Junior Ganymede
We endeavor to give satisfaction

Bulldozing homes

July 28th, 2011 by Vader

In order to pump up their prices by limiting the supply.

I understand the economic theory behind this, but my gut reaction is so negative I can’t help wondering if the theory is simply wrong.

 

Comments (9)
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July 28th, 2011 11:14:18
9 comments

agellius
July 28, 2011

I think it’s more like, it costs the bank more to keep them than to donate them in exchange for a write-off, or in some cases pay to have them demolished.

In the case of the cash-for-clunkers thing, I thought that was disgusting since it was basically a mass destruction of wealth, and by reducing the supply of used cars could only make them more expensive for poor people.

This home thing is different, because we’re talking about homes that are simply not economically viable in that it would cost more to make them habitable than they’re worth.


Vader
July 28, 2011

If the homes are in fact in rotten shape, that does change the picture.


Adam G.
July 28, 2011

Shades of farmers burning oranges in the Great D.

Though if the homes cost more in property tax and maintenance/repairs than their actual sell value, that’s different.


Bookslinger
July 28, 2011

Many are being sold for the value of the tax liens.

It’s all an adjustment. The market self-corrects when left alone.


zen
July 28, 2011

If we look at simply the amount of value owned, or even just existing, it is appearent we are making ourselves poorer, not richer. And we are doing it because of greed. It appears we are slowly digging our own grave.


Bookslinger
July 28, 2011

This is the direct consequence of congress mandating that banks give mortgages to people who otherwise didn’t qualify for mortgage loans. Thank Barney Frank, Christopher Dodd, and Teddy Kennedy.

GW Bush warned that most of those sub-prime mortgages would fail, and he was right. That was was pushed the boulder off the cliff.


zen
July 28, 2011

While there is a lot of truth to what you say, Bookslinger, what I find particularly abhorent, is that these were foreclosed homes. The bank forced people out of their homes, and then decided it wasn’t worth anything TO THEM. So they tear it down.


Adam G.
July 28, 2011

Doubtless the bank sees some value in not letting people stop paying their mortgage and still live in the home.

Also the bank may not have realized that the home was worthless until the bank took it over.

Finally, just because the home has been destroyed doesn’t mean the value of the land is gone. The land may even be worth more.


John Mansfield
July 29, 2011

Was GW Bush doing that warning before or after complaining about the unfairness of down payments keeping people from buying houses? Before and after?

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