Local Economy And Your Money, Part 4: Foreclosures And Housing Market

POSTED: 3:15 pm EDT July 10, 2008
UPDATED: 7:09 pm EDT July 10, 2008

PITTSBURGH -- The following is the fourth part of a special series called "Local Economy And Your Money" on WTAE Channel 4 Action News in Pittsburgh.

There were more than 4,900 foreclosures in Pittsburgh last year, and foreclosures are projected to top 5,000 this year.

But the local housing market hasn't been hit as hard as other cities, and Channel 4 Action News reporter Shannon Perrine discovered there's good news to go along with the doom and gloom.

Local Economy And Your Money, Part 4: Foreclosures And Housing Market

While the mortgage crisis did hit Pittsburgh, and the number of foreclosures is up, there are some positives in our area and some success stories in our area.

Take for instance, a home in Peebles Square in Wilkinsburg that was bought at a sheriff's sale, gutted from the inside out and rehabbed with new paint, doors, windows and even a mailbox. It will be sold to a low-income family.

Tom Brennan says he got a bad loan. His family went through flooding during the remnants of Hurricane Ivan and tried to recover. He's facing foreclosure and a sheriff's sale of his Millvale home.

"Anybody that's not under this doesn't understand the stress," Brennan said. "You spend sleepless nights. You don't eat right. It just keeps adding up."

Brennan was laid off from his job as a mechanic. His adjustable rate mortgage jumped from about 11 percent to 14.25 percent, and he just couldn't make the payments.

"I didn't have the credit established enough that I should have had, really," he said. "I think they wanted me to fail, and I just about have, but I'm trying to come out of it and I think I'm getting an option to come out of it."

Thanks to a housing counseling service, Brennan may be able to renegotiate his loan so he doesn't lose his home.

Many, if not most, property owners facing a sheriff's sale can also do that.

The key is not to ignore the problem, said Dan Sullivan, director of Action Housing.

"If I have someone calling me up and saying, 'I got a sheriff's sale in three weeks,' there's very little I can do for them," Sullivan said. "If you call me up and say, 'I'm a week behind on my mortgage payment, but this looks like it could go on a while and I need help now,' yeah, it's almost a slam dunk in many cases that we can get something worked out."

Allegheny County Sheriff Bill Mullen wants the county's president judge to require that any homeowner facing a sheriff's sale meets with the lender and a mediator to broker a new deal that keeps the borrower in their home and the lender making a profit.

"I'm not worried about foreclosures being as dramatic here as elsewhere, and if there are problems that a small fraction of the population need help, I think we can find ways to do that," said Carnegie Mellon University professor Bob Strauss.

Pittsburgh housing is fairly stable, according to Strauss.

"I'm not diminishing the fact that there are people who got swindled, bamboozled," Strauss said. "Unfortunately, they're the ones that government at the federal, state and local level has been slowest to help, I think. People who were just completely misled about the terms of their mortgages."

New homes are still being constructed in our area -- just at a very conservative rate.

Strauss says this region did not see the housing investment bubble and the subsequent burst that other parts of the country did.

"It's kind of like the way we play football, right?" Strauss said. "We like to run the football. We like not to be predictable, we like to have surprises, but we like to win. And if we get a few points ahead, we play conservatively."

Believe it or not, when our sports teams do well, Strauss says it helps our housing market. The national spotlight gives us a chance to show off our low cost of living and our world-class cultural and sports gems.

There is a small trend of people who choose to make their homes as close to those amenities as possible.

"You save money, obviously, in fuel costs," said Rachel Booth, who lives downtown. "It's kind of having restaurants, shops, theaters kind of as your own back yard."

Rachel and Eric Booth and their 18-month-old child are renting an apartment. But if you build and buy a home downtown, the city will not require you to pay property taxes for 10 years.

"That's a significant, significant enhancement and benefit, and we think it will allow those people who are on the border of being able to afford it vs. not being able to afford it to pull the trigger and move downtown," Mayor Luke Ravenstahl said.

Downtown residents get to hear, see and breathe the city from their own homes.

"Some people don't really like the idea of a city because they can't really let their kid run around," said Eric Booth. "Well, we take him to Point State Park, put him in the middle of that field and he can run wherever he wants."

Strauss says the bottom line is that if you're buying or selling a house in the Pittsburgh area -- even in this tough economy -- you are financially better off than if you were doing so in virtually any other part of the country.

Related Links: