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Thread: Foreclosures force suburbs to fight blight

  1. #1
    Cyburbian Plus
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    Foreclosures force suburbs to fight blight

    HEADLINE from the NY Times:
    http://www.nytimes.com/2007/03/23/us...hp&oref=slogin

    HIGHLIGHTS:
    In a sign of the spreading economic fallout of mortgage foreclosures, several suburbs of Cleveland, one of the nation’s hardest-hit cities, are spending millions of dollars to maintain vacant houses as they try to contain blight and real-estate panic.

    The suburbs here are among the best organized in their counterattack, experts say, but many suburbs elsewhere in the country have had jumps in foreclosures and are also working to stem the damage.

    Euclid has installed alarm systems in some vacant houses to keep out people hoping to steal lights and other fixtures, drug users and squatters. The city has hired three new building inspectors, bringing the total to nine, to deal with troubled properties and is getting a $1 million loan from the county to cover the costs of rehabilitation, demolition and lawn care at the foreclosed houses. (When the properties are sold, such direct maintenance costs will be recovered through tax assessments.)

    The Euclid mayor, Bill Cervenik, said the city, with a population of 53,000, was losing $750,000 a year in property taxes from the empty houses.
    Interesting slide show.

    Is this a current or will become a problem in your fair city ?
    Would your deptment be involve or is this a treasurer & housing inspector job ?

  2. #2
    Cyburbian zman's avatar
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    I live in county #1 when it comes to foreclosures. It is a sad commentary, but houses have actually been selling on my street.

    My biggest problem with neighborhood "blight" is that one builder built spec homes on the lots they owned without buyers prior to having lay off their labor in anticipation for the market slump. Now we have nearly one whole block of new homes for sale south of me, which in turn is not helping the existing residents if they need to sell due to economic "hardtimes".
    You get all squeezed up inside/Like the days were carved in stone/You get all wired up inside/And it's bad to be alone

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  3. #3
    moderator in moderation Suburb Repairman's avatar
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    Some friends of ours are facing foreclosure. About twenty families at our church have been pitching about $50/month for two months to them to keep them out of foreclosure while they try to sell it. They finally got a contract on it this week, so hopefully they can slide out without too much credit damage.

    Its not a problem where I work, but our Town Next DoorTM is beginning to have issues due to builder spec construction.

    "Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

    - Herman Göring at the Nuremburg trials (thoughts on democracy)

  4. #4
    Cyburbian Wannaplan?'s avatar
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    My mom had to foreclose on her house two years ago. She was 69 years old, and my dad passed away six years prior. I didn't know it at the time, but my mom couldn't manage a household. She got taken by an inscrupulous national home financing company in 1999, with a home equity loan at about 30% of the home's appraisal. She was 64 at the time. What kind of company does this to a widow right at retirement age?!

    Recently, my sister and her husband put a major addition onto their home. Before they started, the appraisal came in at $95,000. Over the course of two months, the next door neighbor and the folks across the street foreclosed on their homes. After the addition was completed, the home was appraised at $89,000. How 'bout them apples?!

    As far as I am concerned, this should be a war between consumers and the lending institutions. When my wife and I refinanced, the broker offered one of his "loan products," an interest-only loan. I told him absolutely not and gave him a hard time. These people are blatantly crooked, and the average consumer doesn't know any better.

    This is a great blog The Consumerist, if any of you like to keep up on the crooked and criminal companies that have us under their thumbs. Take a look at this relevant entry:

    ...[the] banks should have known better. But the market was hot, they got carried away, and borrowers just followed the advice of their mortgage brokers. Things steamrolled, and here we are. The subprime lending fiasco is costing everyone money except the mortgage brokers who originally wrote the loans so they could walk away with a quick broker fee.

  5. #5
    Cyburbian Cardinal's avatar
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    We had a home not far south of Zman, and another just north of Denver. We were lucky selling the first one. It went for about $20,000 more than its purchase price - enough to pay the realtor. Two neighbors were selling at the same time. After nine months one decided not to move. The other dropped his price by $50,000. We just looked into selling the second home. It has not changed in value over the past year.

    In that market, the high cost of housing led to many people getting in over their heads. I know of a couple people who took interest-only mortgages. They have a short term. The idea is that you pay the interest, and while you are not paying principal, the increase in value lets you build equity. After three to five years when the note comes due you refinance with the equity which has accrued. Now, of course, there is no increase and for many people, there is a decrease. How do you finance your home then?
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    Unfrozen Caveman Planner mendelman's avatar
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    Glad we didn't take that ARM 2 years ago. I'll wait till next year to buy. Though, I'm mostly looking for a house that is underdeveloped (ie in a commercial or high density residential district).

    I feel bad for the people who got snowed, but not for the one's who purposely made the calculated risk.

    At the risk of sounding like an insensitive capitalist pig, maybe there is a good mint to be made from all this...sorta like when smart people bought devalued/undervalued assests after/during the Great Depression.
    I'm sorry. Is my bias showing?

    The ends can justify the means.

  7. #7
    Inner suburbs from 30-40 years ago are dying just as the inner cities have been because of the continued sprawl of recently built suburbs. They are falling harder though since they weren't developed completely.

  8. #8
    Cyburbian DetroitPlanner's avatar
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    I live in the #1 city for this, the house across the street and across the alley are going to hell. Unfortunately the police are understaffed by about 500 right now due to cut backs and attrition so there is not much hope for the near term.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  9. #9
    Cyburbia Administrator Dan's avatar
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    30 year conventional fixed-rate mortgage here. However, my mortgage payment shot up $200 a month last October, thanks to increased property taxes.

    Quote Originally posted by JNA View post
    Is this a current or will become a problem in your fair city ?
    Oh yes. I live in one of those inner-ring suburbs of Cleveland, between Euclid and Shaker Heights. The situation is worse than Shaker here, because unlike Shaker it's predominantly middle-class, and there's a section of the city with a large stock of small Cape Cods built in the 1950s that go for about $100K to $120K.



    The city is trying to keep up with making sure foreclosed properties are maintained, and real estate prices have stagnated. Strangely, not too many For Sale signs out there; I think it's because everyone is aware of the slump and competition from foreclosed houses, and they're holding off on moving until things pick up again.

    Euclid has a double-whammy; a large stock of starter homes, and racial turnover in areas along Euclid Avenue and near the city of East Cleveland. Unlike Shaker, Cleveland Heights, University Heights and other 'burbs "up the hill", Euclid has little "cool" - it's industrial, middle-class blue-collar, old-school Eastern European ethnic, and has few attractions except for Lake Erie. Nice city, but the competition is tough.

  10. #10
    Cyburbian Linda_D's avatar
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    The recent real estate boom largely by-passed the Buffalo area and WNY, so home prices never shot up to the point that a lot of buyers had to go to ARMs and interest only mortgages, but rather grew about on pace with inflation. This area tends to be very conservative economically, so a lot of the abuses by lenders didn't fly here, and there weren't many takers anyways. The foreclosure rates are a lot lower here than in many parts of the country, but if the automakers continue to shed jobs, and that impacts other sectors of the economy, then that will change, but for now, real estate prices are either holding steady or nudging upwards.

    This conservatism has also been a boon for some of the first-ring suburbs, especially those north of Buffalo (Tonawanda, the Cities of Tonawanda and North Tonawanda, and parts of the town of Amherst). These suburbs offer all the amenities like shopping, doctors, hospitals, libraries, town-funded senior & youth activities, etc plus schools with good reputations. The smaller Cape Codes and ranches have become popular with both young families looking for starter homes and empty nesters/retirees seeking to downsize, especially since their modest prices make them affordable. It also helps that these towns and small cities have been very pro-active in attempting to prevent blight long before the current downtown in the national real estate market.

    Quote Originally posted by HeartlandCityBoy View post
    Inner suburbs from 30-40 years ago are dying just as the inner cities have been because of the continued sprawl of recently built suburbs. They are falling harder though since they weren't developed completely.
    That's a blanket statement that's not true in all cases. First off, reports on the death of first ring suburbs are greatly exaggerated. Some might be having some hard times (see Dan's post above), but certainly that's not true for all first ring suburbs, and few, if any, are actually "dying" because the single family detached house remains the preferred housing choice for most Americans.

    In fact, what has sparked much of the "sprawl" that you see as the root of all evil, is the fact that prices for homes in many established neighborhoods in first ring suburbs are higher than for larger, newer homes miles further out from the city limits. Since not everyone wants to commute an hour each way to work, close-in suburban homes remain very desirable. Moreover, as family and/or household size shrinks, smaller homes become more practical.

    What is changing is the business districts in first ring suburbs -- especially those tiny little strip malls along main roads and at crossroads. Like the small shops along urban commercial streets, these are having a tough time competing with the bigger corporate businesses. Most of the bigger strip malls as well as older shopping plazas and malls, however, are frequently being remodelled and reconfigured for new uses.
    Last edited by NHPlanner; 26 Mar 2007 at 10:55 AM. Reason: double reply

  11. #11
    Cyburbian DetroitPlanner's avatar
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    Holy smokes Dan, you just described my neighborhood. In fact my neighborhood is a dead ringer for this one. Same sort of stuff is going on here only the City does not have the resources to keep up with the foreclosed homes being maintained, so its kind of depressing.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  12. #12
    Super Moderator luckless pedestrian's avatar
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    Quote Originally posted by Linda_D View post
    That's a blanket statement that's not true in all cases. First off, reports on the death of first ring suburbs are greatly exaggerated. Some might be having some hard times (see Dan's post above), but certainly that's not true for all first ring suburbs, and few, if any, are actually "dying" because the single family detached house remains the preferred housing choice for most Americans.
    Yes, first ring suburbs in Boston are the very communities that are un-affordable - sprawl happened in the Boston area, in part, because of affordability - nobody can afford Newton, Belmont, Winchester so they had to go out

  13. #13
    Cyburbian Brocktoon's avatar
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    Quote Originally posted by DetroitPlanner View post
    Holy smokes Dan, you just described my neighborhood. In fact my neighborhood is a dead ringer for this one. Same sort of stuff is going on here only the City does not have the resources to keep up with the foreclosed homes being maintained, so its kind of depressing.
    Similiar experiences in Cleveland and Detroit...is that possible? Next thing that will happen is the Indians will make an improbable run to the world series.
    "You merely adopted the dark. I was born in it,..." -Bane

  14. #14
    Cyburbian njm's avatar
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    I don't live in Mpls/St Paul anymore, so this information is based on reading/hearsay--

    I've heard that Dakota County, MN is experiencing an unprecedented spike in mortage foreclosures; why that county more than other Mpls/St. Paul counties is slightly vague... my guess would be the demographics that were able to afford there vs. other counties.

    Also, to temper Linda D's statement, the housing market in Western New York is not a bubble because vacancy rates never got as low there as elsewhere... constant "major employer" (i.e. Kodak, B&L, Xerox, Delphi, Valeo) cutbacks during the "boom" years caused perpetual employment shifts that did not allow people to enter the bidding wars that drove up prices elsewhere. In my former neighborhood in Rochester (one of the more popular), there were a few vacant houses; some of the inner suburbs (Greece, Inrondeqouit) were also seeing a few houses that would not move, primarily those right on the city border.

    Far from the rosy picture, but atleast the city/county have not had to deal with an acute problem similar to other metros.
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  15. #15
    Unfrozen Caveman Planner mendelman's avatar
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    One possible solution:

    Could opening our immigration rules to practially anybody (except violent criminal records), allow for the absorption of all these soon to be and already empty houses and vacant lots in many inner-cities? At least on rental basis?
    I'm sorry. Is my bias showing?

    The ends can justify the means.

  16. #16

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    Slightly off topic:

    If you watch HGTV or TLC or some network like that, they're still showing programs like "Flip That House" or "Design on a Dime" where people are making home improvements and GREATLY increasing home value:

    "That's right -- the $25,000 you just invested in your kitchen now means your home value went from $500,000 to $650,000!!!"

    Isn't that more than a little disconcerting, considering today's flat housing market and foreclosure reality?

  17. #17
    moderator in moderation Suburb Repairman's avatar
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    Quote Originally posted by pete-rock View post
    Slightly off topic:

    If you watch HGTV or TLC or some network like that, they're still showing programs like "Flip That House" or "Design on a Dime" where people are making home improvements and GREATLY increasing home value:

    "That's right -- the $25,000 you just invested in your kitchen now means your home value went from $500,000 to $650,000!!!"

    Isn't that more than a little disconcerting, considering today's flat housing market and foreclosure reality?
    I would love to see them do a couple of those shows, but have the people completely tank. I think that would better reflect the risk often involved in real estate speculation, something these shows completely neglect to mention. So far, the worst one I saw still made a $10K profit.

    "Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

    - Herman Göring at the Nuremburg trials (thoughts on democracy)

  18. #18
    Cyburbian cch's avatar
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    Quote Originally posted by Suburb Repairman View post
    I would love to see them do a couple of those shows, but have the people completely tank.
    I watch those shows all the time, and I've never seen anyone completely tank. But I have seen a couple make a measly profit of only $10K or so, because of carrying costs when the houses sat on the market for months. Once it took over a year, because the house didn't have a/c in southern cali. Idiots .

  19. #19
    Cyburbian Plus
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    NYT article: "'Communities Become Home Buyers to Fight Decay"

    http://www.nytimes.com/2008/08/26/bu...=4&oref=slogin

    Summary:
    Using taxpayer and private money, Boston, Minneapolis, San Diego and a handful of other places are buying foreclosed properties to refurbish and resell them to developers and homeowners in an effort to prevent troubled neighborhoods from sliding into urban decay.

  20. #20
    Cyburbian Plus PlannerGirl's avatar
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    In the DC area yes foreclosures are going nuts, pockets here, whole counties there while some areas are still going up noticeably in value (inside the beltway).

    We are starting to see a number of folks who are going into foreclosure that bought their house THIS YEAR ie they never made a single house payment!! Don't let the Feds or the news fool you there are still sharks out there trying to sell someone something for nothing. Never mind some folks are terminally stupid

    As far as homes that are going to seed its happening here some but neighbors are trying to cover the gap. In counties like Prince William things have gotten more desperate leaving the local government to clean up the mess.

    Honestly the homes that look the worst are the half built ones that the builder/owner just walked away from, there are quite a number of those around sitting waiting for an accident to happen.
    "They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." Ben Franklin

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  21. #21
    Cyburbian Mud Princess's avatar
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    I saw that the other day. One of my former grad school professors is quoted in the article.

    The strategy makes sense to me... Leave it to the libertarians to claim that we should let the free market take care of the problem.

  22. #22
    Cyburbian Cardinal's avatar
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    Nationally, about one in every 500 homes is in foreclosure (at the end of July 2008). That may mean that a notice of foreclosure has been filed, the house is up for auction/sheriff's sale, or the house has been taken by the bank. Of course, there are states where there are higher concentrations. Nevada, California, Florida, Arizona, and Colorado are the top five.

    Builders in these and other areas had projects in teh pipeline when the market began to turn. This has caused a worsening of the housing slump as it creates a glut of homes. I know of some large condominium projects, for instance, where they have sold less than half of the units three years after construction finished. Often, there were factors other than the market that contributed. Examples like these clearly point out where early predictions of a short downturn and a return to normal were way off.

    The Housing Relief Bill passed by Congress this year provides about $3 billion in funds to local communities to purchase and rehabilitate foreclosed housing for resale or rental. The funds may also be used for some blight elimination purposes. The funds will be apportioned by state population and need, with each state guaranteed at least .5% of the total. At the state level, funds are to be distributed similarly to CDBG. I would guess that in most places, that will mean that entitlement communities get an allotment while others will have to compete for funds.

    I doubt that what has been done so far is enough. A glut of homes, the looming boomer selloff, and financing issues are going to last for some time. Consider that the questionable mortgage products that have caused so many problems were not much used until 2001, and grew as a portion of all home financing through 2007. Most have an initial term from two to five years. At the furthest end, we could see continued mortgage problems from this well into 2012. The other factor is that banks are now tightening credit requirements, do not have money to lend, or are failing. With less money available, more potential buyers will not enter the market. This is spilling over into other markets. Retail finaincing, for instance, is running at a pace from 10 to 20 percent of last year. This is all a good indication of where the economy is headed.
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  23. #23
    Cyburbian Plus
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    Quote Originally posted by Cardinal View post
    . . .With less money available, more potential buyers will not enter the market. . .
    Today's Washington Post gives evidence to the contrary in the article, "Virginia Foreclosures Nearly Triple In A Year":
    There is a silver lining. Home sales have increased throughout most of the region, as high-priced houses become more affordable. The sizable price decreases in Prince William have attracted first-time home buyers and investors who want to take advantage of the deals, according to the Virginia Association of Realtors
    http://www.washingtonpost.com/wp-dyn...082604144.html

  24. #24
    Cyburbian Raf's avatar
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    I live and spend a lot of time in ground zero of the foreclosure mess. I live in Stanislaus County, which for the last year or so has ranked either #1 through #3 counties for foreclosed homes in the nation. To give a sense of how much things have fallen: at the height of the peak in 2006, a 3 bedroom 2 bath was fetching about 400K. That is insane considering the median income around here hovers at about 55K for a family of 4. Now you can buy the same house for about 180K to 250K depending on the neighborhood.

    My folks bought there home in suburban Sacramento in 1985 for 90K. At the end of 2006 they had it appraised for a possible sale for the whopping price of 425K. My dad said it was all funny money, and opted not to sell. Two of his neighbors walked away from their houses that they bought at around the 390s. His block alone had about 10 foreclosed homes sitting on the market at the beginning of the year. Sacramento County had issues at the beginning of the summer with complaints from remaining neighbors of unkept lawns, and worse yet, mosquito ridden pools that caused an outbreak of west nile virus within the community. The block however is making a comback. Housing prices have come down to 1998 levels, if not lower.

    As Sena said, there is a silver lining though. More people are entering the market. Recently 2 people from our office bought homes for the first time because prices have dropped so much. My wife and I are now on the hunt looking for homes that have been foreclosed as we qualify for some new state programs for first time home buyers who snatch up foreclosed homes. The credit market has tightened up considerably, but my sense is that as long as fannie mae has the backing of the feds, slowly but surely the house market will come around. I just feel bad for the folks that are trying to see and competing with the new housing developments. Recently we took a walk through at a townhouse project by Standard Pacific homes and they were throwing all the upgrades, bells, whistles, and new TV for about 180K. It is hard for existing homes to compete with the new homes that sit idle and the home builders willing to take a huge loss just to get those homes off their books. In a planning sense, the housing market as all but killed all planning projects around here for some time imo. Scary thought for someone in the private sector.
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  25. #25
    Cyburbian Tom R's avatar
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    foreclosure

    I heard a local Legal Aid attorney speak on foreclosure. The stories he tells are are amazing and depressing at the same time.
    Banks or loan servicers foreclosing on mortgages for property they don't own.
    Loan originators selling homes to people who can't make the first payment AND THEY LOAN ORIGINATORS KNOW IT! They just make sure that they sell the mortgages to investors the same day.
    How can these people sleep at night?
    WALSTIB

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