Section 8 renters bring "cultural shock waves" to suburbs

Good morning, Christiane. Tuesday morning housing links from here and there:

From Bloomberg via DrudgeReport: "Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com."

From the L.A. Times: Ed McMahon is being sued by a lender who claims McMahon defaulted on a $250,000 loan.

From The New York Times via Patrick.net: The government's Section 8 housing program, combined with the housing downturn, is allowing more poor, inner-city renters to move into vacant suburban houses,  causing "cultural shock waves" that include "social and racial tensions."

From the San Diego Union-Tribune via Calculated Risk: High-end homes, including one that sold for $7.5 million, are beginning to show up in foreclosure statistics.

--Peter Viles
Your thoughts? Comments? E-mail story tips, and suggestions for future links, to peter.viles@latimes.com.

Comments

[CD]

PETER,please read the article from one of the bloggers on Calculatedrisk,
Check the shadow foreclosure market. The MLS is not given the right count. Sacramento real estate statistics
sacreastats.blogspot.com will give you the correct amount and a great article to go with it.
Los Angeles MLS listing: 62,379_
foreclosure inventory: 88,843
What gives?
The MLS is missing a very large amount of distress inventory. it is not reporting the right figures. Check it out.

[Tim K.]

Regarding the Section 8 troubles:

It's reasons like this that it makes sense to wait before buying. Not just to save money on the price of a home, but to evaluate the neighborhood. Many "good" neighborhoods will turn into "bad" ones due to a shift in the demographics.

The worst thing you want is to buy a dream home you can afford, only to watch your neighborhood become a nightmare. Once the rapid decline of home prices ceases, we will then see which neighborhoods are able to pull themselves together and get a handle on crime, maintenance, and services. THEN it will be the right time to buy.

[sfvrealestate]

Three things: remind me again how and why Zillow such an expert resource?

Also, Peter, while you are at it, can somebody explain to me why there is such a discrepancy between the L.A. Times' foreclosure by zipcode numbers and foreclosureradar.com's numbers?

And re Section 8: I can't speak for Antioch, but I've had Section 8 renters living next door to me for 14 years now and everything has been fine. I'm happy that their children are able to go to the good public schools that Burbank offers.

[E]

SFVRE said...

"remind me again how and why Zillow such an expert resource?"

It's not. But it has far more credibility than a Realtor(tm) these days.

[Cal]

sfvre:"remind me again how and why Zillow such an expert resource?"

While one can find incosistent data points in any Automated Valuation Model (AVM) in the aggregate they are doing alright. A lot of the numbers in the latest report is merely just crunching numbers on closed sales and have nothing to do with any valuation model.

You look at the mass of homes on the MLS not selling (and all the expirations and daily price cuts) and argue that Realtors are any better than an AVM, I'm hard pressed to see it. The banks are using AVMs more and more to reduce the number of BPOs needed on pre-foreclosure and foreclosure properties.

934 N. Avon... Your listing. Just sold for 665k. Zillow hasn't picked up the sale yet since they run a month behind.

Zestimate: $675,500

[Ace]

On Section 8,

Many of the brand new luxury apartments that opened in the NoHo Arts District over the last year have filled their units with Huricane Katrina survivors that are subsidized by FEMA.

The neighborhood changed but not in a negative way. A few soul food restaurants have opened and a bunch of hip hop clothing shops popped up. That is about it.

Crime was always bad here but I don't notice the increase that people always fear with section 8 housing.

[NewtoLA]

Many "good" neighborhoods will turn into "bad" ones due to a shift in the demographics.

Tim, can you explain what is so "good" about living next to a bunch of mortgage deadbeats and "bad" about living near people from the city?

From where I"m sitting your "good" neighbors are too stupid to know they are actually broke.

[Nick]

Maybe this is too obvious to even observe, but the Section 8 laws personally offend me. Why in the world would my government spend my money to let people live in houses they can't afford? That seems as idiotic as insuring sure-fail 3% down loans given to subprime borrowers with taxpayer money, or buying up subprime underwater loans in a declining market by taxpayer subsidized quasi-government corporations still giving out billions to executives and insiders.

... oh, they do that too? ... I hate our moronic socialist programs.

[sfvrealestate]

Nick, maybe I'm taking your comment too literally, but if I may be so bold: for some people, the Section 8 system is a way up and out of bad neighborhoods, bad schools and poor local job markets. The school part of the equation is huge. Improve a kid's chances for a decent education and you'll likely save future taxpayer dollars on future government aid. And as far as people living in places they can't afford, most renters live in places they couldn't afford to buy anyway, so why not? And while you may be offended, I know you're not naive -- let's agree that the government spends our money on many things that offend us.

[somedude]

How much is that housing voucher that allows her to live in a $2200 home?

Welfare should not allow you live better than those in the middle class who actually worked hard on their future.

I went to college, have to work hard every day, and have a lesser standard of living than a person like this? Sick!

It's so hard to do things right. I am relatively young, was it always this way?

[Steve]

After buying over 50 SFD homes for rent, you do not want to buy a house in an area that is mostly rentals and section 8. You want good tennants that care, then buy in an established area with excellent schools. There is such a shrotage of this you can charge higher rents and they stay and maintain the property. Also I would not touch anyting in California at this point, especially in LA

[tarbubble]

You're right, Nick. The poor should either be homeless or live in shantytowns out in the desert, taking the bus 2+ hours each day so they can serve you at the drive-through window, clean your office, or cut your lawn, then take the bus 2 hours back to their shack in Duroville or wherever it is the poor can afford to be.

[Adam]

I completely agree with Nick. If you can't afford to live in a certain neighborhood, then you need to live where you can afford the rent on your own. If that means you have to live in the 'hood so be it. My tax dollars should not be used to help you live in comfort. How is this fair to those of us who pay our own way? I make six figures, but due to the insane run-up in real-estate prices, I am stuck in the same house I have been living in for 11 years because I refuse to buy anything in this market. I would like to live in a $1M+ home, is the government going to subsidize my housing?

Another thing, these types of programs are easily abused. I am sure many of us have stood in line at the grocery store checkout register behind the lady with the acrylic nails using food stamps to purchase the food, yet her kids have the latest portable video games and then they drive off in an Escalade. Makes my blood boil just thinking about it...

[Tim K.]

NewtoLA and Ace:

That's why I put "good" and "bad" in quotes.

For some people, the very same demographics change (i.e. an area changing to a predominantly different race or culture than before) is "good" but for others, it's "bad".

For example, the only Korean businessman left in a largely black neighborhood might feel differently than the only german guy left in a white neighborhood.

I agree with Ace that not all change due to Section 8 is "bad". However, it DOES change the character, so an area that was formally "bad" for you might now be "good", and you'll want to move there.

Therefore, my initial premise still stands - you want to WAIT to figure out how these neighborhoods are changing. Things like Section 8 change neighborhoods FASTER - it might be "good" or "bad", but these are the sorts of events that rapidly change neighborhoods compared to normal.

[The original RZ]

People with high end homes have the easiest out for avoiding foreclosure: sell the home and downsize to a small home! Sure, they'll take a loss on the home since prices are down, but at least they'd avoid screwing their credit. But I guess that many didn't consider this until it was too late.

[Zacksmom]

I was in Corona the other day and I am predicting that this area is going to become a Section 8 haven. There are so many homes for sale that are bank owned or in distress. Some of these homes are quite large and nicely upgraded. It is a shame to see the area deteriorate like it is. Corona has always been the jewel of the IE, but that may be changing unfortunately.

[azure]

I think people need to stop with all the stereotypes about people on section 8. Yes alot of people on section 8 are very low class,but there are alot of people who are on section 8 that are not. I know many people that own houses and do not have an ounce of class. People have to remember, money does not make you who you are.Anyone at anytime can suddenly become poor or financially unstable. So before you judge, get to know a person. Walk a mile in their shoes.

[ellen]

Some people are going to be renting in my neighborhood and they have a nicer car than me. It is insane. They are on Section 8 and my landlord is salivating over the subsidy. Instead of lowering the rent to match market value, this is how hard working renters get screwed. Instead of getting lower rent when the market is bad, the landlords raise the rent and take in section 8
so those of us who worked our way to the middle class don't get market value rent. We still pay premium rent.