Like many Americans, Gillian Minter with Fair Housing Council of Riverside County was living the American dream of homeownership until she found herself struggling to make her mortgage payment month after month.
Due to the economic downturn In 2008, Gillian lost her job and her husband couldn’t find jobs as a truck driver.
“We used all of our savings, cashed out our IRA’s and sold whatever we could to pay our mortgage,” said Minter.
Running out of options and stressed about how she would pull herself out of the ditch she was in because of her overwhelming mortgage payments she finally received a loan modification in 2011 thanks to the Fair Housing Council of Riverside County, Inc.
“They saved our house, saved us stress and allowed us to begin our road to recovery,” said Minter. The experience of nearly losing her job led her to getting a job with Fair Housing and now she helps other families who are in her position.
Minorities in the Inland Empire were especially affected by the housing downturn due to a fragile economy, subprime lending, and being priced out of the market by private investors. Now they might not be in a position to share in the recent gains of housing values.
After years of stagnant home prices throughout Riverside and San Bernardino Counties all signs are pointing to a housing market recovery. The numbers say we are: foreclosures are down, median home prices are up, sales are climbing, and housing starts are rising.
But who is benefiting? “Sellers,” says realtor Doug Shepard.
He has been selling houses in Southern California for 30 years and has seen markets rise and fall.
Minter thought realtors like Shepard were benefiting because their commissions are a percentage of the cost of the house…and median home prices are skyrocketing. February home prices in Riverside County rose from $193,000 in 2012 to $228,000 in 2013 and San Bernardino from $147,700 to $175,000 in the same time frame, gains of 18 percent, with the city of Mountain Center, 20 miles east of Hemet, posting gains of 228.95 percent.
“It’s not helping low and middle class families,” said Minter. “We’re getting left behind.”
The Fair Housing Council of Riverside County provides services to increase housing opportunities and reduce discrimination. Minter has seen more families than she can count be adversely affected by the housing crisis including herself.
“Without the loan modification I don’t know what would have happened,” said Minter. Shepard said “most” realtors had nothing to do with people losing their homes and added they are slowly recovering from a crisis that hit them hard as well. Low housing inventory has made it difficult to find the right house for a buyer.
“You’re not going to see us crying in the streets, but it can be tough,” said Shepard. “We only make money when a home gets sold.”
They both agreed that even with fixed rates on 30-year loans at historic lows, buyers with previous foreclosures now able to reenter the market are having a hard time finding a home. And they both admit cash buyers are buying up what little inventory is available.
According to a report by the Inland Valley Association of Realtors, cash purchases in 2008 were a distant third to conventional home loans and Federal Housing Administration loans. In 2012 cash was first with no end in sight.
“Cash continues to be king . . . with one out of three homes sales being sold to a cash buyer, this now represents the largest segment of homebuyers in the region,” the report stated.
Sellers often prefer all-cash offers over a higher priced offer with conventional or FHA loan financing, because they know the cash offer is more likely to close. They may avoid extra costs like title insurance, appraiser fees, or even commissions to realtors like Shepard.
UCR professor Vanesa Estrada is one of the people who believes subprime lending and the housing crisis destroyed the very fabric of historically underserved communities. She said subprime loans were given to nonwhites at much higher rates than their white counterparts.
“The housing crisis was felt more extensively in minority communities,” said Estrada.
Financial expert Jeremy Vohwinkle describes subprime loans as the “payday loan” version of mortgages. 80 percent of subprime mortgages were adjustable-rate mortgages and some adjusted to double what payments originally were, making repayment nearly impossible. She said home ownership can create “stable and thriving living environments,” and can positively impact everything from crime rates, to academic achievement, to voting turnout.
A 2010 report from the Center for Responsible Lending said twice as many Latino and Black borrowers have lost their homes to foreclosure or are seriously delinquent, compared to white borrowers.
“What’s troubling is the recovery doesn’t happen at the same rates for everyone,” said Estrada. “Inequalities that were already there are being exacerbated.”
Christopher Thornberg, one of the founders of Beacon Economics in Los Angeles, vehemently disagrees with Estrada.
“Everybody,” declared Thornberg when asked who is benefiting. “Listen to me, everybody.” He said housing sales are also helping people who are underwater get some of the equity in their homes back which is spurring the overall economic recovery.
“You don’t have to worry about housing,” said Thornberg. Paul Herrera, government affairs director for Inland Valley Association of Realtors (IVAR) said too many people sought and received loans they could not afford.
“This includes both predatory lending as well as irresponsible borrowing – combined, of course, with irresponsible lending,” said Herrera. “It takes two to tango down to the foreclosure auction.”
Borrowers nationwide are being assisted in staying in their homes through loan modifications provided by Freddie Mac and Fannie Mae, which helped 232,993 stay in their homes through actions like the the Home Affordable Modification Program, according to the Federal Housing Finance Agency. Still 141,464 lost their homes due to short sales and there were 1.8 million foreclosure filings in 2012 and the Inland area had the second highest rate in the nation.
According to IVAR, foreclosures in the Inland area were down in January and February. Herrera said the recovery is happening.
“Long term, there’s risk and some complex issues that can create new problems,” said Herrera. “For now, there’s optimism for the first time in seven to eight years.”
“Just, please, let’s not go on a new bender with the housing market.”