One in nine homes across the U.S. is empty, according to the Census Bureau. Experts predict that the current overstock will change the real estate landscape for years, though some areas may see real estate values stabilize by the end of this year as buyers seeking bargains begin to reduce the backlog of homes.
The white notice taped to the front window of a luxury home in the Vasaro subdivision is a telltale sign.
“Bank-owned,” says real estate agent John Groves, without skipping a beat.
There are other clues. Dirt where a lush lawn should be. Vacant lots on either side. And the sale price: $729,900 for a never-lived-in, 5,500-square-foot, five-bedroom, 3.5-bath custom home that about a year ago was listed for more than $1.2 million.
In a nearby subdivision of this community of 246,000, one of the largest suburbs in metropolitan Phoenix, a foreclosure sign in the front yard of a more modest house signals yet another financially troubled home needing a buyer.
Multiply that scenario hundreds of thousands of times. From Maine to Hawaii, millions of new McMansions, post-World War II bungalows, modern downtown lofts, exurban town homes and inner-city row houses sit empty. This unprecedented glut of vacant homes – one in nine homes across the USA, according to the Census Bureau – will change the real estate landscape for years.
Already, rock-bottom prices in the hardest-hit markets are attracting first-time home buyers who could not afford a home during boom times. Some areas may see real estate values stabilize by the end of this year, as buyers seeking bargains begin to reduce the backlog of homes for sale. At the same time, the availability of rental housing will widen, potentially pushing down the cost of renting.
“We overproduced by 1 million new units,” says Edward Glaeser, economist at Harvard University. “Now we have to work our way through the stock.”
What happens to the 14 million empty houses, condominiums and apartments and the 9.4 million that are for sale? How long will it take to absorb this massive and unprecedented oversupply of housing?
“Two more years,” Glaeser says. His is one of the more optimistic estimates. Projections by housing analysts range from as early as this year in some areas to as late as 2014 in others.
“From a pure need for shelter, we don’t need more homes built for the next several years,” says John Burns, head of John Burns Real Estate Consulting in Irvine, Calif., who says the recovery might take five years in some areas. “We clearly overbuilt.”
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©2009 Florida Assocation of REALTORS®
The heirs of the late Leona Helmsley have cut the price of her Greenwich, Conn., home by 40 percent to $75 million from $125 million (property taxes alone are $1.8M). Helmsley and her late husband, Harry, paid $11 million for the property in the early 1980s. The renovation of the 20,000-square-foot, Jacobean-style mansion led to her conviction for tax evasion in 1989 after she billed her company for millions of dollars in costs related to redoing the home. She served time in federal prison for the crime. The $50 million reduction is believed to be the largest price reduction ever on a U.S. house.
