Smart Blog
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The "How Well You Know your Neighbor" Index
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I've often been asked why cities like Las Vegas have been absolutely decimated by the real estate crash, and other places like New York and Boston have remained relatively unscathed. The obvious answer is to assume older cities already have had decades for home prices to appreciate while cities like Vegas and Phoenix were just catching up. Additionally, cities like Las Vegas and Phoenix had a lot of vacant land to build new homes. When the new inventory didn't get absorbed, boom goes the dynamite. If you take a look at the hardest hit areas within each city I think you'll find a common theme among the neighborhoods. People don't know their neighbors. If you look at not just the older neighborhoods in this country where foreclosures are still rare, but also the newer neighborhoods with tighter HOA's and closer knit communities in general, I think you'll find a much lower rate of foreclosure. Now, this is purely speculative on my part, and I could, in fact, be way off base. I don't have a team off researchers knocking on doors or checking county records, but I'd bet at least $100 that I'm right :) . However, in my experience I have found the hard-hit foreclosure areas have felt desolate, cold and unneighborly even before the Orange Stickers started showing up on the doors. Think about the hardest-hit areas in the country. Vegas, Phoenix, Orlando. They all have one thing in common, they are places where a good percentage of the population has moved there, but didn't grow up there. I currently live in Las Vegas, and it's rare to find someone that grew up here. Months will go by, when moving to a new place, before I know any of my neighbors and while I may not be Mr. Social, not knowing who lives next door is the rule here and not the exception. The reverse is true where I grew up, a suburb outside of Boston. Everyone knew everyone. On the rare occasion where a house would go un-lived in or unkempt, I remember my father pushing the lawnmower down the street and mowing their lawn for them. That is something I just couldn't see happening in a Vegas or Phoenix or Miami. Even in the nicest of neighborhoods, people don't seem to have much of a relationship with their neighbors. In a place like the suburbs of Massachusetts, there is a commonality that exists. Everyone roots for the same sports teams, follows the local political issues, knows exactly what the 10-day weather forecast is going to look like etc. It's like the town is your wife. You're happy to be with her and you don't ever plan on leaving. So the thought of simply walking away from your home, even if property values have dropped and you are having trouble paying your mortgage, is tantamount to losing your identity. You don't just pack up and leave the women you've been married to for 20 yrs. You go to counseling, try a couples retreat, but quitting is the last option. You'll borrow from the mob before you let the bank take your home back. The opposite is true in the more transient cities, where people view their home as an investment and not a place to where their roots will grow deep and their grandchildren will visit. Regardless of depreciation of the financial situation of the homeowner, it is far easier for them to let go. Losing a home in a neighborhood where everyone knows you carries a far greater stigma than losing a home in a place where you are anynomous. I was at a friend's house recently and noticed their neighborhood of 10 or so houses had about 5 foreclosures. Whose homes were they, I asked. Their response, though, was that they didn't know, as they had never met their neighbors. I think you'll find this all too common among neighborhoods with a high percentage of foreclosures. It's far easier to detach from a place when there is little attachment in the first place. The common assumption is that a foreclsoure is simply a matter of economics. Either your income goes down, your payment goes up, or a combination of both and boom you're back to Rent City. My experience in talking with people looking to modify their home loans, or that had recently left their homes, tells a far different story. Many people simply choose to walk away from their home, the same way they'd choose to fold at a poker table, rather than throw in the rest of their chips. Essentially, they are voluntarily foreclosing. To throw out another cheesy analogy, they bet with the house's money and walk away without paying their marker. Imagine this happening in some old neighborhood in Brooklyn. Many of these people took out the same risky mortgages that their friends in Vegas and Atlanta did and many have seen their investment decline. The attachment to the "neighborhood" in some places is just far greater in certain areas than others, When it becomes difficult to pay the mortgage, the people in the stronger neighborhoods buckle down, borrow money from relatives, and fight tooth and nail with the mortgage company to modify their loan. The neighborhood represents more than the place where there house resides. It's part of their culture, the development of their kids, and where there friends live. So, getting extracted from one's home means more than just moving to lesser digs. It means losing all that goes along with the community. Leaving the McMansion in Phoenix that you've lived in for 6 months and have only met one neighbor is far less painful. So the moral of this is simply get a feel for where you are moving into. If it feels cold and austere don't be surprised to see a bank-owned sprout from your neighbor's lawn. |
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