The foreclosure crisis hit hard in both Michigan and Arizona, but the wreckage of bank-owned inventory has been much more difficult for the Michigan market to absorb than the Arizona market.
Evidence of that is the existence of the Michigan Land Bank, which was created by state law in 2004 to clean up the inventory of thousands of foreclosed properties that virtually no one else wants to acquire. The land bank is allowed to “manage, sell, exchange, lease, option, renovate, develop, and demolish properties within its inventory.”
Translation: the land bank figures out the best method for repurposing foreclosed and vacant properties so that it improves the neighborhoods those properties are in rather than drags down the quality of those neighborhoods. That can be done through rehabbing and reselling or leasing the properties, but often the best solution is to demolish the properties and re-purpose the land into parks or gardens.
Using money appropriated by the Housing and Economic Recovery Act passed by the U.S. Congress in 2008, the land bank has demolished approximately 400 “blighted properties” in the state.
Meanwhile Arizona seems to have no need of a land bank. Foreclosure properties and other properties are being snatched up like hot cakes by eager investors and home buyers. More than 18,000 Arizona properties in some stage of foreclosure or bank-owned were sold in the first quarter of 2012, compared to about 11,000 in Michigan — still an impressive number but well below the volume in the smaller state of Arizona.
While there are certainly other reasons having to do with unemployment and the health of the overall economy, one of the reasons behind the disparity between the fast-selling foreclosures in Arizona and the glut of unsold foreclosure inventory that no one seems to want in Michigan is the age of the inventory in each of the states.
In Arizona, one-third of all properties in some stage of foreclosure or bank-owned were built within the past 10 years, and 55 percent were built in 1990 or later. That means if you’re purchasing a foreclosure in Arizona, you’re likely purchasing a fairly recently built property that hasn’t been around long enough to fall into disrepair.
Meanwhile, in Michigan, 25 percent of all properties in foreclosure or bank-owned were built between 1940 and 1960. There is a sizeable group of Michigan foreclosures built more recently — about 10 percent were built in 1990 or later. But I would guess those are the foreclosures that are more in demand in Michigan, while the foreclosures built in the mid 20th Century are those that the land bank is having to soak up.
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