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The question of whether the US economy is in fact experiencing a housing recovery has a lot of similarity to the question of an employment recovery. The answer really depends on where you choose to look.

Historically owner occupied housing has been the prime generator for the accumulation of middle class wealth. The ability to get a loan to purchase a home with a low down payment at modest rates of interest made it possible for millions of Americans to participate financially in the long term appreciation of property markets. One of the biggest expansions of this ownership class came just after WW II when FHA and VA loans spurred a huge construction boom that created the suburban landscape. Racial minorities were systematically excluded from such government subsidized opportunities by the practice of redlining. This situation did not begin to be corrected until the passage of fair housing legislation in the 1960s. By then a generation of minority families had already been left behind.

The great crash of 2008 ended the real estate boom that opened the 21st C and created a major decline in the value of real estate. Six years later the economy is still digging its way out of that hole. A group of UC Berkeley economist have just issued a report which highlights the very spotty nature of the recovery in housing values.

Underwater homes: Minorities still suffering from housing collapse  

Despite the Bay Area's robust housing recovery, the East Bay communities of Vallejo, Antioch and Richmond are among the nation's 100 cities with the highest percentages of underwater mortgages, according to a report released Thursday.

The report, by UC Berkeley's Haas Institute for a Fair and Inclusive Society, points out that these communities and others with large minority populations have substantial percentages of homes still underwater, or worth less than their mortgages. Initially targeted by subprime lenders and then hit with the steepest home price declines, the communities are still struggling from the housing crash.

While this article is focused on the San Francisco Bay Area, the study was a nationwide survey and found similar patterns in other parts of the country. The Bay Area is a particular dramatic study in contrasts. The tech boom in San Francisco and Silicon Valley has created a frenzied housing boom, with many listed properties getting sold for amounts considerably greater than the original asking price. Yet that prosperity is having a limited impact on the broader region. The New York metropolitan area seems to be following a similar pattern.
The institute argued that market forces won't help the hardest-hit communities recover. It called for federal intervention to reduce the principal on underwater mortgages to current market values, saying that federal efforts so far have been "woefully insufficient."

"The best solution would be for banks and mortgage holders Fannie Mae and Freddie Mac and investors to simply modify the mortgages,'' Dreier said. ''That would avoid lots of other complicated efforts by local and federal governments. But they're not doing it and show no inclination to do it."

A second alternative would be for the head of the Federal Housing Finance Agency to change policy to allow Fannie Mae and Freddie Mac to reduce the amount owed on the loans, he said. "It makes the most sense. It's a national problem. Doing it on a city by city basis is a little inefficient," Dreier said.  

Somehow I don't see much prospect of anything getting done to correct the economic imbalance.

Originally posted to Richard Lyon on Fri May 09, 2014 at 10:11 AM PDT.

Also republished by Black Kos community and Community Spotlight.

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Comment Preferences

  •  Location, location, location (3+ / 0-)
    Recommended by:
    Richard Lyon, Eric Nelson, koNko

    Never truer.

  •  i guess this is related (5+ / 0-)

    but are there any historic minority (black) communities in San Francisco? How are they faring?

    I know about Oakland, but not about SF.

    Dawkins is to atheism as Rand is to personal responsibility. uid 52583 lol

    by terrypinder on Fri May 09, 2014 at 12:20:46 PM PDT

    •  There once were several. (6+ / 0-)

      Most of the historically black communities that were established around WW II were gentrified out of existence a long time ago. Hunters Point/Bayview still has a large black population. The Mission is heavily Latino. It is now coming under pressure from development and the techie onslaught. It is the scene of regular raucous protest.

    •  The largest historically black community in SF (5+ / 0-)

      was the Fillmore District. The Fillmore District, is also known as the Western Addition, of which it technically is actually but one portion. The original Western Addition consists of a considerable portion of the northern half of San Francisco, bounded by Larkin Street (the city's original western boundary on the east, the Upper and Lower Haight Districts on the south, Pacific Heights on the north and the Richmond District on the west. The Fillmore District was the eastern portion of the original Western Addition, immediately south of Pacific Heights and bounded by Gough Street on the East, Divisadero Street on the west and Fulton Street on the south. There was a thriving music scene in the Fillmore until the 1950's.

      During the first period of "urban renewal" the Fillmore District was "redeveloped" out of existence. Block upon block of viable low-density housing (including many examples of what would today be considered prized Victorian/Edwardian homes which survived the 1906 earthquake intact) was simply condemned, bulldozed and replaced with characterless subsidized low-rise apartment developments. While the subsidized housing was not, in and of itself, a bad thing, the displacement that resulted from the removal of what had been there previously was a disaster for San Francisco's A-A community. In addition, what had been an economically fairly diverse community became instead a uniformly poor one. The area developed a bad reputation such that replacement housing was not properly managed or maintained, which turned it into "housing of last resort," much like some of San Francisco's scandalously badly-built and badly maintained public housing projects.

  •  Not only was the crsh carefully orchestrated (1+ / 0-)
    Recommended by:

    but the recovery seems orchestrated, as well.

    I'm living in America, and in America you're on your own. America's not a country. It's just a business.

    by CFAmick on Fri May 09, 2014 at 12:21:46 PM PDT

    •  It's just Real Estate 101 (0+ / 0-)

      The strongest areas of town have the least risk and that's where people look when they're uncertain about the economy.  So the poorest areas and the areas farthest out in more speculative locations recover last.  Builders are tearing down and in-filling in desirable locations.

  •  No housing recovery: Renewed investment gaming (3+ / 0-)
    Recommended by:
    Richard Lyon, koNko, vcmvo2

    Demand for housing is high -- extremely high -- and rents are phenomenal around the nation. The new activity in housing, however, hasn't been in places where the population is going. The recovery has been in places where capital is accumulating. (premise 1)

    Banks are not making mortgage loans. The rate of acceptance on mortgage applications is abysmal, so financing isn't present for the traditional buyer. (premise 2)

    House sales are taking place in places where there is a reliably high cost of living, and Wall Street firms are continuing to invent brand names for mortgages.

    In other words, Goldman and Friends are buying houses as financial instruments again. They think they're good investments and never mind the humans who need shelter.

    "man, proud man,/ Drest in a little brief authority,. . . Plays such fantastic tricks before high heaven/ As make the angels weep; who, with our spleens,/ Would all themselves laugh mortal." -- Shakespeare, Measure for Measure II ii, 117-23

    by The Geogre on Fri May 09, 2014 at 04:33:00 PM PDT

  •  Black america is getting its ass kicked.. (4+ / 0-)
    Recommended by:
    dfarrah, Richard Lyon, Eric Nelson, koNko

    But no one cares, and there's no one advocating in our behalf.
    And this is when democrats 'win'...

  •  Didn't the whole (3+ / 0-)
    Recommended by:
    dclawyer06, koNko, Peace Missile

    'recovery' thing kind of bypass everyone in the lower ranks?

    The banks have a stranglehold on the political process. Mike Whitney

    by dfarrah on Fri May 09, 2014 at 05:26:10 PM PDT

  •  The rule seems to be that proper balance means (1+ / 0-)
    Recommended by:

    all the weight on one side, and none of the weight on the other. So we're still on course to get there.

    Somehow I don't see much prospect of anything getting done to correct the economic imbalance.

    A government is a body of people usually notably ungoverned. -- Firefly

    by Jim P on Fri May 09, 2014 at 11:39:09 PM PDT

  •  "Red Lining the new scam (2+ / 0-)
    Recommended by:
    Richard Lyon, vcmvo2

    Trying to sell her deceased mother's home in a predominantly AA neighborhood, a friend had a qualified FHA buyer, but the banks  Red Lined(? )the area even though this neighborhood has been  stable for decades.

    The appraiser, devalued the home well below it's value. which the seller could not accept.  This is what seems to be adding greater problems for sellers and buyers.

    FHA has a rule that buyers are ineligible for their program for two whole years after an application, even if another lender does not Red Line and their appraisal is more consistent with the true value of the same home.

    Conventional loans are too expensive for low/middle income first time buyers.

    Hopefully, Mel Watts can address some of these deterrents to these minority markets moving forward.    

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