We’ve known for a few years that the foreclosure crisis has led banks to offer some seized homes at bargain-basement prices. Now an executive with a real-estate company that focuses on foreclosures has predicted that this sales trend could have an upside for hard-hit Midwestern cities, transforming them into some of the most desirable places to live in the country.
Last week, Daren Blomquist, a vice president of RealtyTrac, published “The Rust Belt Is Poised for a Comeback” at Business Insider; it’s part of the website’s Great Debate series, which asks the question, “Where Will Americans Be Living in 20 Years?”
Blomquist’s answer: Chicago, Cleveland, Detroit, Indianapolis, and Milwaukee.
As Blomquist noted, each of those cities had more than 4,000 unsold bank-owned homes (Chicago had 32,000). “But from these ruins will rise—slowly but surely over the next 20 years—five cities with solid economic foundations, rebuilt from the ground up and supporting robust real estate markets,” he wrote.
It starts with land banking, an amorphous term that, in the context of foreclosures, mostly refers to municipalities buying up or taking control of large numbers of vacant homes in order to have control over what happens to them as a combined mass, rather than one by one. In some instances, that can result in the demolition of swaths of derelict structures to create new parkland; in the case of the Cook County land bank initiative backed by county board president Toni Preckwinkle, that would mean acquiring and rehabilitating “unproductive properties” as part of a neighborhood economic development program.
Detroit and Cleveland are already tearing down many empty homes and land banking the properties. Blomquist lauds the cities for mining the transformative opportunity in foreclosures. “The rust will be knocked off,” he wrote, “leaving five shining examples of the persistent power of the American dream.”
I called Blomquist with a few questions.
Q: Will a stock of nicely renovated, low-cost housing be enough to counteract Chicago’s weather and make it one of the places in America that people most want to live?
A: I lived in Chicago [attending Trinity University] for five years, so I know the weather is a consideration. I do think that as Americans continue to get healthier in their old age, that will help mitigate some of those concerns about cold weather. But Chicago and the other cities have been population hubs for a long time, so people have been able to overcome the weather issue.
Q: How does Cook County’s land-bank proposal mesh with your forecast?
A: I haven’t followed it closely, but those are the types of creative ideas that would help transform what a city looks like in the 21st century.
Q: You’ve written about land banking only in Midwestern cities. Is it a better idea here than in places like Miami or Las Vegas, which also have a lot of foreclosures?
A: Yes, because of the age and size and condition of the properties. In the Rust Belt, a lot of the foreclosures are happening on properties that were built decades ago. They’re smaller properties that buyers may not be as interested in. If you look at Las Vegas or Florida, a lot of the foreclosures are actually on properties that were built in [the 21st century] during the building boom, so those are properties and locations that people are interested in purchasing and living in.
Q: Is Chicago different from the other four cities in any significant way?
A: From what I know of the cities, Chicago as an overall metro area has been the least impacted by foreclosures. That’s not to say it hasn’t been impacted, but because its economy is more diverse, it has been impacted the least of all of them. So it’s probably less likely that Chicago will be able to kind of reinvent itself. It hasn’t truly hit bottom, but some of the others have nowhere to go but up.
Q: What do you think is the likelihood that the transformation you describe will happen?
A: (Laughs) There’s probably a 50-50 chance that this opportunity will be grabbed, or that we’ll miss the opportunity and just move on.