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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