Forget the tumbleweed, spooky cemeteries and abandoned saloons. America’s 21st-century ghost towns have never even had a chance to host a ghost.
Some of these modern-day ghost towns include streets and streetlights but no houses. In others, there are unsold or foreclosed mega-mansions or sky-high condos that were never finished. There are foundations without walls, homes without windows or siding and cul-de-sacs that have been graded but never paved.
In many cases, these would-be housing developments are the victims of the real estate collapse that began in late 2006.
Now that the economy is on the mend and the real estate market is beginning to correct itself, it’s likely these places will bring up the rear of the recovery train. That, suggests John Gallo, a real estate analyst and finance lecturer at the University of Iowa, is because they’re tainted by their association with the housing collapse and recession.
“It’s going to take a long time to absorb those places into the market,” Gallo said in a report issued by the University of Iowa News Services. “Nobody wants to buy houses in those developments or build new houses because so many of the properties have or will become rental properties, and you don’t know who your neighbors will be.”
David Rice, president of New Home Star Corp., a company that sells new residential construction in 14 markets, ranging from Seattle to Orlando, says lumping all these ghost developments into the same category would be wrong.
“How quickly they rebound will be directly linked to the reasons the development stalled in the first place,” he said. “There’s a big difference between a development that sits 90 minutes outside a metropolitan area whose pool of buyers dried up, and a very desirable, well-located piece of land being developed by someone who got in over his head financially.
“If the project made great sense because of its amenities, location and price, it will make great sense again,” Rice predicted. “If it was a project located just another exit or two farther from the city than the last project that was built, well, I think those developments may be slower to recover — and it’s possible they may never be completed. We’ve actually seen that with some Detroit developments, where they’ve just pushed dirt over the poured foundations. They’re done.”
Are they a good buy?
Gallo believes governments and developers will likely need to offer incentives to buyers to bring them back into the failed developments. “If you can offer the right incentives and get the seeds planted, you can get things going again,” he said.
So, as new life is breathed back into these once-abandoned developments, does it make sense to be among the first to buy?
“It could be risky,” Rice said. “Who knows if the rest of the development will be finished or if you’ll be living there among sidewalks that lead nowhere? On the other hand, most of these projects will be severely discounted in the beginning, so you could potentially see a higher return. You just have to decide how much risk you’re willing to assume.”
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