Are We Having a Housing Crisis Déjà Vu? 10 comments
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Back during the 1930s, a number of shanty towns sprung up around the U.S. These makeshift settlements were known as "Hoovervilles." This was a derisory term that stemmed from the popular notion that Herbert Hoover, the president at the start of the Great Depression, had not done enough to help those who had been left homeless or unemployed as a result of the collapse in economic activity. In "Tent City in Suburbs Is Cost of Home Crisis," Reuters reports on a similar phenomenon unfolding in places like Ontario, California and elsewhere across the country.
Between railroad tracks and beneath the roar of departing planes sits "tent city," a terminus for homeless people. It is not, as might be expected, in a blighted city center, but in the once-booming suburbia of Southern California.
The noisy, dusty camp sprang up in July with 20 residents and now numbers 200 people, including several children, growing as this region east of Los Angeles has been hit by the U.S. housing crisis.
The unraveling of the region known as the Inland Empire reads like a 21st century version of "The Grapes of Wrath," John Steinbeck's novel about families driven from their lands by the Great Depression.
As more families throw in the towel and head to foreclosure here and across the nation, the social costs of collapse are adding up in the form of higher rates of homelessness, crime and even disease.
While no current residents claim to be victims of foreclosure, all agree that tent city is a symptom of the wider economic downturn. And it's just a matter of time before foreclosed families end up at tent city, local housing experts say.
"They don't hit the streets immediately," said activist Jane Mercer. Most families can find transitional housing in a motel or with friends before turning to charity or the streets. "They only hit tent city when they really bottom out."
Steve, 50, who declined to give his last name, moved to tent city four months ago. He gets social security payments, but cannot work and said rents are too high.
"House prices are going down, but the rentals are sky-high," said Steve. "If it wasn't for here, I wouldn't have a place to go."
'SQUATTING IN VACANT HOUSES'
Nationally, foreclosures are at an all-time high. Filings are up nearly 100 percent from a year ago, according to the data firm RealtyTrac. Officials say that as many as half a million people could lose their homes as adjustable mortgage rates rise over the next two years.
California ranks second in the nation for foreclosure filings -- one per 88 households last quarter. Within California, San Bernardino county in the Inland Empire is worse -- one filing for every 43 households, according to RealtyTrac.
Maryanne Hernandez bought her dream house in San Bernardino in 2003 and now risks losing it after falling four months behind on mortgage payments.
"It's not just us. It's all over," said Hernandez, who lives in a neighborhood where most families are struggling to meet payments and many have lost their homes.
She has noticed an increase in crime since the foreclosures started. Her house was robbed, her kids' bikes were stolen and she worries about what type of message empty houses send.
The pattern is cropping up in communities across the country, like Cleveland, Ohio, where Mark Wiseman, director of the Cuyahoga County Foreclosure Prevention Program, said there are entire blocks of homes in Cleveland where 60 or 70 percent of houses are boarded up.
"I don't think there are enough police to go after criminals holed up in those houses, squatting or doing drug deals or whatever," Wiseman said.
"And it's not just a problem of a neighborhood filled with people squatting in the vacant houses, it's the people left behind, who have to worry about people taking siding off your home or breaking into your house while you're sleeping."
Health risks are also on the rise. All those empty swimming pools in California's Inland Empire have become breeding grounds for mosquitoes, which can transmit the sometimes deadly West Nile virus, Riverside County officials say.
'TRICKLE-DOWN EFFECT'
But it is not just homeowners who are hit by the foreclosure wave. People who rent now find themselves in a tighter, more expensive market as demand rises from families who lost homes, said Jean Beil, senior vice president for programs and services at Catholic Charities USA.
"Folks who would have been in a house before are now in an apartment and folks that would have been in an apartment, now can't afford it," said Beil. "It has a trickle-down effect."
For cities, foreclosures can trigger a range of short-term costs, like added policing, inspection and code enforcement. These expenses can be significant, said Lt. Scott Patterson with the San Bernardino Police Department, but the larger concern is that vacant properties lower home values and in the long-run, decrease tax revenues.
And it all comes at a time when municipalities are ill-equipped to respond. High foreclosure rates and declining home values are sapping property tax revenues, a key source of local funding to tackle such problems.
Earlier this month, U.S. President George W. Bush rolled out a plan to slow foreclosures by freezing the interest rates on some loans. But for many in these parts, the intervention is too little and too late.
Ken Sawa, CEO of Catholic Charities in San Bernardino and Riverside counties, said his organization is overwhelmed and ill-equipped to handle the volume of people seeking help.
"We feel helpless," said Sawa. "Obviously, it's a local problem because it's in our backyard, but the solution is not local."
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This article has 10 comments:
Do you think by adding your prologue with a bit of history that you add value ?
There are lots of negative signs about the health of America and it's economy, and folks cutting and pasting other folks work and pretending like they've done some kind of analysis is just another one of them.
For crying out loud, if you don't have your own work or thoughts to present, stay out of the way.
Regards, Johnny.
This guy just wants to get his mug in this forum as many times as possible in order to sell his doom and gloom thesis. I don't have a problem with him selling his own ideas and work, but sheesh is this really a forum for cutting and pasting Reuters articles ?
I don't think so.
Johnny.
Indeed, WakeUp deserves to ask the question I always have in my mind: "What the insanity is doing onto this great country?"
I don't know what all the politicans are going to deal with the "shortage" of police power when a reduction of property tax revenue is expected, even Cali Governor declared a "fiscal emergency."
But based on my experience, I do know it is NOT going to work.
All I think these days is it is really a piece of cake for me to solve the problem in Ontario if I have a fundation with $2 million start-up capital. At least, the fundation is able to help reduce the distress very quickly and efficiently. No lip service or negative GNP production at all.
The fundation's goal is working at keeping the owners stay at their homes, not to leave. The goal is to get the owners a new loan amount and monthly payment they can work with without interest rate cut or freeze to create a negative amortization later. And at the same time this capital seed money is getting at least $12% return for its investors in the first year.
Can we do that? What kind of business plan I have to cure the problem? Try me, if you have $2 mil.
In my blog, people start to argue about what the cause: socialism or individualism. No need to get involved in those theories such as "government involvement" or "private capitalist market."
It's an emergency, we have to do a job as a fire-engine people does. No time to put our energy in theory, let us do something to solve it first. Timing is important since we can not sit and talk until we find out ALL the facts.
All I care is to help people stay at his home and make a good return to a foundation shareholders.
p.s. I don't have to touch your money. Or you can follow my business plan and do it by yourself as long as you can help our people.
To compare the correction of a bubble to the deep, economic crisis following 1929 is just putting two crises next to each other without looking at them more closely.
1929, eleven years after the disastrous end of World War I (which had never let go in Europe since the war ended), with political unrest, right wing parties snatching power in several European countries, a crazy boom on the stock exchange, the lack of many regulations and market stabilizers on one side...
... a correction of crazy prices on the other side. Of course, spending comes down a little, as houses ceased to work as ATMs.
This article has no substance. But it still has an importance. If more and more of this kind get published, they could help create a hysteria of economical fear.
Just a few years ago, the hot air rushed out of the .com bubble. Billions of dollars got destroyed? Billions of dollars? Nonsense. That money never existed but in the books.
Another thought: after building new homes like crazy, that market had to come down. I mean, how many homes does America need? At this very moment, the next emerging market is already building, and the next bubble will come.
It's all a very natural process.
How much, do you think, did a loaf of break cost in Germany around 1930?
Answer: several million marks. It cost so much, that you could not carry the bread to the baker any more in your pocket. The money to buy bread weighed more than the bread it bought. Prices rose on an hourly basis.
In the USA the crisis was much more muted, but if you look at the jobless rates, or know the images Walker Evans shot during the depression...
So don't give us such little thought-out notations.
Paragraph three should read:
It (bread) cost so much, that you could not carry the money for it in your pocket any longer.
Good question?
Look at the guidlines for "Contribute to Seeking Alpha":
If you have an informed opinion on a U.S.-traded stock or ETF that you want to share with the Seeking Alpha community, we'd like to publish it.....To submit your article, first read the guidelines to the right:
1. Be specific :
Write about a particular stock or ETF, not general market commentary.
......
Hope you know now why some articles are so narrow-minded. Because they are SA's favors to be "specific" to a "particular" perspective.
That's why there is nothing like you said. Some are with "no substance", only trivia interpretation. SA are trying to be an expert or specialist so much that makes them too close to a tree to see the forest.
After I tried to contribute some articles to return the favor from SA, I gave up my kindness. I know mine is not going to be published because my content is not "specific" and with a broader perspective.
Anyway, I still thank SA and read its collections, particularly Judy's "housing market tracker" that saves me a lot of time. She is a wonderful secretary help me to see the general market situation.
Well, We should thank for other's narrow-sided or near-sighted opinion, too. All we have to do is to be cautious and objective with our reasoning power and macroeconomic knowledge like you jsut did as the above.
They can feed anything and call it "expert viewpoints" to create a market psyche. We can still be benefited from that market sentiment if we are a generalist and keep a cool judgement and clear eyes to see some irrational exuberance coming up.
Recently the Wall Street created a "credit crunch" smoke gun for some people to make money. That's great! Thank you for the great jobs contributed by those specialists like Cramer.
Just sit, relax and laugh at the SMARTEST MBA Wall street guys losing their paper money and holding an empty bag in the crisis. Isn't it great fun?
Does the US need aid from the World Bank??????????????