The housing mess: 5 'dumb' questions

They rent. It's back to renting for many who are losing homes to foreclosure. "We believe most owner-occupants who are foreclosed upon become renters," says Brian Sullivan, a spokesman for the U.S. Department of Housing and Urban Development.

Fortunately, at least in a number of places, the housing mess is creating additional rentals. Craigslist says its rental listings nationally have grown by 257% in the past two years.

Many homeowners who can't sell for enough to pay off their mortgages are becoming landlords, at least until the market turns around. That's happened, for example, in Southern California's Riverside County, with the fifth-most foreclosures in the country.

Kurtis Squyres, who buys bank foreclosures and sells them to investors, says many former homeowners are reluctant to return to multiplex living. They are pleased to find newer, single-family rentals that let them avoid high mortgage payments and homeowner responsibilities. (Their home-owning neighbors, however, aren't always so pleased.)

They live on the street. Foreclosures are putting some people on the street. How many is a subject of debate. HUD's latest Annual Homeless Assessment Report to Congress finds that few renters who lose their housing go directly to emergency shelters or transitional-housing programs. However, USA Today recently reported that homelessness is rising in 12 major cities, a turnaround after federal and local efforts produced a decline in recent years.

Renters, too, are affected by foreclosures. (In Cook County, Ill., Sheriff Tom Dart refused for a time to enforce evictions because his deputies were finding renters who had no idea their homes were in foreclosure.) In Los Angeles, 50% of foreclosures are rentals; in New England, it's 45%, Pelletiere says.

There are too many homes, generally, but a severe shortage of affordable rentals: 9 million renters need more-affordable homes -- three times as many as there are homes for them, Pelletiere says. The increased demand is driving rents up in some areas. Residents who can't replace rental deposits lost to foreclosure may get pushed to the curb.

Why not offer foreclosures to poor people?

That's happening, actually, at least with some homes owned by the federal government.

HUD, which sells mortgages to homeowners, has started selling some of its foreclosed properties to cities and towns, especially in low-income areas, for $1. (Read about HUD Dollar Homes and search for sale properties here.) The Housing and Economic Recovery Act of 2008, enacted last summer, provides about $4 billion in grants to fix them up.

Still, most foreclosed properties are in private hands, and those owners are unlikely to be able, without government help, to hand their places over to the homeless. They've got to make money from the property to cover the mortgage. That means, Latham says, a homeless person would probably need:

• A credit history. Without a payment history, a previous rental address, references and a deposit, it's virtually impossible for someone who's been out of the rental market to get started.

• References. Someone has to vouch for a prospective tenant. A landlord, even charities and government agencies, are likely to run a credit check on an applicant. Living on the street can be a stigma.

• Money. The property's owner has to rent to someone who can make payments. If there's a mortgage, the owner needs the investment to pay off.

How long can a house sit before it's not salable?

So much depends where the house is and whether it was closed up carefully. All things being equal, an empty house probably lasts longer in the arid Southwest than in the humid Southeast. All across the country, banks and city governments are finding that, in general, an empty house has a surprisingly short life.

For example, an abandoned house won't last more than a year in wet northwestern Washington state, says Kirk Juneau, an home inspector in Ferndale. "I've seen where blackberry bushes have grown under siding and into the house and vents," he says.

With no one to caulk windows, clean gutters, trim bushes, run the water, flush toilets and turn on the heat, moisture -- death to houses -- seeps in. In just one winter, mold, rot and even foundation cracks appear. Condensation in a cold house turns building materials soggy and weak. Wind rubs tree limbs against siding. The limbs trap moisture and make a gangway for critters that feast on wood, insulation or wiring. When water is shut off without first blowing air through the pipes, freeze-damaged, cracked pipes will leak when the water is turned on again.

New homes, in some ways, can fall apart faster, Juneau says, because they use manufactured wood products vulnerable to swelling and mold. But in other ways they're tougher: Better ventilated and wrapped tightly against the elements, they can stay dry longer.

A house left half built, even for a time, sustains damage that becomes invisible once the place is finished. Moisture barriers aren't meant to be left flapping in the wind. "The longest you'd want to wait (before putting up the siding) would be two months," Juneau says. An exposed foundation can freeze and crack, especially if the site hasn't been graded for drainage and water runs into and under it.

In Miami, a wooden building won't last long if windows and doors are broken by vandals, letting wind, rain, animals and people in, says Cedric Mar, a city official with the title of chief of unsafe structures.

Termites and wood rot take over quickly, he says. Wind blowing through a home can buckle walls and roofs. The city tries to act quickly to pressure owners to repair or demolish abandoned houses. It takes over derelict properties, but because of legal hurdles, that takes a few months or even several years. In contrast, someone who breaks in and builds a fire to keep warm can burn down a house in an evening.

Published Nov. 6, 2008

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