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The Tipping Point...When Poverty Moves to the "Burbs"

By
Real Estate Broker/Owner with Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate

the tipping point, poverty in the burbsThis past week, I was talking to a real estate broker about the Open House he had scheduled.  After comparing notes about local market conditions, our discussion  focused on an article that had been recently published in the Grand Rapids Press about sellers in Grand Rapids, Michigan renting their homes because they were having difficulty selling them.  He said, " Lola, this crisis is everywhereI am doing an Open House today in a home that is in foreclosure and there are a total of 3 in MY neighborhood."

I understood.  Not so long ago, forclosures were confined to areas where there was less economic growth.  The suburbs seemed insulated from this scourge.  Not long ago, brokers debated whether it was appropriate to disclose if there was a financial crisis as that might prejudice the sale against the seller...even if the home was in the 6 month redemption period during which a seller might reclaim some equity if a sale could be generated.  Those days now seem to be a long, long, time ago.  Now, agents of our local board routinely see notifications in red lettering alterting them to the fact that a particular listing is in foreclosure or will require a short sale to close.

In a recent article by Newsweek magazine, entitled "Poor Among Plenty," authors Peg Tyre & Mathew Philips discuss an increasingly disturbing trend; 

 "Once prized as a leafy haven from the social ills of urban life, the suburbs are now grappling with a new outbreak of an old problem: poverty. Currently, 38 million Americans live below the poverty line, which the federal government defines as an annual income of $20,000 or less for a family of four. But for the first time in history, more of America's poor are living in the suburbs than the cities-1.2 million more, according to a 2005 survey."

The concerns of the middle class caught in this vice grip are aggravated by a number of factors, not the least being that the "new poor' don't fit the stereoptype of what we have come to expect of the impoverished.  They live in nice neighborhoods, have cars and appear to be living normal suburban lives. The suburbs are not places where you find soup kitchens or pawn shops.  The new poor are often living right alongside their affluent neighbors.

Increasingly, folks with good manufacturing jobs in West Michigan are finding that it no longer takes 2 jobs to make it, you might be required to have three or four to keep your head above water.  It is no longer uncommon to meet with someone and have them share that they are in deep financial crisis.  One of my clients recently asked me a rhetorical question, she said " Lola, how can 2 people working 2 jobs not be able to keep their house?"  It's a question that doesn't have any simple answers. 

Read Part 2 of The Tipping Point...Coping with Crisis....

© Audu Real Estate 2007  All rights reserved

Comments(21)

Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Lynda,

Amazing comment from the rep from HUD...and this in the 1990's.  I appreciate hearing from someone who went through and successfully survived a situation similar to what we are experiencing in the Michigan real estate market.  It's good to know that it's not permanent and recovery is likely and possible.  It's interesting to think that 1 in every 5 homes sold during the time you indicated was in some sort of crisis.  This definitely puts our situation in perspective.  Thanks.

 

Feb 15, 2007 12:01 PM
Don Rich
West USA Realty - Peoria, AZ

Focusing on the foreclosure issue.  During the last few years and booming home prices combined with lenders and creative financing such as interest only, I think there is trouble on the horizon with home values falling and many, many oweing much more that the home is currently worth.  I hope I am wrong.

Don

Feb 15, 2007 01:45 PM
Rob Marken
Bend River Realty - Bend, OR
25+ years experience in Bend
It is definately hard to tell the people that are well off from the ones that are sinking. Many of these people that find themselves working more than 1 job need to re assess owning verses renting, or possibly roomates. We may find people moving toward a European Style with more than one family sharing a kitchen or bathroom in the same building. Possibly thsy  might share ownership. Interesting Problem, I hope alot of these people get a handle on their finance before they lose their homes.
Feb 15, 2007 01:48 PM
Lynda Eisenmann
Preferred Home Brokers - Brea, CA
Broker Associate ,CRS,GRI,SRES, Brea,CA, Orange Co

Hi again,

Thanks Lola for the nice response.

And I also agree with the comments of Don Rich.  To further add to that,... some people have been using their home equity like a checkbook with HELOC'S for example.  Buying autos, paying of cc debt, vacations, etc. etc.  Assuming that prices would always continue to go up. 

Not true, it's a wake-up and a reminder for us all. 

 

 

Feb 15, 2007 02:12 PM
Sabine Pyrchalla
Colorado Springs, CO

Lola,

according to a recent article in the local Newspaper - our town will not only have issues with foreclosures, but with an expected "Segregation" into "rich and poor" areas. All we can do is become involved in our comminities and try to prevent those "future outlooks".

Feb 15, 2007 02:25 PM
Timothy Schwartz
Century 21 Mack Morris Iris Lurie - Marlboro Twp, NJ
There is a book called the Tipping Point.  It is a good read but I don't remember the author's name.  Some would say having a roof over your head and food on the table is not poor.
Feb 15, 2007 02:49 PM
Marty Van Diest
Valley Market Real Estate - Wasilla, AK
Your Alaskan Realtor

I agree Timothy, poverty is in the mind.  Food and warmth, (I'm in Alaska), are the basic needs.  Everything else is icing on the cake.

When we bought our home in 1987 I knew little about real estate.  I knew that we bought our home for almost exactly 1/2 of it's selling price of $124,000 as a new home just 3 years before.  By the end of 1988, when we turned off the main road into our development, 14 of the 27 homes we drove past before getting to our home were vacant.  Almost all of us in the rest of the homes were struggling. 

HUD was offering homes for $100 down.  Move in and start making payments they practically begged.

By 1991 things were turning around and we sold our home in 1996 for $135,000.

 

Feb 15, 2007 06:20 PM
Anonymous
Stan

Lots of reasons for the rise in "poverty"; but at the top of the list is cheap credit for anyone who can fog a mirror.  Sooner or later somebody has to pay the bill and it's coming due......for the home buyer who foolishly believed real estate only goes up, for real estate agents who sold them on the idea, and for lenders who made the loan.

Karma can be very, very expensive.

Feb 16, 2007 01:12 AM
#9
Heather Saul
Weichert Realtors Hoey Group - Wildwood, NJ

Stan-  good point. 

Lola - great post.  The market I work in is mostly second homes - so our situation is different.  We hear of foreclosures - but it is not on the primary residence. 

Feb 16, 2007 01:52 AM
John Marlow
Foxhall Investments - Chevy Chase, MD
John Marlow
Foreclosures is becoming an increasing prevelent aspect of real estate today.  We are seeing it in Chicago in all neighborhoods, not exclusively in "bad" neighborhoods.
Feb 16, 2007 03:32 AM
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Rob,

The point you make about the difficulty in distinguishing who is alright and who is in trouble is exacerbated because of the assumptions we have made as a society of what it means to live in the suburbs.  The Newsweek article seems to indicate that in many situations, neighbors may not know that other homeowners are in such deep trouble. We are no longer as a society "our brothers keeper".  This resonantes with it's own peculiar type of sadness.  In reality we are all dependent on the grace of God.  No matter how much money we have, no one is completely isolated from the effects of unforseen circumstances. 

Don,

I'd agree with you that I think there is a lot more trouble on the horizon before this is finished...I think the silver lining will be this hardship causing us to re-evaluate our priorities as to what is important in life and relationships.  I think Rob's point about shared ownership as an option for home ownership is an excellent example of creative solutions.  Perhaps instead of putting kids in dorms in college or Mom & Pop in a nursing home; we may be become more open to the benefits of inter-generational living.

 

 

 

Feb 16, 2007 06:07 AM
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Sabine,

Very interesting article about Pike's Peak in Colorado.  I was struck by the comment in the related link about many of the "new poor" expected to be from soldiers in the neighboring military base...

Timothy,

The Tipping Point is an excellent book which is quoted in the follow up story to this article entitled "How to Avoid Being Tipped Over During the Housing Crisis.  The authors name is Malcolm Gladwell.

Profound truths in comments from Timothy & Marty regarding the real nature of poverty...It's not just about money.  I am often struck by how many beautiful homes feel empty and vacant as though there is no life being lived and enjoyed within them.  I wonder if even within our supposed prosperity, there may be extreme poverty of Spirit. 

Feb 16, 2007 06:21 AM
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Heather,

Count yourself and community fortunate!  In Michigan, the crisis is no longer limited to first time homebuyers...it has gone totally viral afflicting people in every socio-economic group. 

I agree with Stan's comment that cheap credit has been a significant factor in the rise of all types of economic distress.  But the choice has always remained ours to make....I read a book several years ago called Credit Card Nation.  It was extremely sobering as it highlighted how we had moved as a nation towards credit in ways that were potentially very destructive.

Feb 16, 2007 06:27 AM
Chris Hendricks
Walnut Creek, CA
True, no simple answers-- at least practically speaking today.  One simple answer is to learn, as a society, to live within our means.  That implies saving as a risk management strategy, delaying gratification, and living [perhaps better] with less than is readily available to us.  Simple answer in theory-- harder in practice to apply to our lives.
Feb 16, 2007 07:52 AM
Kaye Thomas
Real Estate West - Manhattan Beach, CA
e-PRO, Manhattan Beach CA
I remember '87 and the S&L crisis... it was awful but we managed.. the fall of aerospace in the 90's was much worse in CA then in other places.. today we are a more diversified economy.. but you never know what may happen.   Thanks for a timely post..
Feb 16, 2007 12:27 PM
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Chris, the narrow road always seems harder initially, but the wide open EASY road of irresponsibility is ultimately the hardest road of all...

Kaye, interesting comment on the long term results of the S&L crisis.  I can see that the increased diversification in Michigan's economy will probably be much more beneficial in the long run.  We are having a lot of people leave the State due to lack of jobs, but on a brighter note...Google actually moved into Ann Arbor.

Feb 16, 2007 02:17 PM
Diane Rice
Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - Lansing, IL
SFR, SRES, CNC

The rich and poor meet together......the LORD is the maker of them all.  Prov 22:2

Lola - this is a relevant article for the "challenges" group.  Please post it there also.  Thank you.

Feb 16, 2007 02:44 PM
Ed Vogt
Midwest Properties of Michigan - Grandville, MI
Grandville, MI Midwest Properties

It's amazing that my first year in Real Estate - this IS the main topic!  My very first meeting involved a mortgage lender speaking about foreclosures.  A lot of people are using their home equity to get money either to get ahead or sometimes to just get caught up, which inevetibly, leaves them in a situation for a short sale when they need to sell their home.  This is a crisis that seems to be snowballing. 

Great post Lola!

Ed

Feb 18, 2007 11:19 PM
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Thanks for the invite, Diane...I'll post the article.

Ed, These truly are interesting times...how interesting depends on who you are and what is happening at the moment.  The comfort is that "no condition is permanent in this world"...that's another one of my African sayings.  The good news is that if things are rock bottom, there's only way to go...UP!

Feb 19, 2007 09:43 AM
Diane Rice
Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - Lansing, IL
SFR, SRES, CNC
Good comments & good post Lola.  I have featured this in the Challenges Group
Feb 19, 2007 11:13 AM