Bank foreclosures and abandonment are causing high home vacancy levels in
neighborhoods across the country. Scott Pelley travels to Cleveland, a city that’s fighting back against blight.
Chances are the home you’re in isn’t worth what it used to be. You may not have indulged in the real estate bubble with its liar’s loans and Wall Street greed, but you were stuck with the bill. Home values have dropped so far, so fast, that nearly 25 percent of mortgage holders today owe more than their house is worth.
And with unemployment so high, so long, many face foreclosure. If you thought your home value couldn’t drop any more, have a look up and down the block. You might say, “There goes the neighborhood.” The new threat from the great recession is the sudden surge in the number of abandoned houses. Vacant homes have become so ruinous to some neighborhoods that one city, Cleveland, decided it had to find a solution.
Perfectly good homes, worth 75, 100 thousand dollars or more a couple of years ago, are being ripped to splinters in Cleveland, Cuyahoga County, Ohio. Here, the great recession left one fifth of all houses vacant. The owners walked away because they couldn’t or wouldn’t keep paying on a mortgage debt that can be twice the value of the home. Cleveland waited four years for home values to recover and now they’ve decided to face facts and bury the dead.
Why destroy them? Jim Rokakis, a former county treasurer, showed us.
Jim Rokakis: We’re looking at a neighborhood that has almost as many vacant houses awaiting demolition as there are houses with people living in them. We have one here. One here. One here. One there.
Rokakis is leading the effort to tear down thousands of abandoned homes because they’re rotting their neighborhoods from the inside out. It often starts, he told us, when a vacant house becomes an open house to thieves.
Scott Pelley: It’s a nice house from the roof to about here. And then down here it’s been ripped to pieces. What’s goin’ on?
Rokakis: Well this is typical because this is as high as they could reach without using ladders. They ripped off the aluminum siding, which you’ll see on most of these houses. The aluminum and the vinyl siding comes off. It’s getting’ about a buck a pound.
Pelley: Essentially foreclosure scavengers have been through here?
Rokakis: The thieves have gone high tech. They know when evictions are occurring ’cause they’re posted online. And they will follow the sheriff. They’re usually there that afternoon or that evening.
Rokakis: So, in here, what you’re gonna see, well. I guess they took everything including the proverbial kitchen sink, right? The sink is gone. The plumbing is gone in this house. All the copper. Anything metal that had value is gone. The furnace is gone.
Pelley: The light fixture–
Rokakis: Light fixture came out–
Pelley: Is gone. How often is this happening in Cleveland?
Rokakis: This happens every day. And the foreclosure crisis creates this spiral, because as a result of this people are now more likely to leave neighborhoods like this. And as they leave, the scavengers come in and do the same thing to the house next door or across the street.
To make the house next door, worth more instead of less, vacant land created by demolition is often given to the neighbors, and sometimes turned into fields or gardens.
Cleveland and Cuyahoga County believe that only by turning the failures of the great recession into green space can they stabilize the value of what’s left. Otherwise the scourge would keep spreading.
Pelley: When you see a house that the scavengers have torn apart like this one, I mean, what does it do to the guy next door?
Rokakis: It clearly makes his house worth a lot less money because when you’ve got four or five, six vacant houses on a street like this, your house isn’t worth a percentage less, it’s just worthless.
Roberta Bryant: It’s probably worth about $30, I mean seriously. Who knows? It’s sad. It’s really sad.
Roberta Bryant lives at the end of the street in a house made, essentially, worthless by her vacant neighbors.
Pelley: Do you think in this neighborhood you could even sell this house if you wanted to?
Bryant: No I don’t think anybody would buy it. Are you interested?
Pelley: I don’t live in Cleveland.
Bryant: Okay. Well this could be your summer home.
In theory there shouldn’t be this many abandoned houses. When homeowners walk away, the bank is supposed to take responsibility. But one little known feature of the great recession is, that many banks are walking away too, unwilling to maintain a house whose value has crashed.
Rokakis: Very often a bank will take a property to the point of foreclosure, but won’t go to the sheriff’s sale, ’cause they don’t want that property. They don’t want the responsibility of the $8-$10,000 bill that comes with tearing this house down.
Former County Treasurer Jim Rokakis says some banks have turned their backs on a blight they created.
Rokakis: In a normal real estate market people are out looking for loans. In the perverse real estate market we created in this country, you know during the period 2000-2006 this wasn’t people looking for money, this was money looking for people. And that’s why so many of those loans were made without down payments and without verification of income. And I might also add, phony appraisals.
Pelley: And this is the result?
Rokakis: This is the result. And it’s not just here, it’s all over America.
All over America, eleven million homeowners owe more than their house is worth – they’re said to be “underwater.” And the truth is, more neighborhoods would collapse if it weren’t for people like Linda Bizzelle who refuses to walk away from her mortgage – even though it might be best.
Linda Bizzelle: The mortgage company called me and said that I was getting ready to go into foreclosure. So I mailed a payment in that day and it was the last of my savings.
Pelley: That you sent in on this mortgage that’s underwater?
Bizzelle: Oh yeah.
Her house is worth 50,000, she owes a hundred. A financial planner might tell her to put something away for retirement rather than pay a mortgage that will never recover. Especially, since she lost her job in nursing last April.
Pelley: What have you been cutting back on?
Bizzelle: Sometimes food. I would go to the food bank in order to make up the difference, so that I wouldn’t be completely hungry. Sometimes I wouldn’t get my medications renewed and I would have difficulty with that because I really need my medications. I take medication for high blood pressure. And my doctor could always tell when I didn’t take ’em and I said, “Oh no, you can’t do that. No No.”
Pelley: You’re living on unemployment right now?
Pelley: What about the next mortgage payment?
Bizzelle: I’m gonna pray. That’s the best I can do. I’m gonna pray that I find a job.
When you think of it, her neighbor’s home values are being propped up by linda Bizzelle’s fragile grip on the American dream. We found a lot of