30 Woodbine Street, one of five foreclosed homes on a single block off Broadway. — Photo by Diego Cupolo.
Bushwick has been prominent among New York neighborhoods in news of the country’s foreclosure “crisis.” Much sap has been made of a few people losing their houses in the neighborhood, but do the facts justify the hysteria?
While 3.7% of Bushwick’s housing was in some part of the foreclosure process in 2006 [pdf], and it’s likely even higher now, it’s important to keep the proper perspective: the vast majority of homes in Bushwick are not in foreclosure. However, there are some clusters in the 2-to-3-family areas south of Myrtle that might look alarming to the casual observer.
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Richard McGee has been living at 24 Woodbine Street for about 18 months, and says almost half the houses on his block are either sealed up or having work done on them. According to McGee, five of them are boarded up, and three were recently given emergency maintenance by the Dept. of Sanitation — “Weeds had grown to jungle proportions, windows and doors were broken,” he said. A few have been vacant for almost two years — the first dominoes to fall.
“All these houses went way up in price without anyone doing anything to them,” McGee said. “The guy on the corner bought his building as prices were peaking and something must have happened because I saw a for sale sign out front a few months ago — now it’s gone.”
Shawn O’Toole, a Woodbine Street resident for 7 years, is worried about the future viability of the block.
“With a housing market like this, there’s changes every minute,” O’Toole said. “If it’s not the people, it’s the situation. This street is so full of vacant houses now that people thinking about moving in might turn away when they see all these boarded up windows.”
Bushwick resident and house hunter Cate Corcoran has been calling banks to ask about their plans for repossessed homes, and hasn’t been able to get any answers.
“The banks have all these properties now, and they are no property managers. My experience with their mortgage departments, for example, is they are totally unresponsive — unless you want to buy a mortgage, of course. You call a vault in Wisconsin and they take your info and never call you back,” says Corcoran. “Now that the government is running some of them, as with IndyMac — well, I don’t imagine it will make them any faster.”
Though banks never planned on entering the property management business, their irresponsible lending has forced them into it. And instead of turning lemons into lemonade by rehabbing the interiors and renting them out, they are allowing them to rot, ruining the livability of the rest of the block.
“Once a bank takes over a piece of property, I think it’s within their interest to invest in it,” McGee, of Woodbine Street, said. “It doesn’t make much sense to board up the windows and let the place fall apart — possibly attracting squatters.”
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On another front, the City, backed by $24 million in federal funding, is planning to buy 115 foreclosed homes throughout the city and refurbish them. They will be sold to low- and middle-income buyers with low-rate financing in an effort to “stabilize neighborhoods.” These spotty efforts are unlikely to make a significant impact considering the thousands of homes — 336 just last month — in foreclosure, and the resources are limited.
Some economists say the best way to resolve the vacant home problem is to let home prices fall to a level where the average buyer will re-enter the housing market. The idea is that vacant homes can then be snapped up and occupied with less expense and far less need for shady mortgage acrobatics. This “price discovery” process is being frustrated by the US government’s efforts to prop up prices, and may prolong the economic pain.
It seems unlikely that Brooklyn will descend back into the nightmare of crime and fire suffered by previous generations. But localized damage can still be done, and that is why many hope to encourage banks to stem the bleeding of our neighborhood’s vitality — and their revenues. Then maybe they wouldn’t need such massive bailouts.
With reporting by Diego Cupolo.
Jimmy Legs December 1st, 2008 at 5:38 pm
i wonder how low prices would have to go for a natural correction?
chillinoncentral December 1st, 2008 at 6:41 pm
Surpisingly I think, homes in Bushwick have actually managed to maintain their value over these tough market times while dropping elsewhere. Thanks for this most informative article.
mopar December 1st, 2008 at 8:52 pm
Ahem, prices are already so low they are as cheap as renting — if you can come up with a 3 percent down payment and the $300 per month for private mortgage insurance. Seems to me this is pretty much a “natural correction.” But I’m not sure anyone is buying…
DeniseVB December 1st, 2008 at 8:59 pm
I’m still in the market for a Bushwick vacation home, this is looking good :)
will December 2nd, 2008 at 12:17 am
Jeremy if you actually look at the PDF you link to you can see that Bushwick foreclosures have gone from 11.5 per 1000 in 1990 to 36.6 per 1000 in 2006. 2006! That is not 2007 or 2008 so you you shouldn’t imply that these statistics are current.
Meanwhile that document also shows Home purchase loans per 1000 houses going from 27 to 157.2 – I.E. lots more people have mortgages on thier homes now. And Bushwick has (and has always had) lots of subprime loans. And the median price of a house in Bushwick had doubled from 2000 to 2006!
These are some scary statistics for Bushwick housing.
P.S. Stop reading Mises. It’s Kook central.
will December 2nd, 2008 at 12:32 am
I should clarify, you should stop linking to the Mises Institute, it’s Kook Central.
http://unforeseencontingencies.blogspot.com/2008/01/note-on-mises-institute.html
Jeremy Sapienza December 2nd, 2008 at 2:17 am
Mopar: What you might consider cheap, others may not. Also, it’s the uncertainty, not simply the price, that keeps people from knowing/believing the market has reached bottom.
Will: You’re right about the foreclosure rate, I could not find current stats and forgot to change the above section during editing. It’s fixed above (not perfectly, but whatever). As for the linked sources, I don’t care about obscure infighting among ideological factions; the article linked here is appropriate.
ricmac01 December 2nd, 2008 at 6:27 pm
I think current stats remain hidden until the powers that be figure out how to massage them to best suit their needs – only yesterday did we find out that the nation has been in a recession for the past year (duh, most things we really know without the assistance of statistics, don’t we?). An old saying says there are three kinds of lies: lies, damned lies, and statistics.
Regarding housing prices in Bushwick doubling from 2000 to 2006 – problem is, this is more thanks to herd mentality than to anything else (kind of like our over-inflated stock market). The intrinsic value wasn’t there to support such a market increase – very little renovation of the houses and very little improvement in the neighborhood amenities needed to drive such an increase (unless you count new cars on the JMZ line).
Check out the first house pictured above (30 Woodbine) – NexTag estimates a projected sales price of $737,000!!!!
mopar December 2nd, 2008 at 11:38 pm
I’m not saying everyone can afford to buy in Bushwick – hardly! But if you can come up with the down payment and your household income qualifies, then the cost of owning is as cheap as renting. That’s quite unusual, historically, for New York City.
For example, a two-family in a short sale costs about $430,000 right now. With 20 percent down and no PMI, all expenses (including heat, etc.) add up to about $3,000 a month. If you rent out one apartment for $1600, then your rent is $1400. If you can’t afford 20 percent down, you’ll be paying an additional $300 per month in PMI, which brings your monthly costs to $1700.
There are cheaper and also more expensive buildings around. With a three-family — or living in the basement and renting out the other two units, which I believe is illegal — you’d pay almost nothing per month.
Two families here sold for about $600,000 in 2006, so prices have dropped about 40 percent. I don’t doubt prices of foreclosed houses are even less or will be, but you need a lot of cash to buy a foreclosure.
Jeremy Sapienza December 2nd, 2008 at 11:51 pm
Heh, if the economic shit does hit the fan, you WILL find me living in the basement and renting the upper floors.
Plazma December 6th, 2008 at 11:43 pm
Nice summary. I hope Bushwick doesn’t return to the ’70s and ’80s. Although it appears more likely it will. With so many layoffs in the city it could happen.
My M train ride seems to be dicier in the last month or so. I haven’t been robbed or anything close to that but people seem more stressed, a bit more angrier, nasty. I mean you see folks like this all the time in NY, we’re in Bushwick, but it feels more intense right, even for Bushwick levels.
mopar December 8th, 2008 at 1:42 pm
I have a theory about the 70s. An underlying factor was that massive amounts of employed people moved out of the city and into the suburbs in the 1950s, ’60s, and ’70s. Then city services were cut. Apparently there was no looting during the last blackout because they happened early in the day and police had time to respond before dark. As for mass migration, now people are moving back into the city center. I am clinging onto this small fact and hoping it means our world will not explode in 70s violence. But as for the M train feeling nastier, the murder rate is already up a few ticks.