The Mean Economy: For housing industry, a fast fall and a slow rebound

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DOWNINGTOWN, Pa. — Joseph Carr and his family know the ups and downs of the housing market well. They’ve lived it for the past five years.

First, there was the frenzy of developers building new homes and properties in the mid-2000s, when seemingly everyone and his brother was buying houses and trying to flip them for a profit.

“The housing market was booming. There was all kinds of work,” recalled Mr. Carr, 41, a longtime plumber and pipefitter. “But it was crazy. I knew something had to give.”

He and his wife, Anna Sofia Santo, 39, a paralegal who at the time was working at Wachovia Bank, tried to steer clear of the madding crowds bidding up the price of homes and financing them with risky, unsound mortgages.

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They bought a modest, rundown home in foreclosure here in the country outside Philadelphia and fixed it up themselves, leaving them with only a small mortgage of $1,200 a month and still have money to save and spend on their two young children.

That turned out to be a smart move — so smart, in fact, that it probably saved the family from severe hardship when the big bust hit in October 2008. Both of the Carrs lost their jobs within a matter of months, along with millions of others across the country, as the housing and financial markets collapsed in the worst debt and financial crisis since the Great Depression.

For about six months they had no income other than unemployment benefits of a little more than $1,000 a month to pay the bills. They got by on sheer grit, living frugally until one of the 526 resumes Mrs. Santo sent out finally paid off and landed her a new job with the J.G. Wentworth Co. — making about $10,000 less than her Wachovia salary of $60,000 a year.

The 2008 crisis was just the beginning of the most trying time in modern history, both for the Carr family and the U.S. housing market. Mr. Carr fell in and out of unemployment three times over the course of three years, the first time when Erickson, a major developer of retirement communities, suspended work midway through a 14-unit project it was building locally as it plummeted toward bankruptcy.

Mr. Carr’s employer, Worth & Co., an Erickson subcontractor, slashed its staff from around 400 to 90 in three rounds of layoffs. Mr. Carr saw long-time colleagues who had worked there and at other companies for 20 years or more suddenly pushed out of work and left without pensions or health care. Some of them remain idle without good job prospects to this day.

Before landing safely at Wentworth, Mrs. Santo was jobless for a year and a half after living through the horror of watching her employer Wachovia, once one of the biggest and most respected U.S. banks, get consumed by its huge portfolio of risky mortgages. Federal regulators approved a deal in the fall of 2008 to fold the bank into the West Coast giant Wells Fargo to avert a spectacular failure.

“It was scary as hell,” said Mrs. Santo, and only got scarier months later when, ensconced in her new job at Wentworth, Mrs. Santo got pregnant just as Mr. Carr was getting laid off one of his jobs. She worried about how they would finance her six weeks of unpaid maternity leave and growing family.

“I was pregnant, emotional, hormonal,” she said. “I thought we would never have any security.” The anxiety and frustration led to tension and fights within the family, compounding the hard times.

But Mr. Carr said he knew he could tough it out. He’d already had a hard life. His mother died when he was only 4 years old, and he moved out on his own when he was only 17.

“I’ve been dealing with adversity my whole life,” he said.

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