After being held up last year because of the robo-signing scandal, foreclosed homes are due to hit the market in ever-increasing numbers. The bad news? They’ll be worth jack-squat. Former Treasury Secretary Lawrence Summers once said, “in the history of the world, no one has ever washed a rental car”. He may be a little off (I washed a rental once, when I couldn’t stand the dirt) but it’s a cinch that a homeowner with no money who knows he’s going to lose his house eventually isn’t going to spend much maintaining his home. That’s why on average, homes in foreclosure for under a year lose 35% of their value while those in the process two years drop 60%. And 43% of all houses currently in foreclosure have been there two years or longer.
A quarter of homes in long-term foreclosure may need to be bulldozed, according to the Cleveland Fed’s report. About 500,000 foreclosures in the U.S. are vacant, according to a housing study Fed Chairman Ben Bernanke sent to Congress in January. Many of them are “badly damaged,” he said.