The Foreclosure Crisis Recovery Is Enriching the Elite
As the housing market continues to rebound, it appears that those benefiting the most from the recovery are wealthy Americans and real estate corporations. In her New York Times piece Boom Bust Flip, economic reporter Catherine Rampell describes how most foreclosures during the mortgage crisis occurred in middle and lower class neighborhoods, often when big banks refused to renegotiate mortgages. Most purchasers of foreclosed properties in the past five years have been wealthy Americans and large corporations like Blackstone, the private equity giant. Foreclosed properties were purchased at deep discounts and are now being resold at close to or in excess of the the original purchase price of those that were foreclosed on – meaning that housing prices have rebounded in some areas to close to pre-crisis levels. However now, the original middle and lower class homeowners have foreclosures on their record while wealthy Americans and large corporations are profiting handsomely on the housing price rebound.
brought down the housing market. Yet more than half of all homes that
went into foreclosure between 2007 and 2012 were actually in the lowest
price tier when they were purchased, and most were located in middle-
and lower-income areas. As foreclosures mounted and home prices
plummeted, observers have noted, it was disparately the wealthier
investors who bought them up at bargain prices. (Credit was hard to come
by, after all, which benefited cash buyers.) Blackstone, the
private-equity giant, bought almost 30,000 homes around the country and
now has a nationwide single-family-home rental platform. . . .
market has come back, and many of these investors are cashing in.
According to tabulations by Redfin, an online real estate listings site,
banks have already sold about 1.5 million of the nearly 2 million homes
that were foreclosed on during the past half-decade. Resales are
becoming more common and can be hugely profitable. A house in Redwood
City, Calif., for instance, was sold in a foreclosure auction in 2011
for less than half what the evicted owner paid in 2006. Ten months
later, it was flipped for close to its previous price. Another house in
Los Angeles went into foreclosure in 2012 and was flipped seven months
later for a markup of $254,000, or 66 percent. Of the 87,062
foreclosures in the last five years that were bought by corporate
investors and have been flipped, about a quarter were sold for at least
$100,000 more than what the investor originally paid, according to
Redfin.”
Once again, Main Street suffers while Wall Street scoops up piles of cash. As noted by Rampell: “The boom-bust-flip phenomenon is just one of the most obvious ways that
research suggests the financial crisis has benefited the upper class
while brutalizing the middle class. . . . Even before the recession, inequality was growing. Now, despite all the
promises that politicians of both parties have made, the housing market
and public policy are helping to accelerate the [inequality] trend.”
Source: http://corporatejusticeblog.blogspot.com/2013/10/the-foreclosure-crisis-recovery-is.html
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