It’s a sign of simmering frustration over the housing crisis—now in its second half-decade—that Jamie Dimon, one of the nation’s top bank executives, complained last Friday that “there is no one really in charge” of fixing the problem. “It is just kind of sitting there,” he said. The Obama administration also signaled this week that it hasn’t done enough to help homeowners.
Nowhere is the exasperation more evident than in a pair of reports issued last week by the Woodstock Institute, the Chicago community-development research group that has been aggressively documenting the devastation foreclosures have wrought on the city’s low- and moderate-income communities. On January 9, the institute endorsed the Federal Reserve’s white paper calling for widespread conversion of foreclosures to rentals. But it warned that such programs shouldn’t “cut corners” and cause further damage to low-income communities.
Four days later, on January 13—the same day Dimon made his statement—the institute released another report, this one calling for new leadership at the federal level on programs designed to help homeowners.
That day, I sat down to talk with Tom Feltner, Woodstock’s vice president, and Katie Buitrago, its policy and communications associate. “We consider the federal policy that has come down to be well meaning but ultimately not sufficient,” Feltner said. Like Dimon, they characterize the housing problem as a many-tentacled menace that needs to be attacked from several directions at once. Among other things, that means taking on the viral spread of foreclosures and derelict properties in low-income neighborhoods; confronting the inability of middle- and upper-income homeowners to move because of the ongoing drag on property values caused by unemployment and other factors; and addressing the tighter lending rules that put down payments out of many buyers’ reach.
Feltner and Buitrago did see promise in efforts to combat the blight of vacant foreclosures. They spoke hopefully of the proposal by Congressman Danny Davis to bring the U.S. House of Representatives’ Committee on Oversight and Government Reform to Chicago for a hearing about the impact vacant foreclosures have on urban neighborhoods. “What’s happening in Chicago and [other cities’] neighborhoods is very much on the radar of policy makers,” Feltner said. Unfortunately, less than an hour after our conversation, Feltner let me know that Davis’s request had been denied.
Also in danger of being stopped or slowed is Chicago’s vacant property ordinance, which grew in part out of the Woodstock Institute’s research and advocacy. In December, the Federal Housing Finance Agency sued to block the ordinance. Feltner and others see that legislation as Chicago’s best hope to help neighborhoods troubled by foreclosures. The lawsuit, Buitrago said, “shows the leadership is out of touch with what’s happening in communities.”
At the upper end of the real-estate market, the frustration of waiting for a solution to this mess was evident in last week’s report from Moody’s Investors Service. It forecast an increase in strategic defaults, or “walkaways,” prompted by homeowners being underwater with little hope for recovery. Other reports also suggest that the growing frustration is impelling more homeowners to walk away.
Finally, Gary Engelhardt, a Syracuse University economics professor, has authored a study that, among other things, shows how problems with the residential real-estate market have affected people selling homes. They have become so irked by how far prices have fallen, Engelhardt concluded, that they are simply backing out of the market.
How about you? Are you frustrated?