Zombie Property Apocalypse

The property sits vacant for over a year with some sort of notice attached to the front door. This notice seems to be a beacon for destroying the property, as each passing week it shows further signs of vandalism. It is an eye sore to the neighborhood, teetering between uninhabitable and a complete demolition. It was a decent property that is now in shambles, well you get the idea. In the real estate investment world a properties which lies vacant during the foreclosure stage and hence thereafter are fondly referred to as zombies.

These zombie properties peaked in number in the hundreds of thousands nationwide but have since declined due in part to legislative action, bargain rehab investors and  revised foreclosure practices. The crisis is far from over but has slowed considerably in 2016. A recent study by RealtyTrac shows a zombie drop of about 30% in the second quarter of 2016 and an overall drop in the last few years as a whole. This is great news for property owners who are patiently awaiting a return to ‘normal’ for housing prices, having watched there property devalue to below the ‘bubble’  rates of 2005-2007.

One of my properties, a duplex of course, was evaluated at near a 50% increase in market value from 1998 in 2004. I cringe to think what I could have sold it for in 2006, but the aftermath of the bubble brings the current value at about 25% of an increase from its original purchase price in 1998. If the bubble and all of the aftershocks like these zombie properties had not occurred and the value increased at a boring rate of 2% over the same period, it would be worth 36% more. That 11% difference can hurt if you are a real estate investor and own a few investment properties. These figures are super simplified but bring home the overall effect. I can’t complain to much about these numbers, at least the properties are not ‘underwater’, have some built up equity and the real estate market seems to be taking a slow and careful walk in the right direction. I can’t say that I will miss the zombie properties but can think of half a dozen great zombie b movies the zombie properties could have spawned!

 

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