My Mortgage Blog

Waiting for the next onslaught of news from the world’s credit markets, here’s some musing on “recovery.”

The Sacramento-Stockton area, since it was an epicenter of foreclosure activity, has more recently begun to demonstrate the ways local real estate markets can emerge creatively from the depths of the economic crunch.

The community of Elk Grove, for example, has 967 bank-owned properties, most of them boarded and silent, waiting to go on to the market at an undetermined future date. Recently, though, fifteen of the homes have been purchased by a municipal organization, improved, and sold at a low enough price to qualify as a great opportunity for low-end buyers.

The money for this comes from the federal Neighborhood Stabilization Program and the improvements are guided locally by NeighborWorks. The amount of money allocated is determined by how bad the foreclosure situation is and has been in an area. Elk Grove has receive $2.4 million. The city suffered 2,657 foreclosures between January 2007 and June 2008—which should qualify it for great sympathy, at the least.

There are currently about six homes on the market (check egplanning.org/housing). It’s limited to first-time buyers within certain income ranges. And it’s working.

Now, the sale of fifteen homes to qualified low-income buyers is hardly going to make the foreclosure problem disappear. But within the modest parameters of its goal and expectations, it’s working. When a home goes from empty and boarded to attractive and occupied by people with pride of ownership, the whole neighborhood begins to improve. Lenders get REOs off their books. Local builders get work. And any profit generated by the project goes back into the program to help bankroll the next home improvements. (The program also includes assistance with down payment.)

Such things need to be done on a small scale, it seems; otherwise, they stop working very well. “Baby steps,” as the old film, “What About Bob?” asserted.

I confess I am astonished that we are still seeing so few effective programs dealing with foreclosed properties, homeowners who are underwater, and neighborhoods in decline. Perhaps most people look at the magnitude of the remaining problems and assuming it’s all too much and there is no way to whittle it down to the size that allows us to make genuine progress toward solutions.

Beside, if we want something big and terrifying, we can always look at the sovereign debt problems in Europe and elsewhere, and we can get lost in the seemingly unsolvable problem of our national indebtedness. Problems like this inspire many of us to hide our heads, instead of sparking creative, workable solutions.

We—myself included—follow the uncertain mess in Greece as if it were a sport. We watch the score rise and fall. We predict that a default is nearly inevitable. We wait.

And yet, even in the midst of such uncertain markets, there is an amazing amount to be done, and there are good profit possibilities everywhere we look. People need guidance, they need support, the need a helping hand—and in return, they will bless the reasonable profit we make as we provide meaningful help.

There are hundreds, if not thousands, of markets out there—ranging from small towns to developments in cities to consultation and sales services, to assistance with financing. The federal government is amenable, but it can’t do a great deal. Same with state and municipal governments. What we need is the people with the know-how…builders, lenders, salespeople, community development officials.

Probably, we’re going to have to rebuild our communities from the ground up. But here’s the thing: We know how. We’ve done it before.

Instead of waiting for the market to recover and/or improve, perhaps it’s time to create the markets we’ve been waiting for.