Foreclosure Flu sweeps through the Denver suburbs

Denver, riding high among American cities in growth and enlightened politics, has been hard hit by foreclosures. An eye-opening story in USA Today paints a disturbing picture of one Denver suburb where as many as one-third of the residents have lost their homes on some blocks. Denver officials say they expect 11,000 foreclosures this year, up from 7,700 last year. That's an average, last year, of one foreclosure for each 32 households. Particularly hard-hit are remote subdivisions where low and middle-income families are buying their first homes. That might be a warning for where Foreclosure Flu could start hitting the Seattle and Portland regions: in the outer suburbs where home-seeking families escape from high prices near the core. Denver is scrambling to help, holding town hall meetings and providing mortgage counselors, but there's usually not much that can be done once a foreclosure starts. So what about a more radical solution? That would be the "demolition strategy," outlined in this Wall Street Journal opinion piece ($). The idea is to use public funds to buy and demolish foreclosed, unoccupied, and half-built houses. The strategy, already being used in some Midwest towns, is aimed at cleaning up safety hazards and stabilizing prices by reducing supply. Baltimore, Cleveland, and Dayton are three cities employing the practice (often soft-pedaling the program). Other federal programs that subsidize lenders and homeowners, while more humane, may also have worse macro-economic effects of increasing the surplus housing on the market.