In pockets of foreclosure, housing woes spread block by block

In pockets of foreclosure, housing woes spread block by block
In Modesto, Calif., home prices could fall as much as 25 percent.
By Ben Arnoldy | Staff writer of The Christian Science Monitor

from the December 11, 2007 edition
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Modesto, Calif. - Pushing up against almond groves and dirt-bike trails, the row of homes on St. Salazar Circle marks the furthest advance of Modesto's housing boom – and the start of its scorched-earth retreat.

Brown, unwatered lawns of foreclosed homes compete with the green grass of neighbors still hanging on. Some of the structures, although new, are missing outdoor equipment like air conditioners, taken by metal thieves. One in 4 houses of the neighborhood stands empty, and mortgage defaults are certain to push even more residents, mostly Hispanic immigrants, out of their homes.

It's a sign of the home-loan crisis' uneven impact: light in some areas, heavy in others – often those populated by minorities or the lower-middle class. The concern now is that the woes concentrated in these pockets of foreclosure will spread outward, causing home prices to spiral down rapidly and broadly.

How far could it spread? Much depends on how the overall economy performs. Things like gas prices, job creation, and pay hikes will affect how many homeowners are driven into foreclosure. The biggest danger may be the sinking housing market, with negative forces feeding off each other: Falling home prices, reluctant buyers, distressed sellers, and tighter lending standards by banks.

In a worst case, economists say that a deep national recession is possible. Home prices could fall as much as 25 percent – more in places like Modesto and less in many towns that saw less of a boom. Bank woes could make credit dry up, while the declines in construction and housing wealth could hurt jobs and retail sales.

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http://www.csmonitor.com/2007/1211/p01s03-usec.html