Creative destruction

One side effect of the foreclosure crisis:  Many banks do not want to hold and pay taxes on run-down properties that no one will ever want to buy.  So they are razing the decrepit buildings that plague so many of our big cities and are donating the lots to new land banks.  These, in turn,  are making the land available for next to nothing for new development and neighborhood improvement projects.  (These include churches, which in some cases are getting land for expansion for pennies.) Thus we have an example of capitalism’s “creative destruction.”

See Banks turn to demolition of foreclosed properties to ease housing-market pressures – The Washington Post.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • –helen

    I hope the churches can get clear title to these bargain properties before they build anything but a parking lot on them!

  • –helen

    I hope the churches can get clear title to these bargain properties before they build anything but a parking lot on them!

  • Joe

    Well – its not the MinnSo selling the land.

    This is an aspect of capitalism that many people want to avoid or pretend is bad. Its not it is a necessary part of the market at work. Many say that creative destruction is a kin to a market failure – its not it is the market fixing the failures of men.

  • Joe

    Well – its not the MinnSo selling the land.

    This is an aspect of capitalism that many people want to avoid or pretend is bad. Its not it is a necessary part of the market at work. Many say that creative destruction is a kin to a market failure – its not it is the market fixing the failures of men.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    So, they kick out folks who are behind on the mortgages, then relabel the properties ‘abandoned’ and donate them. Surreal. This kind of stuff is like dumping commodities like milk during the depression rather than give it away to starving kids. You can almost visualize them kicking folks out and screaming, “We’ll burn it down before we will let you live in it.” Stuff like this gives credence to the OWS types.

    Couldn’t they donate the houses to Habitat for Humanity?

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    So, they kick out folks who are behind on the mortgages, then relabel the properties ‘abandoned’ and donate them. Surreal. This kind of stuff is like dumping commodities like milk during the depression rather than give it away to starving kids. You can almost visualize them kicking folks out and screaming, “We’ll burn it down before we will let you live in it.” Stuff like this gives credence to the OWS types.

    Couldn’t they donate the houses to Habitat for Humanity?

  • Steve Billingsley

    sg,
    Did you actually read the article? We’re not talking about suburban homes in decent shape. And we’re not talking about properties that some poor family got evicted from. The article refers to rundown properties that have little value in the residential real estate market and that non-profits are by and large benefiting from.
    Next time, actually read the article before you comment on it.

  • Steve Billingsley

    sg,
    Did you actually read the article? We’re not talking about suburban homes in decent shape. And we’re not talking about properties that some poor family got evicted from. The article refers to rundown properties that have little value in the residential real estate market and that non-profits are by and large benefiting from.
    Next time, actually read the article before you comment on it.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    I read it before I commented. It doesn’t say that the properties were unsaleable. It is clear that were foreclosed. That means someone had a mortgage on them until they were kicked out.

    A handful of the nation’s largest banks have begun giving away scores of properties that are abandoned or otherwise at risk of languishing indefinitely and further dragging down already depressed neighborhoods.

    They give them away rather than sell them at what the market will bear. What does “dragging down already depressed” mean? It means that selling the foreclosed property for the its market value will quickly reveal to the neighbors that their houses are not worth what they owe on them. The local appraisal boards would have to lower their tax assessments even more. Even the title of the article asserts that the goal is to artificially support inflated (but falling) property values. There is plenty of demand for housing but not at the inflated prices. It is not a free market where sellers sell for what the market will bear. The article is clear that banks were pretty nervous about these types of deals. This is just big business and gov’t figuring how to scratch each other’s backs and having us pay for it. Those properties should have been sold at auction a long time ago.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    I read it before I commented. It doesn’t say that the properties were unsaleable. It is clear that were foreclosed. That means someone had a mortgage on them until they were kicked out.

    A handful of the nation’s largest banks have begun giving away scores of properties that are abandoned or otherwise at risk of languishing indefinitely and further dragging down already depressed neighborhoods.

    They give them away rather than sell them at what the market will bear. What does “dragging down already depressed” mean? It means that selling the foreclosed property for the its market value will quickly reveal to the neighbors that their houses are not worth what they owe on them. The local appraisal boards would have to lower their tax assessments even more. Even the title of the article asserts that the goal is to artificially support inflated (but falling) property values. There is plenty of demand for housing but not at the inflated prices. It is not a free market where sellers sell for what the market will bear. The article is clear that banks were pretty nervous about these types of deals. This is just big business and gov’t figuring how to scratch each other’s backs and having us pay for it. Those properties should have been sold at auction a long time ago.

  • Steve Billingsley

    I agree that the properties should have been sold at auction a long time ago, but where is your evidence that poor people were dragged kicking, screaming and crying from their homes to live in the streets?

    Are banks trying to cut their losses? Sure. But if they can do that in a way that benefits others and helps their balance sheets at the same time, why is that a bad thing?

    Your original comment was still ridiculous.

  • Steve Billingsley

    I agree that the properties should have been sold at auction a long time ago, but where is your evidence that poor people were dragged kicking, screaming and crying from their homes to live in the streets?

    Are banks trying to cut their losses? Sure. But if they can do that in a way that benefits others and helps their balance sheets at the same time, why is that a bad thing?

    Your original comment was still ridiculous.

  • Joe

    I represent a couple of banks and foreclosure and the inevitable ownership of property is not generally the first choice of a bank. They don’t want to own houses. They sell them as fast as they can. If they can’t they have to find a way to recoup some of the loss they took on the mortgage – in some cases that means razing the property and selling the land to someone else.

    Also, many foreclosures are the result of the mortgagee simply handing the keys to the bank and waling away.

  • Joe

    I represent a couple of banks and foreclosure and the inevitable ownership of property is not generally the first choice of a bank. They don’t want to own houses. They sell them as fast as they can. If they can’t they have to find a way to recoup some of the loss they took on the mortgage – in some cases that means razing the property and selling the land to someone else.

    Also, many foreclosures are the result of the mortgagee simply handing the keys to the bank and waling away.

  • WebMonk

    sg – epic fail on knowledge of how the foreclosure process works and further failure by ridiculously dramatizing things way beyond reality.

    Like Joe mentioned, banks don’t like to foreclose. The foreclosure process has lots and lots of off-ramps to avoid getting to the final foreclosure. Rarely will an entity begin foreclosure before three payments have been missed, and if even partial payments are being made it’s fairly common for foreclosure proceedings to be held off for a year or more.

    Even after foreclosure happens there are many things that can happen that avoid eviction. And if eviction becomes possible, it can be months (or even years in extreme cases) before the eviction can be enforced. It’s even a common practice for the foreclosing company to offer several hundred to a couple thousand dollars for a person to hand over the keys a week or two before eviction dates to avoid tenants trashing the place.

    But, sure. Let’s make up hair-raising stories about people being dragged kicking, crying, and screaming from their homes. Who cares if that in any way reflects reality; it’s a lot more entertaining.

    I’m also somewhat skeptical of your claim that you read the article. At best you skimmed it and probably only the front page.

    Note:

    After countless meetings, however, land bank officials and banking representatives shed their initial wariness of one another. …. We’ll take your worst properties, the ones not worth keeping. Pony up for the demolition, and you’ll still come out ahead. Just don’t walk away from them.

    This isn’t something the banks are doing frequently or quickly. They are doing it with reluctance and are only doing it to properties which are the worst of the worst – the ones that are being abandoned.

    Why would a bank abandon a property? Because they can’t sell it or rent it. No one wants the buildings they are tearing down. No one lives in them. No one wants to buy them.

    These are abandoned properties in urban environments. These tend to drag down the values of the properties around them and are attractive to gangs and drug dealers.

    If you absorb what’s on the second page you’ll note that the homes they were destroying were empty and rotten. Other descriptors: abandoned and vacant.

    Hey! What do you know! No families being evicted. No crying. No cops dragging people kicking and screaming. In fact you have the neighbors all around being glad it is finally being done.

  • WebMonk

    sg – epic fail on knowledge of how the foreclosure process works and further failure by ridiculously dramatizing things way beyond reality.

    Like Joe mentioned, banks don’t like to foreclose. The foreclosure process has lots and lots of off-ramps to avoid getting to the final foreclosure. Rarely will an entity begin foreclosure before three payments have been missed, and if even partial payments are being made it’s fairly common for foreclosure proceedings to be held off for a year or more.

    Even after foreclosure happens there are many things that can happen that avoid eviction. And if eviction becomes possible, it can be months (or even years in extreme cases) before the eviction can be enforced. It’s even a common practice for the foreclosing company to offer several hundred to a couple thousand dollars for a person to hand over the keys a week or two before eviction dates to avoid tenants trashing the place.

    But, sure. Let’s make up hair-raising stories about people being dragged kicking, crying, and screaming from their homes. Who cares if that in any way reflects reality; it’s a lot more entertaining.

    I’m also somewhat skeptical of your claim that you read the article. At best you skimmed it and probably only the front page.

    Note:

    After countless meetings, however, land bank officials and banking representatives shed their initial wariness of one another. …. We’ll take your worst properties, the ones not worth keeping. Pony up for the demolition, and you’ll still come out ahead. Just don’t walk away from them.

    This isn’t something the banks are doing frequently or quickly. They are doing it with reluctance and are only doing it to properties which are the worst of the worst – the ones that are being abandoned.

    Why would a bank abandon a property? Because they can’t sell it or rent it. No one wants the buildings they are tearing down. No one lives in them. No one wants to buy them.

    These are abandoned properties in urban environments. These tend to drag down the values of the properties around them and are attractive to gangs and drug dealers.

    If you absorb what’s on the second page you’ll note that the homes they were destroying were empty and rotten. Other descriptors: abandoned and vacant.

    Hey! What do you know! No families being evicted. No crying. No cops dragging people kicking and screaming. In fact you have the neighbors all around being glad it is finally being done.


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