 | “Wait a tic… Blimey, this redistribution of wealth is trickier than I thought." |
The Washington Post (hattip Lance) alerts us to a bold new plan:
"Gerald E. Connolly, chairman of the Fairfax County Board of Supervisors, proposed last night using county funds to buy foreclosed properties and then sell them at below-market prices to working families.
Doing so would not only create affordable housing in one of the nation's most expensive communities, but it would also help protect neighborhoods in danger of decline from the exploding number of homes going into foreclosure across Fairfax, Connolly said in his annual State of the County speech at the government center.
'Taking a home out of foreclosure would help restore stability to a neighborhood and restore confidence in the local real estate market,' said Connolly, a candidate for Congress. 'Workforce housing is in great demand but short in supply.'"
18 comments:
That's an interesting concept & one worth debating. While I generally support the concept, the part that makes me nervous is the price at which the county would acquire these properties. If the county purchases REO properties at the banks' wishing prices, I'd say no. I'd rather see the county take over REO properties that are tax delinquent with minimal compensation to the owners.
Supervisor Herrity's point is also a good one, which is why I believe taxpayers shouldn't lose money in this program. The REO owners shouldn't even get to recover costs, after all, they didn't perform due diligence before making the loans in the first place.
Since my wife and I both work (e.g. we are 'working' folks), I think Fairfax needs to buy one of the foreclosures in McLean or Great Falls and sell it to us for a song (1998 prices, not adjusted)!
they did it in great britain (let people buy council housing at a very low price) and blue collar ownership rates in london surged, followed by huge surge in overall prices.
novawatcher,
Which makes me think - what if the working class don't want to live in blighted old housing? Of course, not all foreclosures are this way, but we know where most of them are concentrated in Fairfax County - Herndon and the like.
I noticed that a lot of commenters at the Washington Post article whinging about the relationship of developers, builders, and politicians. So this idea wouldn't fly, probably, but I think an idea (put very simply) might be for the county to give incentives to builders (low proffers, taxes) to rebuild old neighborhoods where the housing stock and street layout is poor.
It would help the local building economy and if the prices were low enough on the homes, encourage buying.
"to rebuild old neighborhoods where the housing stock and street layout is poor."
old schoolers will complain about "losing the feel of the neighborhood" and people will bitch about mcmansions in the neighborhood next to it.
"they did it in great britain (let people buy council housing at a very low price) and blue collar ownership rates in london surged, followed by huge surge in overall prices."
the banks won't even sell on short sales... so why would they let go at a low price?
Why isn't the bank responsible for property taxes?
IMHO, this is a terrible idea. It is nothing more than a give away to the banks, allowing them to sell properties that would otherwise lay fallow. Why not just cut out the "middle man" (i.e. the county). If banks really want to move the properties, then lower price until someone buys!
On the other hand, I am all in favor of what the city of Baltimore did some time back, which was to sell of tax delinquent properties (as ralph mentioned) for fire sale prices so long as the owner agreed to put significant money ($100k I believe) into fixing it up.
"IMHO, this is a terrible idea. It is nothing more than a give away to the banks, allowing them to sell properties that would otherwise lay fallow. Why not just cut out the "middle man" (i.e. the county). If banks really want to move the properties, then lower price until someone buys!"
Exactly... this is a classic case of a "good" idea in theory that would be terrible in practice.
The market is correcting itself. It is moving slowly, but in time affordable housing will return.
There is no need for the government to waste money trying to pay for overpriced houses in order to sell them for loss. (How do I know they are overpriced... they aren't selling...)
In the end the lenders will cut prices until the houses sell.
Since a big part of the problem is people waiting on the sidelines for the ever lower price, the county could rectify the situation by simply passing lesgislation that it will not record any sale of property where the purchase prices is not at least equal to (or greater than) it was at the last sale point.
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;) LOL
Some good points made by all here, But like Herrity's comment in the article may be biased by their own situations.
There are many of us in the service sector that were being priced out the FFX market. In particular us singles.
Even with some of the bargains out there, it still takes half of our incomes to afford a place of our own after taxes. Whether renting or buying.
A median income of $100K for a family does struggle. But perhaps desires to live larger than they can afford leads to that struggle.
We do need affordable housing in FFX. We also need people to be more responsible about their lives.
What would this do to the value of homes in the neighborhoods of the forcelosed homes? Wouldn't the county be competing with regular homesellers?
Another politician playing with public funds. If FFX county has that kind of funds at it's disposal then it should first build the metro to Dulles.
If FC has that kind of money, they should return it to the taxpayers!
This is a terrible idea. Let the markets work, cut out the government.
If FC has that kind of money, they should return it to the taxpayers!
This is a terrible idea. Let the markets work, cut out the government.
I love this idea! I think that when the Alt A-s hit the higher priced neighborhoods, the neighbors will be delighted for the County to buy them homes and use them as shelters. I can see the residents of McLean and Great falls will really take to this idea...WTF!
This is a horrible idea. In addition to continuing to prop up the outrageously high prices in the area, you will be giving the homes to people who can't afford the upkeep. The neighborhoods will crash!. It’s expensive to OWN a home. Not just to buy one. Gerry is nuts with this idea.
The market has to rationalize. It’s painful for sure, but I find it the pains eases quicker when you rip the band aid off quickly, rather than the torture of the slow pull.
Pat said:
"The market has to rationalize. It’s painful for sure, but I find it the pains eases quicker when you rip the band aid off quickly, rather than the torture of the slow pull."
Interesting analogy. The fear of tearing off the band aid is always far greater than the actual pain of tearing off the band aid. I think we'll find that once we've gone past all this fear, the relatively few (and I emphasize "relatively") families that are in danger of losing their homes won't really affect "the many". Prices in some areas have dipped far more now than they would have minus all these "doom and gloom" prophesies which the main stream media have broadcast widely. Once we get over the fear, things will quickly return to normal. And how best to get over that fear than to just let things run their course quickly. For once I may find myself in agreement with a BH viewpoint. Though obviously we see different things resulting from the same actions.
Pat, I think what is missing is what "below market rates" and "working families" are going to be defined as.
Could be that the foreclosed properties are already below market rates, and the county is just signaling that it does not intend to turn them around for a profit.
I sense a bit of fear mongering with the comment about buying homes in McLean and Great Falls and using them as shelters. Unless I missed the article didn't say that.
The problem in trying to discuss the values of where property should be is that it is different for each neighborhood and construction type.
Just using an inflation calculator, my old Herndon TH that I bought in 1993 for $110K would be $160K in 2007 dollars. For many years my TH lagged behind in value. The current value of foreclosed/short sale homes there are now in the $160K range.
For those that are hoping that the market totally tanks in order to bring the prices down. Are you willing to pay massive real estate tax increases for declining values?
Even if we were not see much more of a correction here in this area. How many families currently can afford places at the reduced prices we are seeing right now? Lending is getting tighter. Salaries are not growing for lots of folks.
Something has to give. Otherwise the values of even areas like McLean and Great Falls will decline as places sit vacant - eroding the tax base.
Maybe it is better to help those that can afford "reasonable" prices a chance at owning a home again.
For me there needs to a sound set of rules if FFX does go forward with this:
- The people they sell to should have the means to be able to keep the place up. The basis of selling a foreclosed home that was bought with county $'s would be to assure that the county does not see further eroding of the real estate tax base.
- If the places need fixing up (as many of the foreclosed properties I have visited need), efforts need to be made to make sure that the work can be done. Even if it means a further reduction in the selling price - but with the repairs factored in.
- Those that walked away from their homes simply because the home lost major value - yet they were still able to afford the payments - would be excluded from buying in on the program. (IMO they should never be allowed to buy a home again - but that is another topic.)
- Those that lost a home to foreclosure due to predatory practices would be required to college level type courses in personal finance and home ownership.
Having watched Connolly for many years, I believe that this is mostly about propping up assessment values; selling the houses at 'below market prices' will give the County the fig leaf that those are not market setting prices, and allow them to keep assessments higher than they should be. I think it will be extremely hard politically for the County to raise tax rates in this environment.
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