no surprise, victorville is a shithole in the middle of nowhere. i know a couple of people who bought investment homes there and sadly they are losing money each month from the negative cash flow. and that's on top of the 50% depreciation. this city, which had a population of about 75000 in 2003, built 11,000 single family homes from 2003-07. by contrast, los angeles (50 times the size) built the same number during that time. that's insane. it will be three decades before the demand catches up to the supply
Tearing down new housing in Victorville will help solve the supply issue, as makloda aptly pointed out. Now on to Temecula, Stockton, Sacramento, Inland, etc., etc.
I'm just waiting for someone to argue this will help stimulate the economy due to rebuilding... Perfect Keynesian policy - bulldoze houses then pay people to build them back up again! Repeat ad infinitum and everyone will have a job.
Well our first guess should be that it costs more to maintain or build them to completion than to bulldoze them. Whether that is due to city/state fines, insurance issues, fraud, or other factors I don't know. But no one sensible in the private sector will pay money to vaporize money unless they can eliminate an expense at least as big by doing so.
Right. And the more profound thing is that the bank obviously anticipated it would take a very, very long time, and a very, very, very low price, in order to be able to sell them. That's the issue - the bank literally must have said it 'will take 5 years or more to sell these homes' at any price. The bank should have donated the homes to a deserving homeless family and taken a tax write off.
Victorville- 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. 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 weâve already taken a huge hit on and lost a lot of money, or, we tear down the houses, Smith said. He said the builder put up the homes before completing the site improvements and failed to have enough money to finish roads, walls, and other improvements that bring the community into code. Everything just fell apart at that point and we cant sell homes that are not up to code, Smith said. He said the city of Victorville fined the bank once because the home are out of code and would have faced daily fines if Guaranty didnât do something with the vacant houses. There are still substantial dollars that need to be put into the land before the city of Victorville will give certificates of occupancy on the houses and the bank isnât willing to put forward that amount of money, Smith said. He said the homes are a liability to Guaranty and that all of them are heavily vandalized inside and out with broken glass everywhere. Our projections are that those houses would sit the way they are for at least five years, what would they be worth then? Smith said. He said once the homes are demolished the property will be put on the market again. Calls to the developer were not returned.
This illustrates why the bank is always "dumb money". First, any bank I have ever dealt with would release money from the development loan in partial amounts as construction progresses. I find it hard to believe that they released money to build spec homes without having roads/walls built. That said, I had a rental house catch fire a few years back. The insurance company paid the full amount of my insurance policy, so I decided that rather than rebuild I'd tear the house down, clear the lot, then sell the lot. It cost me about $10K+ to demolish the house and clear the land. This house was small...so maybe these Victorville houses would cost $20K-$30K to tear down. Hard to believe that right now they couldn't sell the houses for lets something well in excess of the cost to tear down to someone who wanted to finish them. I would also say that any city I've ever been in would waive fines as long as there is a plan, and progress toward dealing with the problem. It just takes working with the code officials. Victorville has these problems every decade. Last time I saw it was in the 90s, when nearly every house in town was for sale for $120K. LOL. OldTrader