Driving through my neighborhood, this is the story of housing written on the front-yard signs and plastered to the walls of crumbling homes. There’s no way to exaggerate this: a full half of the houses between mine at the main road are abandoned. And this isn’t some “main road” out in the middle of nowhere, it is about five miles to the beach, downtown, or the financial center of the city. This is a main road for a city with an NFL team and almost a million residents.
Even during the bubble, this neighborhood wasn’t too popular unless people were coming in to build expansions. The houses were originally built in the 1950s as military housing for the nearby naval base. The construction is solid but the space is modest: concrete blocks apportion a meager 1,000 square feet. During the construction boom, people were more willing to buy 3,000 square feet worth of plywood and chinese drywall. I always wondered why people bought weak-walled homes in the middle of a hurricane zone, but I suppose the entire housing situation has been an exercise in insanity. Credit was plentiful, exuberance was irrational, and no one was really thinking of the future.
That future is today, and the “For sale, for rent, foreclosed” signs don’t come down: they just devolve to the next level of seller desperation. When they realize the house won’t sell, they try to rent it out at a loss. At least they’ll be able to avoid foreclosure, right? Not yet – every house that goes empty here is soon bank owned.
The first empty house is a fixture on our street. Its two houses down and its one of the bigger ones on the block at a stately three bedrooms and 1,700 square feet. It even has.. er.. had a pool. This one has been empty since we moved in nearly three years ago. It seems to be owned by some trust fund, but the only ones living there are raccoons, wild weeds, and mosquitoes. Every applicance, piece of hardware, and inch of copper pipes has long been stripped, and the windows are boarded up with a cheap plywood that is now also starting to rot. The online listing claims the property is for sale at the low price of $60,000, but the city posted notices on the front door announce that the structure has been condemned as unfit for human habitation. Of course, the city doesn’t have funds for demolition…
Two doors down again, there’s a jungle of weeds where one of the street’s nicest gardens used to be. A more modest and average house, this one is two medium bedrooms and a small screen porch. One day, we realized our neighbors weren’t outside tending the yard (it really was a nice yard…). A week later, there was still no sign and the weeds had sprouted a few extra feet. The court records say foreclosure, the family must have been forced out. This was two years ago, and there’s no for sale sign, no listings online, and no visible maintenance. What good does this do the bank, the neighborhood, or the crafty gardener who used to call this place home?
A corner house sits “For Sale or Rent.” The new job they moved for must have paid well if they’re able to sit on an extra mortgage for the last few months. But again, there’s no real estate agents showing the place off or curbside shoppers slowing down to take a second look. Next to them, there’s another empty house for just $29,000. The bank kicked out the mortgage borrower when he was almost done paying, and you could buy his home instead for a fraction of what the other houses cost. You even get the shed and the garage he spent all those afternoons and weekeneds building.
A few blocks down the other way, my friends just walked away from a mortgage.  They each had a home, so when they got married they had to rent one out. After years of sucking up the loss on tenants who would not pay the bills or keep the place clean, real estate agents were not even willing to attempt a sale in this market. So my friends are at least fighting back: They’re taking the risk back to the bank. State laws will, of course, give the banks a chance to sue for their losses, but we’ll see if the courts find anything but profit and bailouts in the bank’s books.
It could go on and on…
This isn’t an economic story or a financial abstract that informs your investing patterns: this is a human story and an utter failure to act humanely. As we throw people on to the streets, we let resources sit idly and ultimately decay. Rather than write down the value of our debts and assets to a realistic and sustainable level, we’re watching those assets drop to zero and the debts spiral due to a mix of fines and eventual demolition costs.
It would appear, however, that the insanity of our financial system didn’t end with the boom…