck builds houses that aren't up to code to begin with?
Who the heck would want to buy a home that wasn't up to code?
Who the heck can blame them for wanting to demolish houses that can't even be lived in?
String up the property developers, I say. Evidently they were just looking to turn a quick buck, like.. oh I don't know.. every other property developer, ever.
#11: I'm pretty sure ACORN and Barney Frank are behind it all. Also that comedian from the White House Press Dinner.
[/snark]
But seriously, it is possible that these were "intended to be model houses" model houses. Cheaply and quickly built so the developer would have something to show to potential customers. Down the road, after all the properties were sold, they might have been finished up.
Having vacant houses all over the place is a potential safety hazard. It's obvious a lot of people don't get this, but why have all these vacant houses everywhere when you don't have to? Do you really think this has impacted the market much at all?
isn't it obvious that when a 'solution' to a 'problem' is inherently wasteful and mindlessly destructive, that the problem isn't a real one, and must have been created by bureaucrats and bean counters?
@11
"Who the heck can blame them for wanting to demolish houses that can't even be lived in?"
That's a debatable point. Ever take the time to read the national and state codes for housing, wiring, plumbing, structural?
If my 100 year old house was built today, as it stands it would FAIL so badly that it would be a money pit. However, the roof doesn't leak, it's structurally sound, electricity, plumbing, and everything else work fine.
Yet the government still gets to tell me HOW to fix things...
Chaps my ass.
So can I do some shoots there?
:D
@15
This is what happens when government doesn't have much interest in building codes.
The Bluth family must be inconsolable.
Heinlein wrote about it in the 50's (in THE DOOR INTO SUMMER):
The job I found was crushing new ground limousines so that they could be shipped back to Pittsburgh as scrap. Cadillacs, Chryslers, Eisenhowers, Lincolns-all sorts of great, big, new powerful turbobuggies without a kilometer on their clocks. Drive 'em between the jaws, then crunch!
smash! Crash!-scrap iron for blast furnaces.
I raised the subject just once more because I noticed that very few of the price-support cars were really ready to run. The workmanship was sloppy and they often lacked essentials like instrument dials or air conditioners. But when one day I noticed from the way the teeth of the crusher came down on one that it lacked even a power plant, I spoke up about it.
The shift boss just stared at me. „Great jumping Jupiter, son, surely you don’t expect them to put their best workmanship into cars that are just surplus? These cars had price-support loans against them before they ever came off
the assembly line.“
So that time I shut up and stayed shut. I had better stick to engineering; economics is too esoteric for me.
Ok, banks, listen up:
Step one: donate whole shebang to Habitat for Humanity.
Step two: take big tax write-off as reward. Plus, no more liability.
Step three: houses get finished, made habitable.
step four: people who couldn't afford homes before now have someplace to live.
step five: everybody wins.
Welcome ... once again ... to the madness.
@#20, FredicvsMaximvs;
Step two I think is where things fall apart. Specifically 2(b) "Plus, no more liability."
I'm not from the states so I could be way off here, but up here in Canada there are rules that don't necessarily prevent people from donating to charities per se, but the liability issues make it simply not worth it because liability can't just be absolved through donation.. I suspect that would be the case here as well.
They're not unwanted homes. They're just not making someobody enough of a profit margin.
No sympathy what. so. ever.
Building codes don't necessarily exist for the purposes of creating a "nanny-state"
Firstly, they help reinforce consumer confidence in the real-estate market. Hypothetically, this should result in more houses being bought/sold, and thus stimulate the economy.
Secondly, any "problems" occurring as a result of your home's condition can quickly become everybody else's problem if you house catches fire, falls over, or is stuffed to the brim with asbestos.
On 9/11, a lot of people were very glad that the towers stood for as long as they did, had adequate emergency exit routes, and didn't tip over when they finally did collapse. Strong building codes helped mitigate what could have been a much worse disaster.
Areas prone to natural disasters should have strong building codes as well, to mitigate any damages that might occur. This is particularly relevant, given that the government is often responsible for "bailing out" these areas once a disaster occurs. The Southern US fails on this level quite frequently -- steel/concrete construction should be REQUIRED in areas prone to hurricanes and tornadoes.
Building codes also exist to protect tenants of leased buildings and visitors to public spaces.
If the houses aren't up to code, and their owners are unwilling/unable to repair them, it makes sense for the building to be condemned and demolished.
So-called 'market efficiency' causes 'perverse incentives' yet again.
Kinda beats the alternative though, to be seen in just about every East German city below 100.000 inhabitants.
You wouldn't believe *what* kinds of buildings are *for rent* here, never mind those *for sale*.
Scrap the "peaceful revolution" thingy, today, this place looks like a war-zone.
"@15 This is what happens when government doesn't have much interest in building codes."
And this is what happens in a place (Tempe, AZ, where I used to live) that's fanatical about enforcing code violations.
I don't know about elsewhere, but building codes in Arizona are often used by bureaucrats to crowbar people off their properties so that they can entice big businesses with those same properties (and giant tax breaks). Aggressively searching out and pursuing bogus "building code violations" was the method used by Tempe's bureaucrats to drive out most of downtown Tempe's interesting and independent businesses so the place coudl be turned into an outdoor shopping mall. (And it's now why there are empty retail spaces and FOR LEASE signs everywhere, now that the big retailers have either gone elsewhere or gone under.)
Sounds like Austin, Texas's bureaucrats may have used a similar method against the Rhizome Collective.
Reminds me a bit of how Roosevelt limited the amount of grain farmers could produce during the depression to keep the price up-- same limitation of supply.
Kunstler, Kunstler, Kunstler.
Anyone who's watched "Holmes on Homes" knows how important building codes are. Yes, sometimes they need to be fixed, but by and large they do protect the consumer.
These particular homes shouldn't have been built in the first place. They were built on spec (i.e., no buyers lined up) in the high desert of California, a location that is not sustainable given the state's water crisis. Better to tear them down.
@#24: It's also important to remember that while we own our homes, they almost certainly will be owned by someone else in the future. Someone innocent could wind up dead if I do something that doesn't meet code, hide it, and then sell the house.
Owning property has a certain degree of stewardship that a lot of people seem troubled by. Me, I like it. Any time a wall is opened up, I leave a photo or postcard or something for future owners. :)
FWIW, in this case I suspect they're in noncompliance with code not because the houses were bad, but that other aspects of the property were or because they never got inspections in the first place.