How the Housing Market Is Fighting Its Way Back

Larger homebuilders — the ones that sat on big stores of land going into the bust — have to find another way. These days, CBH Homes' headquarters, just south of Interstate 84, are chillingly quiet. The game is no longer volume — the busloads of investors from California stopped coming long ago — but efficiency. Owner Corey Barton squeezes costs wherever he can, which is why half of what CBH builds (which still isn't much) now belongs to its slimmed-down Advantage Collection. The trick: boxier floor plans cut out embellishments like bay windows and take fewer materials and less time. A 2,000-sq.-ft. (186 sq m) house can be built for $10,000 to $15,000 less and priced to reflect that, since Barton's main competition is distressed sellers. "The foreclosure and short-sale market is a monster," he says.

Still Too Late for Some
It would be less monstrous if more people could take advantage of government and bank programs that would allow them to stay in their homes. But this part of the equation has been difficult in Boise and nationwide — the reason the Obama Administration recently invited 25 mortgage servicers for a day of head-knocking in Washington.

After 35 years in the mortgage industry, Tom Birch took a job as a housing counselor at Boise's Neighborhood Housing Services this past winter. He spends his days meeting with people who can no longer afford their mortgage payments. It has been tough going. More than most, Birch appreciates that mortgage companies were not prepared to handle the number of cases they have seen. He also understands, again probably more than most, that foreclosure is, in certain circumstances, the right outcome.

And yet what would help him do his job, the thing he most wants from a lender when he sends in an application for a loan modification — asking for something like a reduced interest rate that could help keep a family in its home — is simple. "I just want to know someone is looking at it," he says. Often, that hasn't been the case. Banks simply don't call back.

One person caught in the middle is Teri Lupo, who bought her first house — an $80,000 starter home — when she was 20 years old. Over the years, she and her husband Scott have owned a couple of other houses as well. They don't anymore.

In late June, Teri, now 31, tearfully packed the last few things — dishes, plants — in her three-bedroom house in Star, a Boise exurb of a few thousand people. When the Lupos' 7-year-old daughter was asked by a neighborhood friend why her family didn't have enough money to pay for its house, she couldn't say. The answer: her father's income from selling cars kept dropping just as her mother's medical-transcription company started losing business to electronic record-keeping. Among the expenses cut from the family budget was health insurance.

The devastating thing for the Lupos is that they'd gotten Wells Fargo, their bank, to agree to a short sale. The Lupos had found a buyer who would pay market price for the house — short of what was owed — and Wells agreed to forgive the rest of the couple's debt. The sticking point was a second lien — a $75,000 home-equity loan — owned by a different division of Wells. The buyer got spooked and walked. The Lupos have since moved into a rental house and now live in fear of the bank coming after them. "It's humiliating when you work so hard," says Scott. "But one day, we'll get back to where we were."

Which goes to show that for all the glimmers of hope in housing, there is still a long slog ahead. Because fundamentally, what a rational housing market means is that people can afford the homes they have and move to bigger ones only once they have decent and growing paychecks.

In other words, until the economy returns to full strength, neither will housing. For years, Americans acted as though one didn't have anything to do with the other: buying a house wasn't really about whether or not you could afford it. Buy and flip; refinance in between if necessary. Now that housing is working its way back to being logical, there's only one way to build value in houses. The right way.

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