Loading the slideshow
The slideshow requires script be turned on to function.
Next up
Financial crisis threatens townsSee which places may be hit hardest by Wall Street’s ripple effect.
Bailout offers little help?Propping up Wall Street may not do much for Main Street.
Finding your dream foreclosureHere’s what to know if you’re looking to buy a bank-owned property.
Obama expands homebuyer creditBill extends timeline, adds eligibility for some current homeowners.
Stay local for homebuying helpCheck whether your state, employer or other associations offer assistance.
Are distressed homes worth it?You may find more headaches than bargains with these properties.
Photo by Brian Smith for Parade
Photo by Brian Smith for Parade
Photo by Mark Mann for Parade
Photo by Jonathan Sprague/Redux for Parade
Photo by Jonathan Sprague/Redux for Parade
FIND YOUR DREAM HOME OR APARTMENT
5 families feel the housing pinch
I'm stuck
Daniel Gavagan, Zeeland, Mich.
Retiree Daniel Gavagan, 57, paid $145,000 for a house in 2002 with money he earned from working 31 years in a General Motors Corp. plant. He sank an additional $50,000 into improvements. Happily, the appraised value ballooned to $210,000 in 2005, so Gavagan decided to sell the house.
But at the same time, Michigan real-estate prices crashed. Gavagan lowered his price to $198,500. Today, he's asking $169,500 — just enough to cover his note and pay the Realtor. The improvements he made amount to a gift to the next owner. "If people haven't got the cash, it doesn't matter what you do to the house. I thought I would make $12,000 on it," he says. "But that's gone. I'm way upside-down." Click here to view the slide show "How home prices have changed."
By Earl Swift, Parade magazine
5 families feel the housing pinch
We lucked out
Lauren Martz and Paul Frederick, St. Petersburg, Fla.
Three months after graduating from college, 23-year-old Lauren Martz of St. Petersburg, Fla., bought her first house.
Such a purchase might exceed the means of most first-year teachers, but Martz found that the housing slump has a flip side. Prices are down — way down, in some markets — and interest rates are low. Sellers are eager to deal. It's a great time to buy.
Martz first spotted her 900-square-foot house during her final semester at the University of South Florida. It was a single-story cottage in a good neighborhood, with a big backyard and a one-car garage.
The sellers had bought the place for $175,000 in 2006, when local sales were peaking. Since then, property values throughout Florida had tumbled; they were asking $150,000.
Martz wasn't ready to buy, but the place stuck in her head. In January, the price had dropped to $130,000.
It seemed a good fit for Martz and her fiancé, Paul Frederick, who plan to marry in July. It was close to shopping, two minutes from the neighborhood in which she grew up, and a short drive to the elementary school where she teaches fourth grade. Because it was in St. Petersburg, she qualified for a $20,000 grant available to teachers buying their first home.
She and the seller agreed on $125,000. Her 6% fixed interest rate will keep the payments low.
Plus, the house "is real cute," she said. "It's painted throughout, and spotless, in really good shape. It's in a nice, safe neighborhood. I feel like I really lucked out," she said. "I was excited just to get a garage."
5 families feel the housing pinch
We're struggling
The Dinmore family, Franklin, Mass.
In June 2000, Joseph and Suzanne Dinmore thought they had found their dream home: a four-bedroom, $215,000 house in Franklin, Mass. Both were working, he as a teacher and she as a nurse, and raising three kids with the anticipation of more.
They put down $30,000 and had a fixed-rate, 30-year loan, with a manageable $1,600 monthly payment. But the situation turned within two years. "My wife got pregnant with our fifth child, and we needed to expand," says Dinmore. "We considered selling, but couldn't get the $300,000 we needed for a larger home."
When they tried to refinance, they were hit with a whopping 9% adjustable rate. "I needed the money, so we went along with it," Dinmore says. By 2005, they were paying more than $3,000 a month, and Suzanne was pregnant again. "At this point we owed about $380,000."
The Dinmores were denied an adjustment. They were turned down when they offered to sell the house for the market value of $340,000 and hand over the keys. "The bank refused to help," Dinmore says. They moved out last June and were told their home would be sold at auction.
They then turned to the Neighborhood Assistance Corporation of America, a national, homeowner's advocacy group. "We called the bank, stopped the auction and negotiated a new loan at a rate of 5.25%," says NACA case worker Bill Whitehouse. Their payment dropped from $3,104 to $2,140."
The family was back in their home by Christmas. "It was like coming back from the dead," says Dinmore. But the deal collapsed when the lender piled on back payments and penalties that made their debt well exceed the value of their house. "Now we owe them about $450,000," says an exasperated Dinmore. "We've hired a lawyer to look at our options. We thought we were saved, but now we might still lose everything."
The family is currently working with a mortgage auditor named Marie McDonnell from an organization called Truth in Lending that was recommended to them by their bankruptcy attorney.
"She's looking at all of our mortgage documents to determine if we were the victims of any inconsistencies or lending violations," says Dinmore. "If she's successful, we may be able to have the mortgage rescinded." In the meantime, they are back in their home and hoping for the best.
5 families feel the housing pinch
We worked it out
Michelle and Imani DeJohnette, San Diego
Real estate was sky-high when Michelle DeJohnette, 41, bought her three-bedroom house in San Diego in April 2005. Still, she was excited. "I liked that it was on a quarter-acre lot, and there was a room addition that I could use for my child-care business."
So, she and her 18-year-old daughter, Imani, moved in, financing the purchase with an adjustable-rate mortgage that reset after two years.
In April 2007, the house payment leaped by nearly half. "I knew there was no way," DeJohnette says.
So she phoned her lender. "I said, ‘Hey, I need help!' What I got was: ‘You're not behind on your payments, so there's nothing we can do for you.'" The lender's position was that if she was able to write that monthly check — no matter how she had to scrape to do so — she could afford the loan.
"I was trying to be proactive, saying, ‘Yeah, I'm paying the mortgage, but it's kicking my butt,'" she says. "I was thinking there was a real possibility I was going to lose my home if something drastic didn't change."
Lean months followed. Before a second reset occurred, DeJohnette took action. Last December she called the Minneapolis-based Homeownership Preservation Foundation, part of a network of counseling services that helps consumers wrangle their debt. The foundation connected her to Trina Campbell, a housing and credit counselor in Duluth, Ga., and began a protracted negotiation with the lender.
"I advised her to request a workout specialist, get her documentation together and secure a loan modification," Campbell says. "She did very well." DeJohnette came away with a fixed-rate mortgage and a monthly payment reduced by more than $800.
"I want to tell people to have faith, to have hope," she says. "That was what kept me going."
5 families feel the housing pinch
We had to walk away
The Parker family, Merced, Calif.
Keith and Debbie Parker turned their house over to the bank when their adjustable-rate mortgage soared well beyond their means. "The house is worth $170,000 less than the loan, so we couldn't sell," Keith Parker says. "My two kids were devastated, and my wife lost more than half of her day-care business, which she ran from the house."
The family rented a nearby house. While the Parkers may be out of debt, their credit is ruined. "It'll take me years to get back in the game," Keith Parker says. "But for now, we're still eating."
