RENEE MONTAGNE, host:
There is a bright side to the crash in home values. It's created opportunities for people who feared they'd never be able to afford a house. Then again, behind every deal there's a story to tell. NPR's Melissa Jaeger-Miller reports on the house in Baltimore Street, here in California.
MELISSA JAEGER-MILLER: In places where steep prices have kept owning a home out of reach, the pop of the bubble bursting is a welcome sound to some. That's the case for Ben Gaffen(ph) in Los Angeles. Gaffen is a piano tuner and a musician. He lives in an apartment near this noisy stretch of Sunset Boulevard in Hollywood. And on a modest income, he's been setting aside money for years, hoping to own his own place. That, plus an inheritance, led him a few years ago to start searching for a house, working with a budget of about $300,000.
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Mr. BEN GAFFEN (Piano Tuner, Musician): I was looking around at stuff, and the decent stuff was 450 to 650. And just looking at that stuff and thinking realistically, are these pieces of property really worth the asking price? And my gut feeling was no way. They're way, way inflated. I'll wait, because this has got to collapse.
JAEGER-MILLER: Not that Gaffen had to wait. The year was 2005 and financing was easy to come by, if you were willing to get an interest-only adjustable-rate mortgage.
Mr. GAFFEN: I thought that was the loony bin, myself, personally. I thought an interest-only loan is the loony bin. How do you know when it's - if it's going to keep going up? You don't know that.
JAEGER-MILLER: Of course Gaffen was right. The neighborhoods he was checking out have seen home values declining by as much as 50 percent or more in recent months. Now he's found a deal on a place he wants to make his own. It's an old craftsman house on a quiet block in working-class Highland Park, a neighborhood of steep hills scattered with dry palm fronds, the tinkling bells of immigrants pushing ice cream carts. The house is still a fixer, with smelly carpeting that Gaffen can't wait to pull out, and there are some termites to contend with. But there's also a guest house out back, and if he can rent that out...
Mr. GAFFEN: I'll be paying about the same a month as I'm paying to live in a crummy apartment now.
JAEGER-MILLER: But there's still the challenge of getting a mortgage. Ben Gaffen is prepared to put down a lot of cash, 30 percent, which means he's probably in good shape for getting a loan. But in this market, nothing is certain.
Mr. RAPHAEL GARRON(ph) (Realtor): The days of slipshod paperwork and not doing the crossing of all the T's and the dotting of all the I's is over.
JAEGER-MILLER: That's Raphael Garron, he's the realtor who represents the sellers. He says it's getting really hard to seal the deal.
Mr. GARRON: From what my office has seen in the area, we say about 50 to 60 percent of the escrows are failing, and it's all tied into the financing.
JAEGER-MILLER: And this sale has an extra layer of complication. It's a short sale. That means the owners have made a case to their bank that they can't keep up with payments anymore. So the bank has agreed to let them sell the property for less than they owe, rather than go into foreclosure. Ben Gaffen, the piano tuner, doesn't know the current owners, who bought the house for over half a million dollars just a year and a half ago.
Mr. GAFFEN: It looks like just getting the place took everything that they had. It's sad, kind of, because they obviously, they didn't even have the wherewithal to even change the carpets.
JAEGER-MILLER: Dave Cheetham(ph) and his wife Linda are the owners of the house on Baltimore Street for the moment. They live a few hours east of here in the desert. They helped their son buy the house, but when the mortgage payments suddenly ballooned to $4,000 a month, he moved out. The Cheethams were living on a fixed income, but recently Dave has had to return to work, driving long hauls in a delivery truck to keep up with new expenses. Now Dave and Linda aren't rookie home buyers. They've owned over a dozen homes in their 43 years of marriage. They suspect they're the victims of mortgage fraud, but they can't afford a lawyer's fees to prove it. They just want the whole episode over.
Now, the short sale seems like a win-win. The bank gets back some of their investment, and the owners are no longer saddled with a home they can't afford. But across the country, it's just not working out that way. For one thing, there aren't enough people in the banks to deal with the giant influx of short sales so the wait can easily be months. And in a market where prices continue to drop, that means more buyers losing interest, and more houses going into foreclosure, with banks, owners, and neighborhoods all losing out, and buyers, too. After more than two months of waiting on the bank, last week Ben Gaffen canceled his offer on the house on Baltimore Street. He says it became clear to him the house was overpriced. He's still on the hunt, says this is the time to be looking, there are deals to be had.
Melissa Jaeger-Miller, NPR News.
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