Foreclosure heaven

Is Hillary Clinton standing between me and homeownership? I’m beginning to think so, but it will take a moment to explain.

At our wedding reception about a month ago, my wife Heidi’s older relatives peppered me with the typical nuptial interrogation: Kids soon? No, but give us some time. Honeymoon? Montreal. Where’d you buy a house?

A house? What, do I look like I have a hedge fund?

To be fair, most pension-collecting retirees probably don’t know that asking whether a young newlywed owns a slice of the Southern California dream isn’t far off from asking where he keeps his private jet. But that didn’t stop their questions from driving home a stinging reality: Unless Heidi and I trip over a boulder of pure gold or are written into some ailing, unknown millionaire’s will, homeownership for us must be years -- if not decades -- and a few younger Thorntons away.

That is, of course, unless Heidi and I buy into the concept of “ownership” as putting our credit scores and most of our monthly income into the hands of a sub-prime mortgage company about to go belly up over bad loans. And how much sense does that make? Maybe, just maybe, in some economic twilight zone, the average price of a two-bedroom bungalow will continue its steady march well beyond the million-dollar mark, which is the only way a bloated high-interest loan could seem like a wise investment that won’t imperil our kids’ college education.

But there is hope! Earlier this week, The Times’ front page screamed, “.” Indeed, Los Angeles County’s foreclosures in the second quarter this year topped out at a whopping 2,581, up more than 700% from that same period last year. Inland Empire counties had it much worse.

So why the upbeat interpretation of such a sad story? Because borrowers are having trouble making monthly payments on their sub-prime mortgages, the supply of houses is increasing at a faster-than-expected clip. With potential buyers having a few choices, home prices stand to fall (albeit modestly) to levels that aren’t insane -- that is, somewhat below the $649,000-to-$1 million median price for a home in Glendale’s eight ZIP Codes. It’s a simple function of supply and demand, the kind every high school kid learns in basic economics.

But that’s where Hillary comes in to foil me again. This looming crisis comes on the eve of a presidential election, and homeowners, do they ever vote. In the Democratic field, at least two candidates have proposed some form of Washington meddling that would keep the housing market from going where it clearly wants to go -- i.e., down. Earlier this year, Sen. Christopher J. Dodd proposed a onetime, multibillion-dollar bailout at taxpayer expense of borrowers behind on mortgage payments. Sen. Clinton suggested a temporary “foreclosure timeout.” Sen. Barack Obama wrote to Treasury Secretary Henry M. Paulson Jr., “We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes.”

Thankfully, talk of timeouts and bailouts has cooled in Washington -- for now, anyway. But with California -- ground zero of the nation’s housing bubble -- coming so early in the 2008 presidential primaries, and with the rate of foreclosures unlikely to crest any time soon, imperiled, debt-ridden homeowners will doubtless press the populist field of Democratic candidates to promise them a break. If conservatives can use a silly issue such as same-sex marriage in 2004, what’s to keep Democrats away from rising foreclosures in 2008? If Clinton resurrects her “foreclosure timeout,” or if by some political miracle, bailout proponent Dodd still has a shot in February, the presidential election could end up presenting the biggest roadblock to my hopes of eventually owning a home that isn’t in a suburb of Phoenix.

In the meantime, those of us who’ve been priced out of the market for years will have to wait patiently for home prices to return to a level that meets a more sane understanding of affordability. Painful as it is, the only way that can happen is for the housing market to correct itself and reverse part of the bubble -- and that means more foreclosures for the roughly 10% of sub-prime borrowers who can’t make their payments. Any proposed mortgage bailout will only suspend housing prices at their current, unsustainable levels and delay for years the inevitable decline of home prices -- and ownership for those who sensibly refuse to take a chance on high-risk loans for overpriced houses.

For now, Heidi and I will just have to drive past those desperate for-sale signs that scream, “Price reduced!” In the meantime, we’ll ponder how aggressively we’d like to renegotiate our rent.

Paul Thornton is a researcher for The Times’ editorial page. Send us your thoughts at [email protected].