As mortgage defaults and foreclosures continue to rise, the impact is spreading well beyond those who are losing their homes.
In communities across the country, msnbc.com readers report that local governments are coping with shrinking tax rolls, lenders are saddled with more foreclosed homes than they can sell and empty homes in many neighborhoods are being vandalized.
Like everything associated with the nation's housing crisis, the fallout from foreclosures is very local, a fact confirmed by hundreds of e-mails from readers in msnbc.com's Gut Check America. Some regions appear to have escaped relatively unscathed. But in hard-hit states like California, Arizona and Florida, readers report that some neighborhoods are becoming virtual ghost towns.
In Indian Harbour Beach, Fla., “lots of homes have been abandoned by their owners, and many people are going into bankruptcy,” wrote a reader named Robert. “Whole condo projects sit half-finished and rotting in the Florida sun. On some streets almost half the homes are empty. Many people have lost 40-50 percent of the value of their homes. “
Others report a different kind of isolation; many of those losing their home to foreclosure are reluctant to confide in family or friends until the process is complete. Some neighbors are unsure how to respond.
“My community is an upscale middle-class community; I am going through foreclosure right now,” wrote a woman from Pennsylvania. “The neighborhood is very quiet, waiting for the next fall to happen. People do not even talk to each other. They wave but hardly say a word.”
In South Lyon, Mich., life is getting lonelier as more houses are abandoned in Jose's neighborhood.
“I live next door to empty houses instead of neighbors and friends,” he wrote. “It is an overwhelming feeling of dread. You wonder if your family is next."
In hard-hit neighborhoods, the glut of foreclosed homes has not only sent prices crumbling — the houses themselves are also falling down, according to a number of readers from around the country.
“Our neighborhood is going down the tubes because the properties are going unsold for so long that they're falling into disrepair,” wrote Leslie from Albuquerque, N.M. “It's a mess.”
In Memphis, Tenn., Angela reported that her neighborhood was dotted with “growing weedy yards, windows with papers taped to them and broken. There are about five or six such homes in my post-World War II subdivision. And these are NOT expensive homes!”
“My neighborhood is filled with renters who could care less about the parks or the appearance of the homes,” wrote Joe Brogdon, of Queen Creek, Ariz. “There is a smaller home near mine that has no windows and it is barricaded with plywood to prevent any more vandalism to the house. Many of the lawns are not being taken care of, which does not help the situation for resale or pride of ownership.”
Some houses have been damaged by angry, frustrated homeowners who lose their homes to foreclosure, according to Mark in Stockton, Calif., where the foreclosure rate is among the highest in the country.
“This city has so many foreclosed homes that are trashed there is an ad on local TV offering up to $1,000 to people not to trash their home before they are kicked out of it,” he wrote. “The problem here is grave.”
In other cases, abandoned homes are more than an eyesore. Readers in some hard-hit areas report a rise in vandalism, squatting and other crime.
“Vandals have been hitting the empty homes that have been affected by foreclosure in my area,” wrote Gloria of Los Angeles. “With summer around the corner and kids out of school, I just worry about fires starting or other serious problems happening.”
To prevent the blight that can follow a high concentration of abandoned housing, some local governments are using tax dollars to buy up properties and fix them up — or tear them down.
“Our local government is planning to demolish vacant homes,” write Susan, of South Bend, Ind. “It is going to cost the city more money, which in turn creates more tax burden for South Bend's residents. It is a vicious cycle.”
With federal housing relief stalled in Congress, some local governments have stepped up with programs offering small loans to help strapped homeowners head off foreclosures. But as the housing market continues to slide, declining property tax revenues are squeezing town and city budgets.
During the housing boom, many municipalities enjoyed a windfall in property taxes as the value of homes and other properties soared. Now as those values have fallen back, property owners are challenging pricey assessments.
Some local governments facing shrinking tax revenues are resorting to cutting services.
“We have terrible local road repair, our parks need landscaping and maintenance,” said Jose from South Lyon, Mich. “We volunteer our time to the village public park district and mow small park lawns with our own gas and equipment. Our fire department is going back to mostly volunteer, and we may have to lay off some police officers.”
Kristen Cunningham, director of Community & Economic Development in South Lyon, took issue with Jose's account.
"We are a full service city that no doubt has been affected by the foreclosure problems. It obviously is a challenge everywhere," she wrote in an e-mail repsonding to our story.
Cunningham said South Lyon has always had a volunteer fire department and is not laying off police officers. "In addition," she said, "the city is in good solid financial condition and regularly maintains its own park system through general fund monies. There are no volunteers mowing any of our parks with their own equipment and gas."
A report last November by the U.S. Conference of Mayors forecast losses of $166 billion this year for 361 metropolitan areas. The estimate included lost tax revenue, lost jobs and slower consumer spending but not the financial toll of increased crime, fires and building code violations.
Some cities have filed lawsuits against lenders to try to recover costs associated with what local officials claim is predatory lending. In other cases, cities and towns are looking for other ways to raise enough taxes to maintain local services.
“My hometown is broke, and the devaluing of the property tax base is cited as one of the reasons,” wrote Bill, form South Gate, Calif. “If the voters pass a 1 cent per dollar sales tax in June, to prevent cutbacks in services, we will have one of the highest rates (9.25 percent) in the country."
In Memphis, Tenn., Wayne wrote that “the city and county are both hurting due to the lost tax revenue on the foreclosed homes. This also has had a severe setback on the amount of tax-based funds allocated to education, fire and police protection.”
Homeless shelters also report an increase in traffic. Some new arrivals are renters whose landlords defaulted on their loans and lost the property to foreclosure. The National Coalition for the Homeless recently surveyed state and local homeless coalitions and found that 61 percent reported an increase in homelessness since last year.
“It has been horrible,” said Earlinda, a Realtor in Reno, Nev. “We now have a ‘tent city’ because the homeless shelters are overloaded."
In some communities with high foreclosure rates, lenders are having a tough time selling the properties they’ve taken over. The problem is apparently most severe in large developments that were under construction when the housing bubble burst.
“There are well over 500 houses for sale in an area with approximately 5,000 homes,” said Rick from New River, Ariz. “Most are spec homes for sale with sale prices dropped from $100,000 to $200,000. Banks can’t even find buyers at auctions.”
Some real estate agents report that when they do find buyers for foreclosed properties, lenders are so swamped they’re having a hard time answering the phone. One San Diego Realtor reported that agents have taken to getting up early to leave voice mail for lenders before their mailboxes fill up.
In Pinellas and Pasco counties in Florida, home prices have dropped as much as 40 percent, according to Lorraine Seddon, an agent in Dunedin, Fla.
“Banks that should be glad that a contract came through take so much time to respond that buyers buy other homes, leaving these (foreclosed) homes to rot,” she wrote.
The housing slowdown has also hurt local businesses in hard-hit areas, forcing layoffs among builders and mortgage lenders. Some of those in the housing industry who still have jobs are worried that they could be next.
“I work for a much more conservative bank than most, but all of our income has suffered greatly,” write Chris, of Shawnee, Kan. “We are constantly worried that the doors at work will be closed at any moment, and it is a terrible way to live day to day. From what I can tell, things aren't getting better anytime soon.”
Local businesses in hard hit areas are also watching business dry up.
“I sell building material to home builders,” wrote Ed, from Georgetown, Del. “It is very scary what’s going on. I’ve seen a lot of builders go out of business.”
To be sure, readers in some areas of the country — from Watsontown, Pa., to Alto, N.M. — reported that their communities have been spared the impact of the housing downturn, at least so far.
“Property values have not gone down,” wrote Ken of Custer, S.D. “People are still buying and building.”
Some readers reported they were benefiting from foreclosure's fallout — including dozens who said they were now able to afford a home in a buyer’s market.
“I just moved here, and I picked up a nice house for half of what it sold for in 2005,” wrote Doug, from Phoenix, Ariz. “Thanks, Arizona.”
One reader wrote that rising foreclosures had created new employment opportunities.
“The foreclosure crisis has been a boon to me and my family,” wrote Lee, of Riverside, Calif. “After three years of unemployment, I have been working for the past year cleaning and maintaining foreclosed houses and preparing them for sale. It has provided work for me that wouldn't have been there otherwise.”
But other readers reported that their personal and professional lives were on hold because they couldn’t sell their house to take a new job or fund their retirement.
“I recently moved for a new job and am trying to sell my home,” wrote Karen, from Evans, Colo. “My Realtor told me that all of my competition are foreclosures and bank short sales. I will most likely take a $20,000 loss on my house.”
“My wife and I are divorcing, but we will have to live together as roommates,” wrote Mick, from Reno, Nev. “We have a fixed-rate loan, so that is not the issue. It's simply that the implosion has depressed house prices so much that we can't sell our house and move on.”