The post-recession housing crisis sent millions of American homes into foreclosure or made the loans underwater. Since then, many communities have bounced back — but that largely depends on where they are and who owns the homes in them.
While wealthy neighborhoods have rebounded, many working-class neighborhoods are still stuck in a housing slump where the homes are worth less than what owners paid for them.
As of March, 15 percent of homes worth less than $200,000 are still underwater, a situation in which the borrower owes more on the house than it's worth. This is compared with only 6 percent of homes over $200,000, according to CoreLogic, a real estate information firm.
But working-class communities like Trenton, New Jersey; Memphis, Tennessee, and Lithonia, Georgia, a suburb of Atlanta, have bleak prospects and represent a divide in the housing market, according to The Wall Street Journal.
These communities were "hit with foreclosure first, the longest and the hardest," John O'Callaghan, chief executive of Atlanta Neighborhood Development Partnership Inc., told the Journal.
Not only have residents lost homes, but they "don't have good access to mortgage credit; don't have wage growth. Everything is going wrong," he said.
Shirley Jones, a Lithonia resident who bought her house in 1996 for $80,000, saw its value reach $325,000 during the housing bubble. Now it is worth just $50,000, she told the Journal. Her neat brick home is down the street from overgrown lots and boarded-up houses that have been abandoned or foreclosed. "It make the community look dead, like a ghetto," she said.
Experts say neighborhoods like this get caught in a downward spiral, starting with dropping home values and foreclosures. Banks are loath to lend money to low-income borrowers who would buy homes in their neighborhoods, which leads to more foreclosures and drops in home value. The cycle is exacerbated by the issue that low-income workers have seen no growth in wages since the recession.
A report from the American Civil Liberties Union shows that median household wealth for African-Americans continues to drop after the housing collapse, while median wealth for whites has stabilized. Effects on the next generation are predicted to drop the average black family's wealth by $98,000 compared with what it might have been without the recession.
In addition, more blacks and Latinos had money tied up exclusively in their homes — wealth that disappeared when they lost them, according to the ACLU report, and after the collapse, the Federal Reserve found that the net worth of black families fell 17 more percentage points than the 23 percent it had fallen during the collapse, while worth had started to increase again for white families. Some of this wealth transferred to Wall Street, according to New Republic, as hedge funds and investors snatched up foreclosures in low-income neighborhoods and converted them to rentals.
"To turn something like this around it takes a lot of resources and focus," said Julia Gordon of the Center for American Progress to the Journal. "Without help, these neighborhoods might take years to come back."