Many mature housing markets, such as those in the northeastern U.S., have been spared the dramatic drops in prices seen in Florida, Nevada, Arizona and other areas that experienced massive overbuilding during the recent real estate boom and bust.

Still, there are pockets of devastation to be found -- few more evident than Mount Vernon, N.Y., which lies just north of New York City. In 2007, before the bursting of the real-estate bubble, the median price for a home in this working-class city of 69,000 was nearly $510,000, according to Money magazine's annual listing of Best Places to Live. Following the deep recession and mortgage crisis, however, today the median price is around $310,000 -- a decline of 37%.

A Neighborhood Suffers

As is true in many U.S. cities, certain neighborhoods have been affected more than others. A recent survey of completed sales in a roughly 12-block area of south-central Mount Vernon (see the map below) during the past four years reveals just how acutely parts of the city have been affected.

For example, 13 homes in this neighborhood that sold during the 12 months from October 2005 to October 2006 had a median transaction price of $475,000. Four years later, during the comparable period from October 2009 to October 2010, sales data of 17 homes in the same area reveal the median sales price had fallen to $135,000, a drop of 72%.

One telling example is the recent sale of an enormous 4,000-square-foot house at 444 S. Second Ave., which recently sold for just $274,900, according to sales data compiled by Empire Access Multiple Listing Service (MLS), which tracks real-estate transactions in Westchester, Putnam, Dutchess and Bronx counties in New York state. The house's sale price is about $100,000 less than a nearby 1,500-square-foot home sold for just three years prior, notes J. Philip Faranda, vice president of the MLS.

Banks Step In

Just as disconcerting as the drop in prices is that the most recent sales data show that most of the homes sold weren't owned by individuals but rather banks or the U.S. Department of Housing and Urban Development (HUD), the federal agency charged with making home ownership affordable. About two-thirds of the homes sold in September were owned by banks, indicating that the properties had been through foreclosure proceedings, says Faranda, owner of J. Philip Real Estate. "The only thing we're seeing is bank-owned activity."

The drop in sales prices in the Mount Vernon neighborhood is also an example of how minorities, specifically blacks and Hispanics, have been more adversely affected by the housing crisis. The city is 60% black and 10% Hispanic, populations that were frequently targeted by subprime mortgage lenders.

Whatever nest-egg the surge in housing prices promised residents of this neighborhood just a few years ago is now long gone. That's not only devastating for homeowners who have lost their homes but for those who still live in the neighborhood.

Had remaining homeowners in the area sold just two or three years ago, they could have cashed in, but time wasn't on their side. Not everyone can sell when the market's hot, since home sales are often driven by major life events, such as children leaving home or retirement.

Paper Losses

Just as tragically, the dramatic drop in home values that followed the mortgage meltdown hasn't provided one of the benefits often cited with lower prices -- the ability for young people and low-wage earners to buy such homes. Terms of sale for many of the homes in the neighborhood require that buyers pay in cash.

That's unfortunate, Faranda says, because the homes are likely to wind up in the hands of investors who will either do minimal improvements and use the properties as rentals or try to "flip" them. That process involves rehabbing foreclosed houses and then selling them at much higher prices, reducing the likelihood that modest-wage earners will be able to afford them.

For those eager to sell in today's sluggish real-estate market, Faranda advises not to look at depressed housing prices as eating away at that equity. "What are you mourning for -- it wasn't real money," he says.

"However, I think anybody would agree that if we did not have this financial calamity that we wouldn't have seen such an exaggeration in value loss," Faranda says. In other words, a home that sold three years ago for $295,000 instead of an overheated price of $380,000 wouldn't be looking at such a dramatic reduction today.

Innocent Victims

One of Faranda's current listings is for a three-bedroom, single-family home at 27 Harrison Street (see the photo below). It's listed at $125,000 -- roughly half the price it would have commanded at the height of the market a few years ago. The house, the elderly owner of which now lives with her daughter, is a victim of the downturn in the real estate market in a different way.

Having sat vacant for some months, vandals have ransacked the house looking for copper wire and pipe and anything else of value, common in neighborhoods with high vacancy rates caused by numerous foreclosures. Had the house -- owned free and clear -- remained intact, its sale would've provided surviving family members with a larger inheritance than they now stand to gain.

Faranda says much of his business today consists of short sales, homes that are on the market at asking prices less than is owed on the mortgage, as desperate homeowners try to unload homes they can no longer afford. He mourns the devastation the mortgage meltdown has heaped upon this slice of Mount Vernon, which "isn't a ghetto," he says.

"Mount Vernon has really been hammered," Faranda says. "If the question is: 'Show me an area that's been adversely affected by the housing bubble,'" he says. "This is it."

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So the manipulation goes on ... cash-only, house-flipping, etc. The whole intent of the "real estate bubble" was to make more money for those who already have, while fleecing the have-nots, coming and going. This is one mean culture.

December 13 2010 at 4:39 PM Report abuse rate up rate down Reply

unfortunately unless you have cash or are already very well off you will find it very difficult to get a mortgage. I tried to refi my house near a major ivy league university in a stable area. I have above 700 credit, never a late payment and a steady reasonable retirement income. The bank approved me but then at the last minute backed out. If they won't loan someone with a guaranteed income and a strong history of bill payments and a reasonably valuable house in fine condition money you can imagine how hard it is for someone with a not great credit score or less stable income to get a mortgage or loan. That means only the upper middle class and above will be able to buy houses anytime soon.

December 08 2010 at 5:30 AM Report abuse rate up rate down Reply

Over the life of a 30 year loan, a $300 per month decrease would equal over $100K in savings. Search the web for "123 Mortgage Refinance" website they helped me find 3.118% rate easily. Strongly recommend them for anyone.

December 08 2010 at 4:28 AM Report abuse -1 rate up rate down Reply
1 reply to's comment

Do not trust them.

December 13 2010 at 4:42 PM Report abuse rate up rate down Reply

Investigate what Barney Frank and Chris Dodd had to do with this Fannie and Freddie

December 08 2010 at 3:52 AM Report abuse +2 rate up rate down Reply

That is a poor area. I live in FL. For 300K here you could get a mansion.

December 07 2010 at 9:31 PM Report abuse +3 rate up rate down Reply

House next to one of my rentals sold for $210K nine years ago, today the bank is "TRYING" to get $52K (still can not sell it) and it is not torn up. Large lots on a nice Golf course, bank TRYING to get $16K (were selling for $150K) in a newer developemnet with Custom 4,000-9,000sf homes that banks are now selling for $65/sf . Real estate can become a liability if it can not produce an income (rented out, or crops grown, etc).

December 07 2010 at 9:00 PM Report abuse rate up rate down Reply

Ya well, 5 yrs ago the house across the street from me sold for $270K, this summer it sold for $88K. And thats with an inground pool, corner lot.

December 07 2010 at 8:19 PM Report abuse rate up rate down Reply

Half truths and lies were rampant in the real estate market years ago. I worked as a Realtor in the 80's in New York state. Don't have a down payment? Then the attorney for the seller would inflate the contract price by ten or twenty percent. If there was a possible rental unit in the house, a new "fake" lease would be drawn up for the mortgage application to make it look like the property generated more income than it did. If you had 25% or more to put down, the loan was virtually guaranteed with no income or asset verification, but there was a credit check done. It was only after the market went down in the late 80's that banks became more careful with loan approvals. Appraisals were looked at very carefully in the early 90's, I saw many deals fall apart because the appraisals were short of the contract price.

December 07 2010 at 8:05 PM Report abuse +1 rate up rate down Reply
1 reply to RMS's comment

In the early 1970's, people were cashing-in on the GI Bill Vets. We were among the Vets who got taken-in by the 0-down VA loan promises. VA inspections were sub-standard ... our home was approved, with a bad foundation, improper wire junctions, sewer pipe running underneath an "illegal" bedroom, etc. How did we find all this out? Years later, we qualified for a HUD code-violation refinance! In this country, once in a while, someone does the right thing. Buyers, beware, especially now (sellers too ... refinancers especially.)

December 13 2010 at 4:47 PM Report abuse +1 rate up rate down Reply

Not to mention the fact that most of the houses were never worth more than $100,000 to begin with. What Congress did to us in demanding that banks make loans to people who couldn't afford them is unconscionable and instead of putting Wesley Snipes in jail, Sen. Waters, Rep. Frank, and all the rest should be the ones going to jail. Just sayin'!!!

December 07 2010 at 7:16 PM Report abuse +13 rate up rate down Reply
2 replies to jcy5030's comment

Republicans were just as guilty if not more so a Democrats in the real estate scam of the early 2000s. Banks were allowed to deregulate and Glass/Steagle was removed. This allowed investment banks to buy commercial banks which approved loans to people who would not normally qualify for a mortgage. Extra artificial demand drove prices up and people were climbing all over each other to buy. Once defaults began to occur, inventories increased which deflated prices. The entire thing was a scam that started in late 2000.

December 07 2010 at 7:49 PM Report abuse +2 rate up rate down Reply

Read "ericalannelson" reply below. Here here!

December 13 2010 at 4:49 PM Report abuse +1 rate up rate down Reply

We are going to see alot more of this across the USA.We need to stop all the free money and get back to work.If we keep it up we too will be a third world country. Wake up america.

December 07 2010 at 7:08 PM Report abuse +13 rate up rate down Reply
1 reply to Bughowzer's comment

We need to quit bailing out everyone and their brother, when they look to America for help, and start bailing out our own people first. Charity begins at home. It's shameful that this country is Johnny-on-the-spot for everyone else who needs money, yet turns its back on its own. Something is seriously wrong with America's priorities.

December 07 2010 at 10:39 PM Report abuse +4 rate up rate down Reply