An epidemic of boarded-up homes
and describe the devastating impact of the housing bust on one New England city.
WHEN YOU pick up the classifieds in the local paper in Providence, R.I., a phrase jumps out at you: "Legal Notice: Mortgagee's Notice of Sale of Real Estate...Company X by operation in law, dated and recorded in said Land Evidence Records, the conditions of said mortgages having been broken, bounded and described."
Translation: Another family's home has been foreclosed on--and is up for auction.
The number of U.S. home foreclosures rose to record levels at the end of last year, according to the real-estate industry. Some 0.83 percent of mortgage loans were in the foreclosure process in the final three months of the year, up more than 50 percent over the year before. The mortgage delinquency rate was 5.83 percent, the highest in more than 20 years.
Providence has been hit hard. The Providence-New Bedford, Mass., metropolitan area ranked 81st on the list of cities with the highest percentage of foreclosures.
According to the Providence Journal, of the 198 properties that banks repossessed in Providence from July through November of last year, only 20 were resold to new homeowners during the period, according to a report released this week by the state's housing agency, Rhode Island Housing.
The Center for Responsible Lending Web site has compiled the data on the housing bust, along with analyses on how and why it happened. For more on the legislative measures under consideration in Washington--and those that should be, but aren't--see the CLR's page on "Common Sense Solutions." For a closer look at the mortgage and housing crisis, see Petrino DiLeo's "Housing bubble deflates," published in the International Socialist Review last year. New York Times columnist Paul Krugman's article "Don't Cry for Me, America" underlines the scale of the crisis. For more background on the worsening state of the economy, see Joel Geier's "More than a recession: An economic model unravels" in the ISR. The biannual State of Working America is an excellent source of facts, figures and tables about living conditions for U.S. workers. Many parts of the current edition are available on the State of Working America Web site.
What else to read
The Center for Responsible Lending Web site has compiled the data on the housing bust, along with analyses on how and why it happened. For more on the legislative measures under consideration in Washington--and those that should be, but aren't--see the CLR's page on "Common Sense Solutions."
For a closer look at the mortgage and housing crisis, see Petrino DiLeo's "Housing bubble deflates," published in the International Socialist Review last year. New York Times columnist Paul Krugman's article "Don't Cry for Me, America" underlines the scale of the crisis.
For more background on the worsening state of the economy, see Joel Geier's "More than a recession: An economic model unravels" in the ISR.
The biannual State of Working America is an excellent source of facts, figures and tables about living conditions for U.S. workers. Many parts of the current edition are available on the State of Working America Web site.
WHEN YOU drive around Providence, there are "for sale" signs and boarded-up homes everywhere. When we went to the West side to get the pictures that accompany this article, it seemed to take longer to snap the photos than to find another house with plywood covering the first-floor windows.
Many of these homes were just renovated. Now, they are at risk of being ransacked for copper piping and anything else of value in the home.
After the second break-in at one home, someone scribbled "Copper gone" on the door. As the Journal reported, the broker listing for the house reads: "This property has a lot of potential. Priced to sell AS IS condition. Copper missing. Other work needed...Will need rehab loan, private financing or cash."
The real-estate agent in charge of listing the house told the Journal that the property last sold for $240,000 in 2005--now, he said, Deutsche Bank would "be lucky if they got $100,000 for it."
An incredible 7.1 percent of the home mortgages in Providence aren't being paid on time, according to an analysis by a company called LoanPerformance. In certain parts of the city, the statistics are even worse. In the Olneyville section, for example, state housing officials estimate that the foreclosure rate is closer to 9 percent.
About 18 percent of all mortgages in Rhode Island are sub-prime, which means they typically carry variable interest rates that reset to higher levels, causing payments to balloon. The vast majority of Rhode Island's roughly 875 bank-owned houses--78 percent--were initially bought with sub-prime mortgages, according to LoanPerformance.
Among the other victims of the housing crisis are renters who face being thrown out of their homes when the owners go into default on mortgages. Rhode Island Housing reports that 386 multifamily houses in the state were advertised for foreclosure auction from September through December of last year--with two to five families, typically renters, affected in each building.
Legislation is pending at the state level to require that renters be notified of "pending foreclosures" at least 60 days prior to eviction. There is currently no requirement that tenants be notified before a foreclosure; the law states only that tenants must be given "reasonable notice" prior to being evicted. What is deemed "reasonable," lawyers say, can be as little as three days.
On average, eight out of every 1,000 mortgages in Rhode Island fell into foreclosure during the second quarter of last year--four times the foreclosure rate of two per 1,000 mortgages in the second quarter of 1991, during the state's banking crisis. That crisis was so severe that housing prices peaked in 1989 and didn't regain the same level until 2001.
"This irresponsible dumping [of foreclosed property] is exactly what happened in the 1990 credit-union/banking crisis, and it resulted in more disinvestment, a lot of abandonment and demolition, and delayed the recovery substantially," said Mark Van Noppen, managing director of the Armory Revival Co., a developer.
But there is one market in Providence that is defying the overall trend--where at least one real-estate agent reported an 11 percent increase in prices. These are beachfront homes--typically, second homes for the super-rich, often bought with cash. According to broker John Hodnet, "The people in this market still have money, and that's the key. They still are very rich."
Meanwhile, ordinary people are being pushed to the edge. Some programs to help homeowners exist, but they are inadequate. Thus, for example, so-called "home-saver" loans are only available to people without significant debts, or who aren't behind on any payments. A local housing assistance program reported that in 2007 that it was only able to renegotiate one loan because of such restrictions.
OVERALL, THE economy isn't looking very bright in Rhode Island, where the unemployment rate last month was 5.2 percent, the highest in New England. The overall number of unemployed in the state is the highest in 13 years, and there are roughly two unemployed workers for every job advertised online.
Providence was once at the heart of the industrial revolution, and the city is still dotted with large factories and warehouses. But most are now empty--and not just a few are Superfund sites because of years of pollution--and the rest have been turned into condo development projects.
While the city had been in decay for decades, it recently achieved a rebirth, at least according to the media--in part due to the housing boom, with long-time Mayor Vincent "Buddy" Cianci viewed as the man behind the boom.
Now, Cianci is more noted for his recent stay in federal prison for running a racketeering ring out of the mayor's office. And the development plan for Providence? Like similar schemes nationally, it has been revealed to have funneled tax breaks to developers, while government officials cut away at social spending.
The promise of the benefits of development trickling down never materialized. So today, a massive luxury mall sits in downtown Providence, filled with workers at minimum-wage positions that replaced union factory jobs. And don't think that the mall is generating tax revenues--the city graciously waived property and sales taxes so that out-of-state developers could profit.
The potential power of the working class to make a difference still exists in Providence. On May Day 2006, 35,000 immigrants and their supporters shut down parts of the city and marched across the mall to the grounds of the state Capitol building. That inspiring day gave a glimpse of a different kind of society--where today's epidemic of boarded-up homes could never happen.