Wednesday, October 7, 2009
Private investors dominate foreclosure market
Cities and municipalities are having trouble spending money allotted by the federal government’s controversial Neighborhood Stabilization Program, which Congress passed last year to acquire houses in blighted neighborhoods.The goal was to buy vacant properties at 1 percent less than appraised value, rehab them, and either sell or rent the homes to low-income residents. The stumbling block is that private investors and affluent homebuyers purchase the homes first at cheap prices.Some people don’t see that as a problem. “If the private market is coming back and buying houses and crowding the government out, that’s not a bad thing,” says Joseph Pigg, senior counsel at the American Bankers Association.In some areas, the nonprofit National Community Stabilization Trust is working with banks to give government access to foreclosed homes before they are put on the market. But that may be too little, too late. “It’s very unclear when the dust settles how much real change in neighborhood stability and quality of life we’ll see,” says housing expert Alan Malachi of the Brookings Institution.