Will they Call them 'Bushvilles'?

Back during the 1930s, a number of shanty towns sprung up around the U.S. These makeshift settlements were known as "Hoovervilles," a derisory term stemming 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."

Comments

[Tom]

I called them "Green-o-villes" in my Real Estate Mean Reversion article because Alan G had a big part in financing Bush's ownership society.

http://www.neuralmarkettrends.com/2007/10/03/real-estate-mean-reversion/

[Rocky]

If you are a recently retired government employee, especially a retired public safety employee, life is still pretty good in California. The highest paid fireman in Vallejo, CA earned $379,000 in 2006 (base wages plus overtime). He retired in 2007. If he was at least 50 years old at retirement and had 30 years of service, he was entitled to a pension of $341,000 (3% for each year of service, up to 90%), as well as post-retirement medical benefits. Unless the State of California does something to rein in these exploding retirement costs, there will be a lot of government bankruptcies in California in coming years. Proposition 13 protects California homeowners from the outrageous property tax increases now happening in other states. If the sub prime mess does not do in the bond insurers such as AMBAC and MBIA, municipal bankruptcies may get them in the end. Be aware that government lease debt (sometimes called certificates of participation) in California is not considered debt within the meaning of the California constitution. So you don't want to be owning this stuff when the issuers go under and you don't want to be owning a long term bond fund that owns this stuff either.

[dearieme]

"While no current residents claim to be victims of foreclosure..": in other words, this story is a complete beat-up. It's useful to be reminded of Journalistic Standards.

[dearieme]

And journalistic logic: is he really arguing that falling home prices will force up rents?

Hard times are coming, with few consolations; one would be if this twit lost his job.

[David]

"While no current residents claim to be victims of foreclosure" So the entire point of this article is mute. I also question the generalization that all people who face foreclosure are victims. Who are they victims of? Is it possible they are just as much to blame as the people who sold them the crappy loans and heloc's? If these people were stupid enough to live beyond their means, they have it coming. If companies were dishonest in their dealing's they should be held accountable as well.

Dad... "son you made your bed, now you get to lay in it."

Son..."thanks Dad, you taught me well..rest in peace."

[Zeppelin]

Everything's fine, quit trying to sell a book, with Fearmongering...

You sit on a corner with a, "The End is Near" Sign???

Who cares, this is the almighty AMERICA, land of the free...

[MdmRptr]

Dearieme: While I don't disagree with much of what you say above, I feel compelled to point out that the author may not give much credence to your comments if he feels you may not have a completely sound hold on the proper terminology shooting down his article.

moot vs. mute

From Dictionary.com:

moot1 /mut/ Pronunciation Key - Show Spelled Pronunciation[moot] Pronunciation Key - Show IPA Pronunciation
–adjective
1. open to discussion or debate; debatable; doubtful: a moot point.

vs.

mute /myut/ Pronunciation Key - Show Spelled Pronunciation[myoot] Pronunciation Key - Show IPA Pronunciation adjective, mut·er, mut·est, noun, verb, mut·ed, mut·ing.
–adjective
1. silent; refraining from speech or utterance.
2. not emitting or having sound of any kind.
3. incapable of speech; dumb.

etc.

[Mike Jones]

I'll tell you where they'll end up. They'll end up paying rent like most American working people.

I understand the problem with the mortgage crisis but why is it the taxpayers problem? Let 'em go down.

For sixty years real estate prices have been artificially high - and yuppies have been getting mortgages at these inflated prices -- because of government policies favoring investors in rental property. If older, single-family homes were left to freefall in value, the guy who makes fourteen bucks an hour could own his own home.

But hell, no, no one ever wanted me to own a home. They want my landlord to collect rent to keep real estate values artificially high.

So, let them go into artificial freefall. Maybe then my time will come.

[Jerry]

I agree with Mike - the best solution to this problem is to let the market take care of itself. There must be pain before there can be any gain. Those who just stood aside and LIVED WITHIN THEIR MEANS like what everyone else should have been doing will be punished because the bad guys who got in beyond their means will be rescued and in a sense rewarded for their bad behavoir and people won't learn from their bad behavoir if they are allowed to get away with it time and time again.

The market has to adjust without any interference from the government so that it can stabilize and correct without artificial props.

This whole thing was caused by the basic unaffordability of housing. Creative DOA financing was used to get around this. Artificially low interest rates were used to get around this. The fact is that salaries and wages inflation adjusted have gone down since Bush has been in office while housing prices have skyrocketed. You can't afford what you can't afford no matter how creative you make the financing. People who lined up to buy over priced housing trying to outbid one another - Sorry I don't feel sorry for you now. I blame you for being stupid enough to get into what was over your head and for driving up the prices for "living within my own means" person like me.

Now take your own licks and dump your home back to the bank or lower the price below what you paid for it so people like me can own "your" home.