It's actually a boon to people looking for real estate for the banks to sell it cheap. Maybe they're looking for a first home and have little cash but are willing to put in the “sweat equity” to fix the place up.

Houses in Cleveland aren't selling for $1,000 because banks are doing anything wrong–they're selling for $1,000 because the SUPPLY of houses in Cleveland greatly exceeds the demand. It's a dying city with a crappy school system and an aged housing stock. Many of the foreclosed properties in question literally need $40,000-$50,000 in repairs to make them safe and habitable for the tenants who will be their eventual occupants–you can pretty much forget selling them to homeowners in most areas, because homeowners can afford to live where the schools are good, the jobs are plentiful, and the crime rate is low.

Since the rent on a 3 br home in an older section of cleveland is around $700-$900 per month, and taxes and insurance take up perhaps $150 of this, and management, vacancy etc cost another 20% of gross, you can easily see that the risk vs. return on a $40,000+ repair bill calls for a very low purchase price.

what's more, when banks DO make repairs to a property, they tend to do the cheapest, highest-returning work, which means cosmetic upgrades as opposed to the mechanical and energy-saving furnaces, windows, insulation etc that makes it affordable for low and moderate income tenants to live in the finished product. I would much, much rather pay $1,000 and spend $40K to do the repairs myself, and know that the work is done right, than pay the bank $40,000 for a property they've repaired–primarily because i know that i will have to do additional work to their “fixed” house.

I've been in real estate for more than 18 years, watching what's happening to city neighborhoods. Leave housing to the experts–and yes, that includes the “flippers” who take those $1,000 properties and make a little money putting them into the hands of people who know how to rehab and manage them. The example given in the article of the property that was apparently flipped 3x before going back into foreclosure is far from the norm, and would be hard to replicate in today's market where financing for investors is almost impossible to get. Today, most investor buyers are, by necessity, paying CASH for these properties (and thus CANNOT go into foreclosure), and are NOT sitting on money-sucking vacant properties in CLEVELAND hoping they'll magically increase in value. The end buyers of these properties–the ones that the “speculators” are doing a huge service for by locating and negotiating the deals–don't think of them as commodities, but as income-generators, and that's the best thing that could happen to the city of Cleveland right now.

“Banks”–and that's not even who owns most of these properties, thanks to the bizarre securitization of subprime loans, but that's a topic for another day–are NOT going to fix up these properties when they'll lose even MORE money by doing so. They'll continue to do what they've already been forced to by Cleveland's LAST brilliant law…stop foreclosing and leave the rotting properties in the hands of the owners who can't maintain them. NOT the solution. Let the market work, let it shake out which of these properties are worth having and which aren't, and the banks can be charged to tear down what's left.

Or better yet, fix the underlying problems of crime, bad schools, poor services, an expensive, overblown bureaucracy, high taxes, low-paying jobs, and corrupt politics in our rust belt cities, and the housing problem will quickly take care of itself.