November 17, 2012

Home sweet housing stock turns sour

Post-Great Recession, communities have been blighted by both empty houses and homes whose owners can't maintain them.

By Tom Bell tbell@pressherald.com
Staff Writer

SACO - Residents of Mary Avenue have been watching a vacant house deteriorate for the past four years. Thieves have stolen a roof vent, causing water to leak into the house and create mold. Vandals have spray-painted graffiti on the windows, knocked over cans of paint, destroyed a back deck and removed the metal railing at the front entrance.

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Earl Jamieson, 74, stands in front of a dilapidated house, which he says is bringing down neighborhood property values, on Mary Avenue in Saco. He is trying to sell his own property next door.

Photos by Gordon Chibroski/Staff Photographer

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Realtor Marty Macisso, right, chats with owner Jeff Quirk, who is fixing up a house that he bought in Scarborough after it was repossessed by a bank in a default. Quirk is buying such properties at auction, fixing them up and reselling them.

Gordon Chibroski

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"This is taking down the neighborhood," said Earl Jamieson, 74, who is trying to sell his house next door. He said the previous residents bought the house at the top of the real estate market and later abandoned it. The bank now owns the house, but has yet to put it on the market. And so it languishes.

While the Great Recession may have officially ended in June 2009, its legacy remains visible in the form of deteriorating housing stock. Maine homeowners who are "upside down" in their mortgages -- meaning they owe more than the house is worth because the property value has declined -- are reluctant to spend money to maintain their homes, and it's much harder to get home-equity loans for upgrades, according to real estate and construction professionals.

In some cases, people have abandoned their homes, or banks have taken possession through foreclosure. Empty homes lower neighborhood property values and become targets for thieves and vandals.

The tragic fire in Orrington last weekend, in which a father and three children were killed after cardboard boxes placed too close to a wood stove ignited, highlights the substandard quality of housing on the market. The family was in the process of buying a house that had been vacant for nearly a year, and its hot-water furnace was inoperable because heating pipes had frozen while the house sat empty last winter.

The government doesn't keep statistics on how many empty houses there are in Maine or how much money people spend on home repair. While foreclosure activity in the state is trending downward, the issue is not going away anytime soon.

In October alone, 131 properties in Maine had received a foreclosure filing and been repossessed by the bank, according to RealtyTrac, a national real estate information company. The number of new foreclosures, which was 479 last November, has been holding steady at an average of 114 a month for the past nine months.

The statistics, however, don't count "shadow" inventory, the number of bank-owned homes that are not yet on the market, as well as the homes with delinquent mortgages, but on which the foreclosure process has not been completed.

In Maine, it takes a bank an average of 570 days to complete the legal work to foreclose on a house, according to a study by the Federal National Mortgage Association. That's why people see vacant homes in their neighborhoods with no "for sale" signs on them, said Peter Judkins, chairman of the Maine Bankers Association.

Many national lenders now prefer to sell the homes before they complete the foreclosure process. This is called a "short sale," meaning the house is sold for a price that is lower than the principal owed on the loan.

Short sales allow families to leave their house with dignity and without debt, said Martin Macisso, an agent with the Regency Realty Group in South Portland.

"When one family is able to make this transition successfully, that's one less vacant and abandoned home to pull down values for the surrounding community," he said.

The new owners, however, often find the house needs a lot of work because the previous cash-strapped owners had neither the cash nor the incentive to maintain it, said William Fogel, a Portland attorney whose practice includes bankruptcy law.

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