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“A lot of the people we’re talking about would be considered the middle class,” he says. “But one thing we’ve seen is what some people have called the ‘democratization’ of home ownership — it’s moved down a little bit into lower-income groups.”
Foreclosures are hitting every community, from Woodland Hills and Bel Air to Boyle Heights and Fairfax. But while they will probably hit hardest in lower-middle-class areas, they are not expected to be dramatic in Latino neighborhoods. Among Latino homeowners, for whatever reason, foreclosure rates are strikingly low. “To me it’s a puzzle,” Bostic says.
Hyde Park in South Los Angeles, the scene of Jesse Jackson’s press conference, is an area where middle-class home buyers are going under. The largely African-American community contains streets of modest, Spanish-style homes that hover around $475,000 in value.
Herman and Karen Lee, who agreed to let Jackson use their neatly trimmed Craftsman as his soapbox, say they know of at least five neighbors who have lost homes in recent years. “You will see one of your neighbors gone when you get up in the morning,” says Herman Lee, 68, a retired postal worker. “Two or three days later, you’ll see someone moving in, and you’ll never see a for-sale sign go up. One of the houses across the street from me changed hands four times in the last 10 years, and I never saw a for-sale sign go up.”
Homes are repossessed and often resold online, he says.
Unscrupulous lenders constitute a significant part of the problem, experts say, but no one seems sure to what extent. Regulators have filed few criminal charges, though they claim to be looking for bad guys.
“You turn on the lights,” says Peters of the state housing agency, “and the cockroaches scatter. It’s hard to catch them all.” A number of subprime lenders, who brokered deals using their own lines of credit and then sold the loans to investors, have gone belly up and essentially vanished, regulators say.
In spite of it all, some economists see hope — and perhaps even a bit of redemption — amid the misery. Stephen Levy of the Center for the Continuing Study of the California Economy, in Palo Alto, can’t imagine that 10 percent state budget cuts will actually happen — and, in fact, Sacramento pols have rarely made such budget cuts in California’s history, not even during the Gray Davis deficit debacle.
Says Levy, “What’s [Schwarzenegger] going to do, let all the prisoners go?” Nor does he see banks and lenders making much profit off the homes they repossess. “They can’t sell them — they’ve got no buyers at those prices that they made the loans for.”
The banks and lenders are so averse to owning all these L.A. homes, in a gasping housing market whose bubble has clearly burst, that Levy says banks and lenders will probably begin offering families ways to restructure and reduce the existing mortgages. Meanwhile, falling home prices will help those who were kept out of the skyrocketing market but would like to buy.
For L.A., Levy says, “as painful as it is, the extent to which housing prices come back to Earth makes the housing market more open to people. High housing prices were going to kill us.”