Homeowners stretched perilously

The number of homes sold in Massachusetts dropped a whopping 21 percent in January compared with a year ago, the largest year-to-year decrease in monthly home sales in a decade. As a result, home values have begun to soften. Statewide, they actually fell slightly in January compared with a year ago.

Such pressures are forcing a rising number of homeowners to erase their debts by forfeiting their homes. Foreclosure filings in the county that includes Boston nearly doubled in January from a year ago, ForeclosuresMass. says.

Homeowners "call us and are heartbroken," says Robert Pulster, executive director of the Ecumenical Social Action Committee, which works with Boston residents on the brink of losing their homes. "They thought it was their dream."

More trouble lies ahead, some experts warn.

"I would suspect that as home prices soften, you are probably going to see a ramp-up in defaults, delinquencies, and foreclosures," says Nicolas Retsinas of the Joint Center for Housing Studies at Harvard University. "It is not that they were not stretched before, but if you couldn't make the mortgage payments, you would sell. If the market is softer, it is not as easy to do this."

The pressure appears greatest for minorities and immigrants, says Dr. Sum, who conducted the census analysis. Statewide, 33 percent of blacks with mortgages were paying half or more of their gross income toward monthly housing costs, and 29 percent of Hispanics were, more than double the average, he says. And 22 percent of foreign-born fell into the category. Such factors could not be broken down for Boston because the census data are limited.

Mortgages are also riskier for many today. When 30-year, fixed-rate mortgages were standard, a rise in interest rates would have little effect on current homeowners. But in an era of adjustable-rate loans, it can exact a toll.

The toll is especially difficult for minorities, housing experts say, because they are most likely to hold higher-cost subprime loans.

"This is the first decade that we have had this culture of pricing risk in home lending," says Susan Wachter, professor of real estate at the University of Pennsylvania. "What happens if someone loses a job?... If you are already spending 50 percent of your income toward a mortgage, there is no cushion."

A rise in home sales and foreclosures among immigrants, while worrisome nationwide, would be especially troublesome for Massachusetts. Without immigration, the state's population and labor pool would have shrunk since 2000, according to a report released last year by the Massachusetts Institute for a New Commonwealth, a nonpartisan think tank, and the Center for Labor Market Studies.

The number of homeowners with mortgage trouble is rising, says Saul Perlera, who owns a real estate firm in East Boston. Some were scammed by lenders, he says. Others were too quick to buy.

"A lot of them just do not listen. They want a house," he says. "I try to advise them: You can get a house, but you might not be able to stay in it."

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