Neighborhood Stabilization Program Unable to Shake off Slow Start

The intention was to stop the decrease in house values and stabilize communities heavily affected by foreclosure. On a statewide scale, the top three states when it comes to foreclosure percentages include Florida which accounts for 17.12% of foreclosures, Nevada with 15.62% and Arizona with 11.07%.

From the very beginning, critics have been severe. They say the $3.9 billion initial allocation and the $1.9 billion February additional allocation will barely scratch the surface of the problem. There are simply too many houses up for foreclosure with 2.5 million houses already in the current process of getting foreclosed. With many states sharing the allotted amount, there isn’t a lot to go around. The top highest state recipients of funds are California with only $145.1 million followed by Ohio with $116.9 million and Texas with $102 million.

States are supposed to use allocated funds for purchase and rehabilitation; down payment and financing assistance; redevelopment; demolition and purchase for future renovation. The lower sums received by other states may not be able to cover even a handful of houses.

It doesn’t help too that the program puts the financially disadvantaged as the main target for rehabilitated properties. Although the intention is by all mean noble, this has prevented some states from making the few properties they can purchase attractive enough for buyers with higher capacities to pay. Hence, some properties have had to be converted to rental spaces which does little to solve the housing problem.

Clearly there are serious issues when it comes to fully implementing the program. Implementation concerns however are not even the core problem states are facing now. Those states determined to use the funds for what they are intended for can easily stay within the limits of available funding. The real problem of states is that they have tough competition when it comes to finding and acquiring the right properties to rehabilitate. Banks and buyers of cheap foreclosed properties stand most in their way. Banks are more eager to sell to non government entities. This has made the acquisition of properties extremely slow.

The problem is compounded by the fact that state officials do not all have the right skills and experience to approach and communicate with banks. This has led some states to hire help with the process. It is safe to say that the program in its entirety takes a lot of time and effort. Unfortunately, the time is ticking for all states. By autumn, they could lose unused funding. Some have resorted to changing tactics such as identifying larger areas to locate potential houses to rehabilitate.

Despite these hurdles though, some financial experts remain unfazed. There is an enduring feeling among them that completion between the government and private entities is good for the real estate market in general. It remains to be seen though whether there really will be a move towards stabilization. At the rate things are going, it’s hard to say for sure.

This article is provided by Arizona Mansions, which is a luxury real estate and property website focused around offering free listings to Realtor's and assists buyers in finding their new home.