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In pockets of foreclosure, housing woes spread block by block
In Modesto, Calif., home prices could fall as much as 25 percent.
from the December 11, 2007 edition
Page 3 of 3
"What we're seeing in the data is that the earlier vintages – those loans originated in earlier quarters and years – are performing better than the more recent vintages," says Gabriel.
Retail businesses related to housing – everything from appliances to carpet and furniture sales – have seen a downturn. But local charities and churches see little spike in demand for services, and the city center shows few outward signs of trouble except at the courthouse.
There, underneath one of the staircase entrances, hundreds of pages are tacked up, each sheet noting a foreclosed home to be auctioned that month. Hispanic names dominate. Each day at the stroke of noon, Dean Roots arrives at the courthouse steps to read the 40 or so new homes put on the block. Barely audible above the din of passing traffic and the blowing breeze, she reads the list of properties on offer like a long-memorized liturgy.
For months now, no more than a half-dozen onlookers have turned out for the ritual. On most days, no one even bids.
"I try not to think about it because a lot of these people have brought it on themselves," Ms. Roots says. "You don't know which ones are hardship cases."
Back on St. Salazar, Samuel Mendoza checks out a vacant home for sale. His older brother, Daniel, tags along with his own young child. Daniel's home is currently under foreclosure, so his family will be moving in with Samuel when he buys.
Samuel has many suddenly affordable options – an often unsung high note in the housing crisis. Several homes have already been purchased on nearby San Ramos, a sign that the neighborhood may be starting to stabilize. As Gabriel puts it, sometimes a "neighborhood has to convulse, it has to turn over."
Samuel likes the home on St. Salazar, but he's not about to make a rushed, ill-informed decision.
"We're going to learn from my mistakes so he doesn't go through the same thing," says Daniel.
• Mark Trumbull in Boston and Nicole Hill in Modesto contributed to this report.
Who's most at risk?
To some extent, every homeowner is hurt financially when home prices fall. Their net worth goes down, and that can affect spending and their ability to tap home-equity lines of credit. But some will bear a heavier burden than others.
Of America's 109 million households, nearly one-third are renters, largely unaffected by the rise and fall of home values. Another one-fifth own their homes outright: no mortgage, no credit risk. That leaves about 52 million mortgage-holders, according to numbers crunched by economist Gary Shilling in Springfield, N.J..
For them, the danger of foreclosure or bankruptcy depends largely on their financial situation and timing. Most who bought before the boom have either paid down a chunk of their mortgage or have seen a price run-up – cushioning them today. In contrast, those who bought near the peak – in 2003 or later – are more at risk.
If they took out an adjustable-rate mortgage, particularly a higher-interest subprime mortgage, they're the most at risk. Of those 52 million US mortgage-holders, 2 million may go into default – and ultimately foreclosure – between this year and 2009, according to Moody's Economy.com.
The severity depends a lot on geography. The forecast ranks only 80 of 381 metro areas as likely to see home prices fall by 10 percent or more. Still, those include some of the biggest cities on both coasts, plus Detroit and some desert and Rocky Mountain cities.
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