Real estate signs are posted in front of houses in the Villages at Queen Creek subdivision of Queen Creek, Ariz. Home values have fallen 23 percent from their peak in July 2006, according to the S&P/Case Shiller Index.
(Ross D. Franklin/AP Photo)
Three years ago, at the height of the housing boom, prices rose faster in Phoenix than in any other place in the country. In this West Phoenix neighborhood, potential buyers had to enter a lottery system just for the chance to purchase a home. Now, just about every other home here is for sale.
Last Saturday, homeowners, eager to know when this mess will end, gathered in Mesa for counseling services and lectures, sponsored by the Arizona Foreclosure Prevention Task Force.
"They say housing is going to go back up. Well, at 68 years old, I don't know how long it's going to take," said Jim Gallagher, a retired plumber. "It's going to take a while. So I don't know what's going to happen."
Phoenix is not alone. Home values across the country have fallen 23 percent from their peak in July 2006, according to the S&P/Case Shiller Index. One in 10 homeowners with a mortgage is either in foreclosure or delinquent on their payments, according to the Mortgage Banker's Association.
"If we let all of these homes foreclose, it brings down not just those home prices, but everyone else's home prices," said Robert Shiller, professor of economics at Yale University.
So what's the fix?
Some economists believe banks should move borrowers into government-insured mortgages at lower rates. But many banks haven't been receptive, since they would then be forced to write off some of what the borrowers owe.
Some banks have begun to modify mortgages on their own, extending the length, or lowering the interest rate. But the banks won't reveal how many mortgages they've modified. Shiller said mortgage contracts should be more sophisticated to protect people from risk.
"We want a mortgage whose payment goes down in bad times and they go down automatically," Shiller said. "You don't have to go and fill out forms from a bank; you don't have to say anything. It's common sense, actually."
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