MICHELE NORRIS, Host:
A new housing study offers a grim forecast for some parts of the West. It says areas hit hardest by home foreclosures may never fully recover. As NPR's Karen Grigsby Bates reports, that raises big questions about the future of some neighborhoods that spring up during boom times.
KAREN GRIGSBY BATES: This is something that's happening way too infrequently these days.
NORRIS: Cedar-lined closets, lots of built-ins, fabulous walk-in pantry.
GRIGSBY BATES: Now, buyers slowly are coming back, looking for amenities these her husband, Bill, also a broker, is outlining.
NORRIS: Granite counter tops to travertine flooring, stainless steel appliances.
GRIGSBY BATES: Bill Velto says this neighborhood has fared comparatively well because of its location, just east of L.A. County. It's a reasonable commute, and for some the price makes the drive worth it.
NORRIS: Well, you know, back in the old day it was go west, my friend, go west. Now, it's kind of go east, my friend, go east, because of the values.
GRIGSBY BATES: A new study commissioned by the Mortgage Bankers Association's Research Institute for Housing America looked at how plummeting real estate values are dragging down several American cities.
NORRIS: The story's not over, but my sense is the demand drop is significant and persistent, and for some of these places it will be a long time before they fully recover.
GRIGSBY BATES: Jim Follain, an economist and senior fellow at the Rockefeller Institute of Government in Albany authored the study. He says the current housing downturn is reminiscent of the erosion of several industrial cities in the North and Midwest.
NORRIS: Well, I think we believe that there might be some insights about the current situation by looking at what I call traditional declining cities, which you think about some of the places in the Rust Belt.
GRIGSBY BATES: The current housing mess has adversely affected the American economy for the long term says John Wasik, author of a book called "The Cul-de-Sac Syndrome."
NORRIS: I think the real estate market, at least in residential areas, in some of the worst-hit areas, especially in, say, Central and Southern California, are going to be hobbled for at least a generation.
GRIGSBY BATES: Those days are long gone. But John Wasik says hard-hit areas will continue pay a huge price for those easy money mortgages.
NORRIS: Many people finance without any down payment at all. So those are the people who had no economic stake whatsoever in staying in those properties, and subsequently became, you know, part of the foreclosure process.
GRIGSBY BATES: Today it's possible to find a good deal where there used to be none. But the uncertainty of where prices are headed makes buyers and lenders hesitant, which deepens the problem, says economist Jim Follain.
NORRIS: And that's the fear, I think, that, you know, will my neighborhood be one that is going to be particularly slow to recover.
GRIGSBY BATES: Karen Grigsby Bates, NPR News.
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