Most of us have it figured out. We’re in the middle of a historic real estate "correction" that is effecting – read: depressing – property values across the country. Florida, Nevada, parts of California, may take years to recover. Such are the excesses of the Bubble come home to roost.
Across the Metropolitan area, the Chicago market has been effected less than other urban centers across the country. The story varies from neighborhood to neighborhood. Some communities struggle while others seem to chug along just fine. It is in these differences that many find opportunity. Here’s one way to look at it–
Continuing foreclosures in many markets across the country, including Chicago, worsen the already critical need for affordable housing according to affordable housing advocates. It’s not just hapless homeowners losing their homes; improvident investors too, are abandoning their rental properties.
There’s no governmental agency or program to turn to; in today’s economic climate, government agencies are more concerned with job starts than with housing initiatives. How about the banks? Few are known for their philanthropy and, as far as they’re concerned, they have their own problems. They’re so busy either trying to hide or, at the least, cover their losses, they can hardly be expected to participate in social uplift.
It should be about Affordable Housing…
Nevertheless, that very foreclosure catastrophe offers opportunities for creating affordable housing. As long as this “over-supply” of distressed housing persists market values will remain depressed and these homes will be available at a discount.
Astute investors will absorb much of this oversupply of distressed housing and hold the homes as rentals until market values recover, when they may choose to sell. The "unintended consequence" is this: Many of these homes–at least on an interim basis–will contribute to the community’s affordable rental housing inventory. Families displaced by foreclosure will find arguably comparable rental accommodations (which may prove more appropriate to their financial capacity).
To sell or to hold…
Other investors and dealers may choose to sell immediately. Given the currently depressed market values, such homes will only sell if offered at a discount made possible, in part, by the initial "distressed sale" purchase. All or part of the effective discount will be “passed through” to the buyer, resulting in enhanced affordability. Shed no tears for the dealer or rehabber in the middle; their profits are intact. It’s just that the price points at each stage have been reduced.
While less likely, some home buyers may bypass the dealer and buy directly from the foreclosing lender. Where this is achieved, the homebuyer may realize even greater affordability.
Affordable Housing is a market driven solution.
Aided or not by renewed governmental initiatives, foreclosures offer investors, dealers and potential home owners unprecedented incentives for creating affordable housing. If somewhat anomalous, this is a market driven solution to a pressing social problem. Fortunes are built by those who identify unique market demands and niches and mobilize to meet the need.