What is $1 billion between fellow taxpayers? If you are Fannie Mae or Freddie Mac, it is the necessary cost of handling the inventory of foreclosed properties with respect to property maintenance (aka board up, services, repairs, etc).
In a recently released 78 page report by the GAO (Government Accountability Office), the report indicates that vacant inventory of properties increased by more than 50% in the matter of just a decade. Of course, the largest portion of this increase was due to the melt-down in the housing market.
And the damage doesn't stop there...The GAO report referenced other studies that found the impact of vacant foreclosed properties possibly reducing the prices of nearby homes by as much as $17,000 per property.
The domino effect is quite apparent in the substantial revenue short-fall that many municipalities are experiencing due to millions and millions of dollars in lost tax revenues due to falling property values. Then, to make matters worse, there is the cost (or additional burden) to local municipalities of dealing with this inventory of vacant properties.
For example, a recent study by Woodstock Institute, found that 69% of the vacant properties registered with the city of Chicago were associated with a foreclosure filed between 2006 and the first half of 2010. The total of vacant properties was over 18,000 and Illinois experienced an increase in vacant properties in excess of 60%, which was above the United States average of 51.2% increase.
Unfortunately, it is not a pretty scene and it is not looking like any real improvement at least in the coming year. The report is available at the GAO.
Michael Hobbs, PahRoo Appraisal & Consultancy
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