If you can't sell 'em, demolish 'em. This appears to be a new strategy adopted by some big banks struggling with a glut of foreclosed homes on their books. A new report indicates that some houses are being leveled by bulldozers, rather than revitalized and sold. Is this really a smart strategy?
Lindsey Rupp from Bloomberg reports on the phenomenon. The idea is that a bank donates a foreclosed home and possibly even pays for its demolition. One recent example is Bank of America donating 100 foreclosed homes to a Cleveland-area agency that will revitalize the property for other uses.
Source: Why Are Banks Bulldozing Foreclosures? - Daniel Indiviglio - Business - The Atlantic
First, the government institutes TARP which prevents debt write-downs, which would have assuredly allowed real estate prices to decline. Lower prices means more affordable housing; you know, that supply and demand thing.
Unsurprisingly, having spent billions pumping up the market, then spending billions trying to preserve it, we are now going to bull doze the supply because well, we've been propping up demand so long.
So banks and governments will now spend more money solving a problem they created and prolonged.
And you wonder why we are in trouble? With friends like these, who needs enemies?