Add it to the list of how the little guy got a raw deal during the housing bust.
Homes that were foreclosed during the bust gained back value at a much higher rate than other homes, according to research from real estate website Zillow — but their former owners didn’t enjoy the profits during the recovery. Instead, the money went to hedge funds, home flippers and investors who snapped up distressed properties on the cheap from banks.
79 percentValue growth for foreclosed homes since market’s lowest point
Most homes foreclosed during the bust were cheaper, farther from urban centers or entry-level — in other words, homes owned by lower-income earners and younger families.
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In Miami-Dade, Broward and Palm Beach counties, homes that were foreclosed at the market’s lowest point in 2007 have since grown 79 percent in value. That’s lower than the rate for all homes of 65 percent.
“You had a ton of appreciation for these foreclosed homes, but the [former] homeowners weren’t getting the benefits,” said Svenja Gudell, Zillow’s chief economist. “Lower-end and foreclosed homes were bought up by investors who would transform those homes into rental properties. ... Had they held onto their home in many markets, homeowners would’ve made back their original investment plus much more.”
Instead of gaining equity, foreclosed homeowners ended up losing money by paying rent to their new landlords.
Gudell said the numbers show how the foreclosure crisis contributed to the United States’ growing wealth gap.