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Transportation Nation

Gas prices drive up foreclosures

Marketplace Staff Feb 25, 2010
Transportation Nation

Gas prices drive up foreclosures

Marketplace Staff Feb 25, 2010


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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