Bank Demolishes New Homes In Depressed Market

Chalk this story up as being one that can be found in the category, “if you think that you have problems, then take a look at this.”

In California, the housing market has seen some of the steepest price corrections since peaking in 2006. Over the past two to three years, some local markets have witnessed home prices falling by as much as 60% including in Victorville a southern California community located along Highway 15 north of San Bernadino.

Sixteen Homes Meet Their Fate

One out-of-state bank who owned sixteen partially finished or new homes located in a Victorville housing development recently took drastic action, choosing to demolish the homes instead of trying to sell them in a depressed market. Guaranty Bank of Austin (Texas) figured that it was cheaper to dismantle the homes than to pay someone to finish them.

A representative from the bank explained that only four of the homes were substantially complete with most only partially finished and exposed to the elements. The bank gained control over the homes through foreclosure this past December when the builder, Matthews Homes, lost ownership.

Would Cost More To Finish Than To Destroy

The bank’s move was a drastic one, but based on estimates that it would cost more than one million dollars to finish the project and that the Victorville housing market is still saturated with unsold homes, the alternative would have been a costly one. Besides, with squatters and vandals damaging the properties and city officials levying daily fines, then that move seems to be logically based.

Most of the appliances in the homes had been stripped out with some of the wood slated to be ground up and used for landscaping. The remaining lumber will be resold, likely to find their way into new homes being built in Mexico.

Average home prices in Victorville once topped $600,000, but have since fallen back to $265,990 according to DataQuick, a research firm. Federal regulators have been pressuring Guaranty to dispose of its foreclosed properties, citing what they said are its “unsafe and unsound banking practices.” To that end, Guaranty now has sixteen fewer homes to worry about.

Source: The Wall Street Journal

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