You couldn’t sell at any price
November 19, 2009
There was no TARP to save either banks or property owners during the Great Depression. Commonplace foreclosures and property auctions signaled then, as now, that loan balances exceeded saleable value. Some owners dug in until they were forcibly evicted; others quietly abandoned their properties.
Between 1918 and 1945, the number of Aspen’s houses exceeded the number of potential residents. The exodus of residents in 1919 resulted in scores of abandoned properties. Those who stayed eventually traded up, selling less desirable properties and buying houses that needed fewer repairs.
By the time Depression reality gripped Aspen, equilibrium between buyers and sellers had been reestablished. Although times were tough, residents who stayed experienced more underemployment than unemployment. With several mines still meeting payroll, Aspen limped along.
Home mortgages were not readily attainable when most Aspen properties were originally built. The fortunate paid cash. For that reason, mortgage defaults were not Aspen’s primary problem. The significance of abandoning paid-for property was purely physical, at least initially. After many months or years, however, the significance of monetary abandonment – delinquent taxes – grew. Tax delinquencies could lead to auctions.
Former residents continued to own properties, holding on to them as long as they could pay the taxes. During the Depression many owners ceased paying taxes.
An example illustrating that trend is a letter sent to my grandfather in 1933 when he was mayor of Aspen. The letter, from J. H. Gouldy of Amarillo, Texas, says, “I understand that building (the Wheeler Opera House) has been taken over by the city for taxes. Kindly let me know how much and best terms it would take to clear title on this building.”
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In a separate letter he requested information about co-owners of the Wheeler. It seems he didn’t know his partners, or whether they were aware they were about to lose the Wheeler.
The city had its own problems. Deeply in debt from borrowing from 1905 to 1910, it struggled to provide even basic services. Collecting taxes, current or past due, required negotiation and persistence. A few dollars from a few property owners could keep Aspen functioning for a few weeks.
Late in the Depression my parents bought a house on Francis Street for $500. They considered it a special bargain because it was decorated with recently-purchased furniture. They lived in it for a few years, until the expense of repairing the roof would have exceeded the value of the house. They kept the furniture, two pieces of which are still in use in my home. In the 1990s, a consignment store in California offered an identical chest of drawers for $500.
John Herron, my uncle, bought up several abandoned properties, including the Aspen Block, for back taxes. My grandfather, in partnership with the bank he helped found, purchased the Cowenhoven building for delinquent taxes. Ownership of Aspen properties during that period required keeping up with taxes and repairs. A downtown building was as worthless as a miner’s cabin if the boiler broke or rain poured through the roof.
Throughout the first four decades of the 20th century, Aspen property abandonment approached three out of four in lower-income neighborhoods. Commercial properties did not fare much better. Many homes and buildings fell into disrepair and were torn down. Fires claimed others. As late as 1945, the delinquent tax rolls carried properties, some not paying since 1917 (when the owners could not be found). A foreclosure sign on the lawn at that time could not reduce neighboring property values beyond their negative value: zero sale value plus delinquent tax bills.
Some forecasters predict that one in four homes in America will reach foreclosure during this recession. Banks appear to be staggering foreclosures in order to prevent a complete collapse of property values. If your neighbor’s property has a “for sale” sign, remember to put the current crisis in historical context.