Gas prices drive up foreclosures

A gas pump display shows gasoline prices in New York.


Bob Moon: Republican lawmakers took aim at the Obama administration's foreclosure-aid program during a hearing on Capitol Hill today. They complain many homeowners get only temporary relief and end up defaulting anyway. A top Treasury official responded late today that the administration is open to possibly forcing lenders to make principal reductions.

There are lots of reasons families face foreclosure. But several new studies are pointing to a factor that hasn't gotten much attention: gas prices. From WNYC, Andrea Bernstein reports.

Andrea Bernstein: Alice Sweitek, a Polish immigrant, cleans houses in Brooklyn, N.Y. About a decade ago, she and her husband decided to look for a home. They found a nice-sized house in their price range -- two states away, in Pennsylvania. But along with that size came a sizable commute, even starting well before rush-hour.

ALICE SWEITEK: Morning, about 4 o'clock, 5 o'clock, it's two hours.

Long, and with gas in the $3 a gallon level, costly.

SWEITEK: It's expensive for one person coming to New York.

Too expensive, it turns out. Sweitek moved back to Brooklyn. But many of her old neighbors in Stroudsburg, Pa., lost their homes to foreclosure.

Paula Heeschen is the editorial page editor for The Pocono Record newspaper. She noticed a distinct phenomenon shortly after 9/11 -- marketing the Pocono mountains, which had traditionally been a vacation area, as well within commuting range of New York City.

Paula Heeschen: One of the developers was actually running an ad that featured scary scenarios of urban life, with gunfire, and pictures of rodents.

Heeschen remembers wondering aloud with friends about the burdens the new homeowners were taking on.

Heeschen: If anything happened such as an increase in the gas price, it could just tip the balance.

Her prediction came true. In 2005, there were 540 foreclosures in her area. Then Hurricane Katrina struck Louisiana, and gas prices shot up. So did foreclosures.

Heeschen: The very next year they rose to 835. Two years later they were at 1,200.

With the housing crash it got even worse. Last year there were almost 2,000.

Scott Bernstein from The Center for Neighborhood Technology also noted this pattern. His group mapped every foreclosure record in the Chicago area from 1998 to 2009. The further from downtown, the darker the ring.

SCOTT Bernstein: When you look at the map of foreclosures in Chicago what you realize is that they're happening everywhere, but they're happening most frequently in places that are just less convenient to live in.

In 2008, when gas hit $4.30 a gallon in Chicago, Bernstein says some families were pushed over the edge.

BERNSTEIN: The cost of housing was apparently low enough to attract people, but the cost of transportation is so high that you couldn't afford to live there anymore.

Studies in other major cities show the same phenomenon. It's caught the attention of the U.S. Secretary for Housing and Urban Development, Shaun Donovan. He's trying to promote new housing in locations with shorter commutes.

SHAUN Donovan: Because ultimately the combination of what the cost of that housing is and where it's located is really what determines affordability. And I think we can get to the point eventually where we have mortgages and a whole financial system that recognizes a truer sense of affordability.

So when the housing market picks up again, prices at the pump won't jeopardize homeowners.

In New York, I'm Andrea Bernstein for Marketplace.

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As work becomes more centralized into large Corperations and into the Cities, with costs to live outside City boundrys increasing, year on year, you will again see people returning to the Cities, leaving the Countryside free for the very rich to enjoy. Of Course this is all laid out in the UN Plan about a ' substainable America' but what do I know.

This story mixes correlation and causality. What about other factors? It just happens that most centrally located urban neighborhoods are also older neighborhoods that have a lower turnover of houses. Many of these houses are no longer under mortgage. More established families with fixed incomes can also sit out the housing bust. These all create stability that is lacking in far flung areas. Why not compare newly built suburban areas to urban condo market as a control, which is a much more reasonable comparison? You are also neglecting the fact that people who purchase houses that far from their work are really trying to stretch their last dollar just to own a house. Living at such margins makes these home owners much more vulnerable to loss of one income, gas costs and many other variables.

I am left wondering what type of vehicle these people are driving. My guess it has seven seats, weighs over 4,000 lbs and it's engine displaces more than four litres. You create your own problems with YOUR personal choices. Suck it up. Think before you buy and that goes for housing and transportation. Live WITHIN your means.

It looks as though you are confusing correlatio n with causality. High gas prices are friction on the economy causing job losses.

Thank you for finally covering this topic. I have suspected that high gas prices in 2008 contributed to the rash of foreclosures in 2008. It's nice to know that my opinion is not only based on fact but statistics for other years when gas prices rose bear out my opinion.

Hi Andrea Bernstein,
As a retired journalsit I feel secure in stating that the most important parts of any story are names and place. You got the name of Paula Heeschen spelled in incorrectly. You have the name of her newspaper, The Pocono Record wrong, and you got the location wrong. It is Stroudsburg, A triple play.

Errata: I believe you mean STROUDSBURG, Pennsylvania. Strasburg is in Lancaster county, a full three and a half hours from NYC.

One other note not mentioned in the story: per capita these are the longest commutes in the nation, from northwest NJ and northeast PA into the corporate regions of NY and NJ. There's a mass-migration every morning out of these counties, and a mass-migration back every evening.

coincidentally this same story ran earlier today on WNYC's The Brian Lehrer Show but with different sources, reporters and facts.

What about a co-op, or employee-owned business starting up in these far-flung residential enclaves? I envision the pioneer towns of the central prairie in late 19th century America. Like Laura Ingalls Wilder, but not so naive, and more interdependent. Agriculture, like a CSA only co-owned, small scale wind-power utilities, grey-water recycling, ride-sharing, group home-schooling... If the foreclosure problem is so high, surely the mortgage owners would rather help these communities succeed than see their developments become ghost towns.

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