Foreclosures at Historic Highs, but Historic Homes Not Feeling the Pressure
Historic homes take a battering.
Time wears at them: Roof lines sag, chimneys crumble; developers threaten, and bulldozers rumble.
But for the most part, historic homes have not been battered by the mortgage foreclosure crisis. If you are hoping to scour the foreclosure market for bargains in historic homes for sale, you might have a frustrating search.
Nationwide, foreclosure rates continue at record levels. According to RealtyTrac, a California-based foreclosure-listing company, the number of borrowers who have missed a payment or are in foreclosure is at 15 percent, the Associated Press reported in March. A record number of homes were lost to foreclosure in the first quarter of this year.
Of course, like any other segment of the real-estate market, there have been some foreclosures among historic homes, but those foreclosures have occurred at a far lower rate than the general real estate market.
Maps Tell the Tale
Royce Yeater, Midwest Director for the National Trust for Historic Preservation, said overlaying maps of Detroit and Providence historic districts with RealtyTrac foreclosure maps last year made it clear that foreclosure rates in those historic districts was much smaller than in the surrounding neighborhoods.
Yeater said his observations tell him this is a widespread trend, and not just limited to those two cities. But, he said, he didn't have a concrete answer as to why.
He said it is possible that the historic-preservation label itself might be a stabilizing influence, or that historic areas attract more economically stable buyers.
"It is clear that in upper-end historic districts, the affluence and stability of buyers helps shape the pattern (of fewer foreclosures)," Yeater said.
Celia Dunn, of Celia Dunn Sotheby's International, which deals in high-end historic homes in the Savannah, Georgia area, agreed with that perspective. "People who own most of these (upper-end) homes have resources," she said. "They tend to have owned the homes longer and are not in financial trouble with them."
Dunn said she knew of only two foreclosures of historic homes in the Savannah area in the past year, both of which sold.
Dunn surmised there would be a greater chance for foreclosures in low-end, fixer-upper historic homes, which investors purchased to get investment tax credits.
"When the homes lose value, they can't sell them," she said. And if renters aren't there, or if the investors don't want to rent the homes, they might walk away from the investment, she speculated.
But Yeater said he did not think that was the case, and had not seen widespread speculator foreclosures in those lower-end historic districts.
"Many (historic districts) blanket areas of old and very affordable entry-level housing," Yeater said. "…Many historic districts are populated with ordinary working folks.
"It might be true that some flippers were caught, … but no more so than in every other kind of neighborhood."
Foreclosures Can Help Stabilize
Yeater said the impact of foreclosures on a historic neighborhood depends much on the neighborhood--whether it is strong or "on the bubble."
"Where the neighborhood is strong, it is able to weather a few foreclosures," he said. And, "the precipitous drop in property values is making some wonderful historic homes available to those who previously were priced out of the market."
In strong neighborhoods, where the homes often are attractive and well built, the resale of foreclosures has been rapid and helped stabilize the neighborhood, Yeater said.
"New, (financially) healthy buyers now can invest in deferred maintenance or rehabilitation, further strengthening the neighborhood," he said.
An article in the Memphis (Tenn.) News last year complained that houses in Memphis' more shaky historic neighborhoods were suffering "demolition by neglect," in part because investors who had purchased properties to flip now were ignoring them in the bad economic climate.
But much of the focus of that article was the dearth of strong community organizations to protect the city's already deteriorating properties.
"Historic" Label May Help Rebound
Yeater said that in less stable historic neighborhoods, the effect of foreclosed and vacant property can be more like in non-historic districts: It "diminishes confidence and erodes whatever stability might have been developing."
But, he said, there is some evidence that if such a "bubble neighborhood" had historic designation, it would be easier to pull back from decline than a non-historic neighborhood.
Yeater said that both federal and state tax credits for rehabilitation in historic districts creates a pool of capital that, while not aimed at foreclosures, can create reinvestment in those neighborhoods and help mitigate the harmful impact of foreclosures.
Jim Mallery, a semi-retired journalist and onetime registered contractor, has extensive experience remodeling, repairing, and rebuilding homes.