Will we reward speculators for destroying houses?

When the housing bubble collapsed, many speculators who owned the mortgages or related financial instruments refused to sell them at market value.

The speculators said that the market value was an “accounting fiction,” and if only the house sat unempty for months or years on end, it would become valuable again.

The speculators refused to sell the house to someone who would care for it, out of their financial self-interest, and in many cases the houses were subsequently destroyed.

Calculated Risk: Report: One-Third of REOs Seriously Damaged
Popik says responses from thousands of real estate agents nationwide to the questionnaires he sends out quarterly indicate that badly damaged foreclosed homes … are a much bigger element of the national housing picture than officials in Washington have acknowledged.

“In many cases, it costs so much to rehabilitate these houses, it’s just not cost-effective,” he told CNN. “And the properties are eventually going to be bulldozed.”

Whenever speculators complain about “toxic assets,” they are angered that the goods they purchased are now worth less because (a) they purchased them in a bubble and (b) they have not maintained them.

The definition of a “toxic asset” is (a) something worth less than it once was that is (b) owned by someone politically powerful.