I have long made the argument that shadow inventory is a bogeyman which, like shadow boxing, won’t hurt anyone, or at least won’t hurt the housing market in most areas, more than it already has. In effect it’s a sunk cost heavily affecting particular local markets, but will not affect the majority of the US where housing has stabilized. This article is an example of why that is.
Actually the conclusion of the headline is wrong. The fact that the banks refuse to recognize these losses on their balance sheet is bad for them, for the financial system, and especially for the US taxpayer, who stands behind Fannie and Freddie, who stands behind most of the failed, and mostly worthless, loans.
Neighborhoods crumble as thousands of homes sit in legal limbo, Sun Sentinel finds
By Megan O’Matz and John Maines, Sun Sentinel
April 29, 2012
Banks that made reckless home loans have been tiptoeing away from foreclosures in a tactic designed to cut their losses. The result: Orphaned, dilapidated homes dot the landscape from Kendall to Lake Worth.
There are no owners willing to claim and care for them.
A months-long Sun Sentinel investigation of property code violations involving abandoned homes uncovered case after case in which banks launched foreclosure lawsuits but then stalled or avoided taking ownership. In effect, the banks legally sidestepped responsibility for the empty homes, causing great harm to neighborhoods.
via Bad Neighbor Banks: Homes toxic for neighbors, good for lenders – South Florida Sun-Sentinel.com.
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