Boom brings dark side
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
Virginia, Maryland and the District have relatively low foreclosure rates —
analysts say troubled owners in those booming markets can still sell their
homes before facing foreclosure.
Should the nation's housing bubbles deflate, as many economists and federal
officials expect, the foreclosures could prefigure a national crisis.
Americans now shoulder record levels of housing debt — more than 8 percent of
homeowners spend at least half of their income on their mortgage.
"We are clearly seeing a spike in foreclosures in a number of our major urban
areas," said Julie L. Williams, acting U.S. comptroller of the currency,
whose agency regulates the nation's banks. "It can lead to a downward spiral
for neighborhoods. If we are not careful, the American dream can quickly turn
into the American nightmare."
A recent study in Chicago found that rising foreclosures, and attendant
social dislocation, fuel increases in crime rates.