Empty Homes for Sale

To say that residential real estate is now a buyer’s market is almost a joke. Probably anyone and everyone that lives in the United States knows how high the foreclosure rate is, and how slow new home construction sales are. What this has meant to the market is an absolute glut of vacant and empty homes for sale.

And what do we mean by glut? The Census Bureau report puts the number of vacant homes for sale at 2.07 million in the third quarter, up about 2 percent from the second quarter, and 7 percent above year ago levels. As a matter of fact, the number of vacant homes available has increased some 57% in the last three years.

CNN’s Money Magazine illustrated the point nicely by comparing it to the Detroit metropolitan area, which had 2.08 million households reporting for the 2008 Census. As they said, picture every house and condo empty, with a “for sale” sign in the front yard of every home of the city of Detroit to its suburbs, all the way to Flint and Ann Arbor.

The mortgage meltdown felt especially in the sub-prime category is of course mostly to blame for this. Purposely under-inflated introductory rates of adjustable rate mortgages caused a spike in mortgage payments that many borrowers were simply not able to meet.

Additionally, many borrowers have faced extraordinarily tough economic situations. It seems that every day there is news of yet another round of layoffs in the automotive and other manufacturing industries – and sometimes these number into the thousands, not just a few hundred here and there.

But also to blame is the overbuilding by the new home construction industry in the middle of the decade. No doubt these problems went hand-in-hand, as borrowers previously unable to get mortgages were now suddenly approved and were easily seduced into owning a home, so new construction demand soared.

Investors too played a part in this, as they pumped fresh cash into the new construction industry, as real estate development became a hot ticket item, spurring the trade forward.

The poor economic situation and over-populace of available homes has thinned the ranks of potential buyers, meaning that many people are finding that they need to vacate a home before they have another buyer. This may be due to foreclosure, or it may be because of the need to relocate for a job.

“It's really striking how high that is compared to historic levels,” said Dean Baker, co-founder of the Center for Economic and Policy Research, as quoted in Money Magazine. “It's a lot of homes sitting there vacant. It's very hard to see how we're near a bottom, when you have that much excess supply.”

Baker said that the owners trying to sell the vacant homes are going to be very motivated sellers, since it's difficult to carry the cost of a home that isn't having any use. That will drive down home prices and values for all homeowners. And he said that the problem is likely to get far worse as the problems in the mortgage markets could cause problems if foreclosures increase as expected.

“It's very hard to see how this doesn't get worse,” Baker said. “It's certainly possible we could see 3 million, maybe 4 million.”

There are estimates that about 2.8 million homeowners could see the payments on their sub-prime mortgages reset higher in the next two years. If they can't afford the new payments or be able to refinance due to the significantly tighter mortgage market, that could cause an additional flood of empty homes onto the market.

The good news.

It’s hard for many to see where the good news is in all of this housing mess. Families paying an extra mortgage for a home they’re not living in, others scrambling to find housing after being evicted following a foreclosure, these are common occurrences right now.

The National Association of Realtors reported that the pace of sales of existing single family homes fell to the lowest level since 1998 in September. Its reading for the sales rate for all existing homes, including condos and other multi-family units, was the lowest since it started tracking those sales in 1999.

Thursday a separate Census Bureau report showed the pace of new home sales fell to an 11-year low in August, as it revised lower its earlier estimate for sales that month and for July. The September sales pace of new homes was a touch higher than August, but some experts questioned that estimate given the report of a jump in sales in the West.

And there’s good news in this?

But for those who are interested in investing in property or who haven’t been affected by the economic slowdown, this is good news. A buyer’s market is an understatement; home buyers now have the pick of the litter, and even the most luxurious homes have seen a tremendous drop in their asking price.

New home builders have reported losses for the past few quarters, and some were much larger than anticipated. Many are cutting new home prices by 15%, 20%, and even up to 25% their original asking price. Some were also reporting that their orders and sales on homes were cut by almost 50%.

No end in sight.

Unfortunately for those hit hard by the economy and who were almost suckered into purchasing homes that they really couldn’t afford – or can’t now afford – it seems as if there really is no end in sight. Many parts of the manufacturing sector are reporting continued losses and layoffs. And of course having a home foreclosed upon is not the end of the story, and the mortgagee is still saddled with the unpaid note, and even continued debt as the bank incurs expenses in trying to manage and sell the home.

However, for real estate investors who are looking to make some smart moves, homes are for sale at bargain basement prices, and investors are taking notice. More and more are snapping up foreclosed properties for rental or resale purposes. So if you’re ready to play the market and can stay smart about it, a vacant home can actually be a gold mine for you.

Contents

• How Much Mortgage Can You Afford?
• Buying a Good Vacation Home
• Buying a Home for Resale Purposes
• Claremont is the Top Earner – and Most Expensive
• Commercial Real Estate Still a Safe Bet
• Determining Your Offer Price
• Empty Homes for Sale
• Exercise Caution When Flipping
• Expensive and Alternative Homes
• Figuring Property Taxes for the High-End Real Estate
• Florida’s High-End Real Estate Goes Limp
• Foreign Investors and the Hamptons
• German Investment in U.S. Real Estate Creates a Bidding War
• Getting Wealthy From Real Estate Investing
• Going Green
• High-End Goes High-Tech
• High-End Investors – Why Immune to the Real Estate Crunch?
• High-End Real Estate Feels the Crunch?

• High End Property Site Map