Affordability Effort at Risk of Backfiring
Some real estate experts and economists are determining that the government’s plan to provide affordable housing is a bad idea.
The program, which passed Congress a few weeks ago, offers local governments $4 billion to buy, repair, and resell homes lost to foreclosure. Real estate experts and economists point out that the government will now be competing with lenders and private homeowners who have been struggling to sell in a depressed market.
In California, for example, most of the foreclosed homes are in areas such as the Central Valley, the Inland Empire and the Antelope Valley, locales known for their large stock of low-cost housing. If anything, these areas are becoming more affordable because of foreclosures, and sales have picked up in large part because of the availability of these homes at discount prices.
“Those foreclosures are being purchased at a very rapid rate, and they are going to families who have been previously price-excluded out of the market,” says Mark Boud, a consultant who runs Real Estate Economics in Irvine.
In Palmdale and Lancaster, among the state’s cities with the highest percentages of foreclosed homes, Joe Mayol, an associate with Keller Williams, says he’s selling foreclosed homes at the rate of five a week.
“One comes on the market, and it’s gone seven days later,” Mayol says.
“Things are starting to turn around,” says Pamela Vose, chief executive of the Greater Antelope Valley Association of REALTORS®.
“I think if the government had wanted to buy homes a few months ago, maybe it would have helped, but if they’re going to start six months from now or later, it can only hurt.”
Source: Los Angeles Times, William Heisel 8/20/08