MSNBC: "U.S. housing boom a bust for many"...foreclosures on the rise

[Bush_Eats_Beef]

U.S. housing boom a bust for many
Surge in home ownership brings spike in foreclosures
By Michael Powell
Updated: 11:39 p.m. ET May 29, 2005

http://www.msnbc.msn.com/id/8029531/

PHILADELPHIA - To walk Thayer Street in northeast Philadelphia is to count, door by door, the economic devastation afflicting a working-class neighborhood. On a single block, 18 of the 42 brick rowhouses have gone into foreclosure in the past three years.

There's Marciela Perez, who fell ill with cancer, lacked health insurance and stopped making mortgage payments. Barrel-chested Richard Hidalgo, who got divorced and could no longer make his monthly nut. And Mike O'Mara, a rawboned and crew-cut truck driver who took on too much debt, lost his job and fell behind on his mortgage.

"Mortgage companies convinced us to refinance, and each time our bill went up," O'Mara said as he surveyed his narrow street from his shaded front porch. "You fall behind and they swoop down on you."

For some American homeowners, the greatest housing boom in U.S. history has delivered riches. They repeatedly tap their homes for equity and use the cash to purchase granite countertops, a BMW, even a trip to the Super Bowl. But there's a dark side -- a sharp rise in foreclosures that is destroying the single greatest generator of personal wealth for most Americans. Foreclosure rates rose in 47 states in March, according to Foreclosure.com, an online foreclosure listing service. The rates in Florida, Texas and Colorado are more than twice the national average. Even in New York City and Boston, where real estate markets are white-hot, foreclosures are rising in working-class neighborhoods.

[alcibiades_mystery]

1. The banks extend far more credit than is manageable

for mortgages, and people in love with the commodity lap up the unmanageable loans, sometimes taking out secondary loans at higher interest rates just to make the ridiculous downpayments. And all this for pre-fab homes that use twice as much space as a family of five needs. Then they default. Surprise surprise.

[yankeedem]

2. Starting to see more and more articles on the "bust"

that is coming- NY Magazine had a cover article on this few weeks back. My city is building 6000 units on an abandoned military base, right into the teeth of an imminent bust.

The more I read stories of people allowed to take out interest only loans, or no down payment loans, or allowed to pay 50% of their income for their mortage, the more I'm convinced that the next 5 years are going to be ugly.