I’ve been out today with buyers looking at houses and we paid particular attention to houses that are “underwater” – asking less than the owners owe on them. Our unanimous conclusion was that these weren’t worth anything except, perhaps, their rental value. Bad locations, shoddy construction – you tell me how a four-year-old house can already have rot and leaking pipes – and ridiculous prices. I don’t think anyone will find these particular houses are worth tying up money in. Even at, say, $900,000, that’s a lot of money to sink into a clearly depreciating asset, and for what?
There’s a reason these houses haven’t sold and I think there’s a reason they aren’t going to sell any time soon. I’m curious to see how long the banks can continue to carry them at loan value. Much longer and I think it will constitute fraud on their shareholders and the F.D.I.C.