Poughkeepsie copes with housing fallout

John W. Schoen Senior producer • Profile • E-mail

POUGHKEEPSIE, N.Y. - For Al Russo, a 30-year-old husband and father of two young boys, the trouble started about two years ago, when the shoe repair business he inherited from his parents hit a seasonal slow patch during the winter.

He’d set aside money to carry him over — just as his parents had taught him. But he had to use that money to pay for his mother’s funeral and soon began falling behind on his mortgage payments. To try to head off a foreclosure on the house he and his wife bought in 2005, he filed for bankruptcy this year at the federal court here on Main Street, representing himself. 

But on a recent spring afternoon in a standing-room-only courtroom, Russo's struggle to save his home ended after he missed a hearing in which the lender was allowed to proceed with its foreclosure action.

“There’s like no hope for me at all,” he said. “I’m going to lose everything my parents worked for, and there’s not a damn thing I can do about it.”

This city in the heart of the mid-Hudson Valley, about an hour south of Albany, has until recently largely avoided the housing downturn that has hammered parts of California, Florida, Arizona, Nevada and other regions where the housing boom ratcheted up prices the fastest and the mortgage mess has inflicted the most damage so far.

But now, with house prices falling and foreclosures rising here, both residents and local government officials are having a tougher time making ends meet. And they fear things may get worse before they get better.

Cities like Poughkeepsie, the county seat of surrounding Dutchess County, never boomed in the same way but enjoyed a slower but steadier housing expansion and stable economic growth. Until recently, it looked as though communities like this one might escape the fallout faced by housing markets that overheated at the height of the boom.

No longer.

Memories of FDR
Folks here are quick to remind visitors that President Franklin Roosevelt, who helped repair Depression-era economic damage and ushered in a new era of expanded homeownership, was born and raised in nearby Hyde Park. As the American dream of homeownership faces its greatest test in 75 years, Poughkeepsie’s leaders are working hard to minimize the wider economic damage on their community.

For starters, they’re bracing for a drop in property tax revenues as home values fall from peak levels in 2006, when the city conducted its latest revaluation.

“We are going to have to tighten our belts and look at spending across the board and tighten the way we operate,” said Poughkeepsie Mayor John Tkazyik, a 29-year-old former councilman who was elected to his new job in November, in part on his record of working to improve the region's economic development.

The housing downturn here, as in the rest of the country, represents a hangover fueled by easy lending terms that sent prices surging much faster than incomes. Though median household income in surrounding Dutchess County rose by 15 percent from 2001 to 2006, home prices surged by 82 percent, with the average selling price peaking at $409,000 in 2006. 

That average price has fallen back to $371,000. The pace of sales has also fallen; in May, home sales were 31 percent behind year-ago levels.

“Our market has had a significant correction,” said Sandy Tambone, who tracks local housing statistics at the Dutchess County Multiple Listing Service.

Now, as the spring selling season comes to a close, there’s little sign of improvement in what is typically the busiest time the year, according to Norm MacKay, a local real estate agent for 20 years.

“It’s very slow,” he said. “People are coming in with extremely low bids because everything they read and hear says ‘bad market.’”

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As home prices have fallen, layoffs have risen. When the housing market began to soften in 2006, the job market here held up better than many parts of the country. But by early 2007, it had started to weaken and job losses rose through the year.

“What once was broad-based job growth — just about all the industry sectors were adding jobs — now it’s being replaced by job losses throughout most industry sectors,” said John Nelson, a labor market analyst with the New York Department of Labor.

Some job sectors are holding up relatively well, including commercial construction and professional services, a category that includes relatively high-paid professionals like accountants, lawyers and engineers. But the financial services industry in the Poughkeepsie area — including banking, real estate and insurance — are getting hit with job losses that threaten to ripple through the local economy. Several subprime mortgage lenders in the area, for example, began laying off workers as far back as March 2007, said Nelson.

“If people are losing their jobs, some of those people that live in our area - they’re going to cut back their spending,” he said. “A family that used to go out to dinner four to five times a week may cut down to just two, so you’ll see leisure and hospitality industries affected.”

This city and the surrounding county have been through tough times before.

For decades, the economy of the mid-Hudson Valley was heavily reliant on IBM as its biggest employer. So Poughkeepsie and surrounding towns suffered a major blow in 1993 when the company cut 10,000 jobs at a nearby manufacturing plant and the country lost another 10,000 from related industries, according to William Steinhaus, the current county executive, who first took office in 1992.

“To say we had a lot of houses you could have bought at that time would be an understatement,” he said.

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