Bruce Murphy
Murphy’s Law

The Underwater City

New study ranks Milwaukee as 16th hardest hit city, with 40% of homes underwater. But that may understate the problem.

By - May 13th, 2014 01:13 pm
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A fire damaged home in Milwaukee's Uptown neighborhood. The home was previously boarded up and is located at 2400 N 49th St. Home is city-owned. Photo by Jeramey Jannene.

A home in Milwaukee’s Uptown neighborhood. The boarded up home is located at 2400 N 49th St. Property is city-owned. Photo by Jeramey Jannene.

A new national study by the Haas Institute has bad news for America’s cities, including Milwaukee. “Contrary to the claims of many observers that the recent rise in housing prices is solving the nation’s foreclosure and related economic crises, millions of families continue to face financial devastation from which many may never recover,” the authors note.

The study criticizes the media for overstating the impact of rising housing prices, noting that despite this trend, “the total value of owner-occupied housing still remains $3.2 trillion below 2006 levels… there are still some 9.8 million households underwater,” or nearly one in five of all mortgaged homes.

“In fact, the overall ‘post-recession’ narrative is misleading. Foreclosures and mortgage delinquencies may be down since the peak in 2009, but they have yet to return to pre-crisis levels,” the study notes.

While the economic meltdown began in 2008, home prices did not bottom out and mortgage delinquencies and foreclosures did not start to diminish until 2012, the study notes.  “Almost five million families have lost their homes to foreclosure since 2008, and foreclosures continue at rates higher than prior to the Great Recession.”

American households lost an estimated $7 trillion in household wealth between 2006 and 2011 due to the housing crisis, the study reports.  The hardest-hit population has been African Americans and Latinos, who experienced a decline in household wealth of 52 percent and 66 percent, respectively, compared to 16 percent for whites.

Prior to the meltdown, minorities with comparable incomes and credit-worthiness to whites were more likely to get turned down for conventional loans, as past studies have shown. Many African American and Latino homeowners rejected for conventional loans “were targets of abusive and reckless banking practices, including an epidemic of subprime loans with predatory features,” the study notes. “Banks, private mortgage companies, and mortgage brokers preyed on homeowners in low-income and minority areas” and “also targeted middle-class African American and Latino families who lived in neighborhoods with high proportions of minority families.”

These lenders were later sued by a coalition of 25 state attorneys general and the federal government. The nation’s five largest mortgage loan providers, the Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup, Inc., and Ally Financial, Inc. (formerly GMAC), agreed to a combined $25 billion settlement.

But by then the damage had been done. The settlement, while helpful, is a drop in the bucket compared to $7 trillion loss in wealth for homeowners.

The new study looked at the 395 zipcodes in America with the highest percentage of homes that are underwater — those with negative equity, owing more on their mortgage than the market value of the home.  At first glance the problem seems to be concentrated on the boom and bust coasts. The study found that 18 cities in California and 16 in Florida are among the 100 hardest-hit cities.

But the Midwest emerges in the study’s ranking of the 11 states with the highest number of these 395 zipcodes: the worst was Georgia (61 zipcodes), followed by Illinois, Michigan, Ohio, New Jersey, Maryland, Missouri, California, and finally, Nevada and North Carolina, tied for tenth place with 10 of the worst zipcodes.

Wisconsin was not far below this, with eight of the 395 worst zipcodes in the nation, including seven in Milwaukee and one in Kenosha.  Milwaukee ranked as 15th hardest-hit metro area, with 23 percent of homes underwater. Number one were Las Vegas and Atlanta, both with 35 percent.

But the negative equity in metro Milwaukee was concentrated in the city, which ranked as 16th highest among 100 cities ranked, with 40 percent of homes having negative equity.  That was well below top-ranked Hartford CT, with 56 percent, but far above 100th place St. Paul, with 22 percent of its homes underwater.

And when you look only at bigger cities, Milwaukee ranked fourth worst, below only Hartford, Newark NJ and Detroit. All told, this city faces a problem of negative equity that is far worse than in most American cities.

What is being done to address the problem? The $25 billon legal settlement by the five banks was supposed to allocate $140 million to Wisconsin for remediation of the foreclosure problem, the overwhelming majority of which would have gone to Milwaukee. But Gov. Scott Walker grabbed nearly $26 million of it to close a budget shortfall, prompting bitter complaints from Mayor Tom Barrett and other city officials. 

Barrett and the Common Council allocated $14 million in the city’s 2014 budget to address the problem of more than 1,000 tax-foreclosed homes in the city. And Wells Fargo has announced a $5.15 million program for Milwaukee to help prospective low and moderate income home buyers cover their down payments.

Milwaukee’s money will will come from the company’s NeighborhoodLIFT program, which according to Chris Hammond, senior vice president for Wells Fargo, will allocate some $104 million to cities in America, and is the company’s largest single philanthropic effort in history. The company also created a nearly $50 million CityLIFT program as part of the legal settlement to which it agreed, but none of that money has gone to Milwaukee.

Milwaukee still remains far short of the resources it needs to meet this challenge.

Short Takes

-One of the five authors of this new study is Gregory Squires, a sociology professor who taught for years at UW-Milwaukee and is now at George Washington University.

-Sheriff David Clarke has created some bizarre radio ads that combine a pitch for him with a plug for a company called Inet. Is this legal? I have no idea, but it hardly matters, the ads are so amateurish they are only going to make the increasingly silly sheriff look like a cheap huckster.

33 thoughts on “Murphy’s Law: The Underwater City”

  1. Wisconsin Conservative Digest says:

    Milwaukee must solve this problem and they do it, not by building arenas, trolleys or bigger Wisconsin Center but by solving crime, this thing Barrett did today is big joke, MPS, jobs, Management and the others.

  2. PMD says:

    What would you do to solve crime in Milwaukee WCD? Conservatives love to get on their soapbox and insist that solving crime will solve everything else. So what’s the master plan?

  3. wisconsin Conservative Digest says:

    Glenn Frankovis has plan: “Area Saturation Patrol” and NY, Austin, many cities have good plans. Barrett has none. If Barrett and co. cannot solve it. Forbes ranks then as worst managed city after Detroit, get out.

  4. PMD says:

    Is Barrett supposed to have the plan, or is Flynn? Or both? What do you like about the plans in NY and Austin? How have they been effective?

  5. Wisconsin Conservative Digest says:

    After you do your research, come back and we will talk.

  6. PaulK says:

    Bummer. It looked like a good conversation starting. “Come back and will (sic) talk.” is really your response? I was hoping at least for a reference to a study or report that would answer these questions. It’s always easier to criticize than to construct.

  7. Stan says:

    Chief Flynn uses an area saturation plan.

  8. PMD says:

    So you don’t know? Cause you spoke as if you have a lot of knowledge of successful anti-crime efforts in other cities, efforts that should be replicated in Milwaukee. I would genuinely like to know what you like about those efforts and how they have been successful. It would be great if you’ve got more than “Milwaukee needs to reduce crime” and “go do research.”

  9. 2fs says:

    WCD: Look, you brought up the idea – so it’s up to you to bring the facts. Sorry, but it’s a richard move to say “here’s this thing that works” and then compel everyone else to do your work for you and look it up.

    Because, see, that leaves those of us too busy to do that thinking that you’ve got nothin’.

  10. wisconsin Conservative Digest says:

    Sorry, working on another project. the success of NY and others is well documented in bringing down aggravated assaults the most important category that includes robberies etc. Glenn Frankovis does not think that Flynn is doing a job, He said that Artie Jones did better job. Their stories are well documented and I cannot type all that out, so then go and check why NY has less than half the crime rate as Milwaukee and why Forbes ranks this as the worst managed cities.

  11. Jeffrey Jordan says:

    Bruce,
    Here’s another fact that homeowners face when they sell property. In my case, as it is with many home owners, we made significant upgrades to our property. So now, because of the depressed market, as well as taking a loss on the price we paid for our property, we are unable to recover our investment.
    Can we write these losses off on our tax bill? The answer is no, unless we were using it as income property. I see this as one more kick in the teeth to the Average Joe who was trying to live the American Dream only to find out the game is rigged against him.

  12. PMD says:

    No one is asking you to type a term paper here WCD. You referenced anti-crime successes in other cities and spoke as if you are an authority on those efforts. When asked to state what you like about anti-crime efforts in those cities and how they have been successful, all you have said is “it’s well-documented” and “go do research.” Anyone can say that about anything. It’s hard not to think you are pulling stuff out of thin air here, and just want to bash Milwaukee and its leaders.

  13. John G says:

    If City management iss so awful, why is NML is building their new tower here? Why did two NYC hedge fund managers purchase the Bucks? Why did the City have population growth between 2000-present?

    How else can you fix the problem areas unless you have new business development, job growth, and people willing to spend money in neighborhoods. Look how much the East side, Downtown, Menomonee Valley and Bay View have improved since 2000? The City has clearly been trying to attract working professionals and empty nesters who are part of the massive demographic shift turning towards urban living taking place nationally. These are also people who use less in city provided services than your average working family. Increase property tax receipts and vibrancy downtown and you will continue to be able to provide better benefits elsewhere. This has been a resounding success thus far and hopefully the momentum continues. But when you are blindly crazy like WCD, you miss these things.

    I work in commercial real estate and I can tell you there is a lot of enthusiasm for continuing to invest in Milwaukee, and that wouldn’t be the case if the City wasn’t pro-development and well run. I guess people like WCD wouldn’t really know this since most of their personal interactions are with retired suburbanites out of touch with today’s USA.

  14. wisconsin Conservative Digest says:

    NML gas been here for hundred years, hardly a new project. but ask Forbes why they bestowed this on Milwaukee, maybe because: 10th worst for poverty, tenth worst most violent, worst schools, heroin epidemic, 57% youth unemployment, corruption rampant, Milwaukee county a joke, abandoned house everywhere, cheapshot artists against businesses from the Left chase jobs and businesses to Waukesha which has had great growth but worst is people like you who are blind to the problems and have no idea how to fix them and blabber about the Koch brothers, Walker etc. They can blame everyone else but cannot fix a damn thing..
    My father was fond of saying if you cannot “lead, follow then get the hell out of the way”.

  15. Wisconsin Conservative Digest says:

    John G, but your ignorance about me is stupefying. For the last 20 years I have worked in pharmacies all over the inner city, a place where you meet and talk to every one, managed and owned real estate, apts. and other investments in the city. We want the city to be good, but the unions, the Left and the dems try to stop everything that might work, chase out good people like Thornton, elect people like Barrett who has no idea what to do and worse thugs like Holloway and dopey people to the county board.
    In 1974 I started a move to bust up the MPS into smaller units so that the neighborhoods run the schools instead of the mafia on Vliet st.

  16. wisconsin Conservative Digest says:

    PMD, here are Milwaukee’s problems: top ten most violent, top ten worst poverty, top ten worst run, heroin epidemic, 57% youth unemployment, corruption everywhere, incompetent boobs running Milwaukee cty. that lie to the state all the time,,abandoned houses everywhere,constantly demonizing businesses so that they go to Waukesha county which is getting all the growth of the metro area.
    Worst is that you al have your head in the sand as the elephants run right over the top of you. when good people like Paul Ryan and Dale Kooyenga indicate that they have interest in the inner city and helping Milwaukee you haul out old hacks like Red Fred Kessler to attack him.
    I can easily live where I am, as I am retired from pharmacy business but met so many great people in the inner city that we see that the future of Wisconsin means fixing Milwaukee and not just sending them bigger checks to stick in their pockets for salaries and bennies like Milwaukee does.
    Finally you ignore the obvious problems even though they are well documents but attack those that bring them up as if that will solve the problems.

  17. PMD says:

    What an alarmingly simplistic, black-and-white worldview on display in those posts at 10:52 and 10:58. They aren’t even coherent, just a bunch of right-wing sound bites and talking points regurgitated from talk radio. Also, it’s hilarious that you demonize others for blabbering about the Koch Brothers and Walker. Read your own posts. Nothing but blabber about the left, Dems, unions, MPS, Barrett, etc… Talk about a narrow mind and a total lack of self-awareness.

  18. Stacy moss says:

    This article not about CRIME.

    We need a a little more law and order so the these pages are not hijacked to some other topic.

    By the way…..Not that logic matters here —

    If poverty is one of the things that causes crime, then it is a logical facility (affirming the antecedent) to assert attacking crime will solve poverty.

  19. PMD says:

    I am not ignoring anything. I am seeking information about something I have interest in. I asked legitimate questions about crime in Milwaukee, and you still haven’t answered them. I don’t think you have the answers or you would have shared them by now. You just want to take cheap shots at Milwaukee. Read your posts. You just repeat the same things over and over again. You attack and point fingers and lay blame, but when someone asks you a question, you spin and dodge.

  20. PMD says:

    Sorry Stacy.

  21. stacy moss says:

    Geeeez….

    PMD If you have questions about crime there are lots of better places than here to get them answered, no?

    Seriously, we should resist the temptation to make every topic to about right/left politics.

  22. Dave Reid says:

    @John G I’m fairly certain the “worst run” list that WCD continues to cite isn’t Forbes and was in fact was some important sounding (24/7 Wall St.) but not actually site with not much of a methodology. A real rating agency for example rates Milwaukee’s pension system as one of the best (if not the best) managed system in the country http://www.pewstates.org/research/reports/a-widening-gap-in-cities-85899442341. Not a rating of the entire city’s management, but a good example of real quality management by the city.

  23. John G. says:

    If you supported inner city people having access to employment, why does your party continue to defund public transportation? If you are impoverished, car ownership is next to impossible.

    WCD, the tower is a new project and a $450MM investment that could have been a $250MM one down in Franklin. I don’t see how the crime rate in Milwaukee correlates to a Fortune 500 company making their investment in the Downtown but this also seems to refute your assertion that businesses continue to leave for Waukesha. Citing this as a non-success for the City is dishonest, which regular readers here expect from you.

    Let’s cite some more positives here for people to note. Barrett and Walker worked together to get the 794 improvements done opening up 20 acres for new development and making great improvements to the Hoan. The City/county are working to allow development on the Park East corridor (letting Commercial Broker’s represent the space is huge) and the Transit Center. Summerfest has its best lineup ever and likely will smash attendance records again, which seems to refute the idea of people feeling unsafe in the City. Thousands of more housing units are proposed or underway bringing more affluent people to support a thriving downtown economy. More hotels are proposed, Irgen’s is building an 18 story tower next to the US Bank Building, the convention center is looking to expand.

    I could keep typing..

  24. PMD says:

    I said I was sorry. Wasn’t trying to start a left/right debate. I was interested in the issue of crime reduction, where it’s been successful, and how. It went offtrack. Again, I apologize.

  25. Wisconsin Conservative Digest says:

    Stacey if poverty causes crime why did we have the lowest crime ever in the depression. It is pretty much worthless to argue with the Left cause they are happy with the situation the way it is. We clean those things up in suburbs as has NY, Austin, San Antonio and many other places. if it run by the Left is is corrupt and cares little about anything except retaining power. if you do not care why should we? You guys are obviously incompetent.
    Notice murphy never examines solutions to problems in this space, just the problems. why not lay out the solutions that Bloomberg and Giuliani used to counter the mess that Dinkins left. i cannot sit here and typed thousands of words outlining their programs, go research them yourselves.

  26. Maureen in Milwaukee says:

    WCD-The answer to your question: Why does the left not advance any solutions to problems in Milwaukee???

    The answer is that they don’t care. Some care about people losing their jobs or underwater homes. But in terms of what matters to the left and the policies they pursue, they don’t care. The left and the political party it controls do not care if their policies force to companies to leave Milwaukee or Wisconsin. They want Walker to fail, they root for his job creation efforts to fail.

    They don’t care because the left is not interested in prosperity; the left is interested in inequality and in the environment and trolleys and John Doe and biking to work. Furthermore, the worse the economic situation, the more voters are likely to vote Democrat anyway. The worse the economic situation, the greater the number of people receiving government assistance; the greater the number of people receiving government assistance, the greater the number of people who will vote Democrat.

    Therefore, the left in Milwaukee has no reason to be troubled by bad economic news. Did you know Milwaukee and MPS had its credit rating downgraded a couple weeks ago? Why? Due to a declining tax base, but who cares, right? Liberal blogs like Urban Milwaukee do not mention such things. The left is more troubled by inequality and carbon emissions and voter id laws and John Doe trials.

    So there you have it WCD.

  27. wisconsin Conservative Digest says:

    PMD. I came into Milwaukee, owned real estate there for 20 years but the corruption drove me out. I volunteered to work in inner city Walgreens cause inner city people are easier to work with than up tight suburbanites.. I saw the problems every hour, have worked with many people, formed the Fredrick Douglass society etc. I thought in 1964 that these problems would be solved but Milwaukee cries for money which ends up in peoples pockets, kids never see it. Unions, left and bad leaders like Gimble, Barrett, Holloway Dimitrijecivc and others just keep rolling on. Collect their salary, bennies and whine all day.
    The problems are solvable, have outlined them many times in my papers and website, but they never change.

  28. PMD says:

    So a long time ago you spent some time in Milwaukee. Got it.

  29. wisconsin Conservative Digest says:

    Sarcastic ! cannot solve any problems but I was in Milwaukee yesterday and for the last 50 year worked their for 50 years. Last time bother to respond to people with out an y answers do not even understand questions.

  30. 2fs says:

    Lowest crime rates during the Depression? Uh, no: the 1930s saw four consecutive years with homicide rates higher than 9 per 100,000 – a 20th-century peak unmatched until the 1970s. Furthermore, the average rate during the 1940s was 31% lower than it was during the 1930s (5.78 vs. 8.33). Source: Statistical Abstract of the United States.

    Granted: Murder may not be the best way to track violent crime generally – but those numbers do suggest that a simple claim that “we had the lowest crime rate ever during the Depression” is a vast oversimplification.

  31. John G. says:

    “Granted: Murder may not be the best way to track violent crime generally – but those numbers do suggest that a simple claim that “we had the lowest crime rate ever during the Depression” is a vast oversimplification.”

    That is a common theme with the guy…

  32. Wisconsin Conservative Digest says:

    There are no votes for a new arena anywhere in this state except for those that profit from it.

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