FEATURE-U.S. housing risks still lurk even as buyers return

JOBS GONE, BUSINESSES IDLE, HOMES LOST

The swift downturn in California's economy and the ensuing wave of job losses cost Sue and Nabil Boctor their house.

They own Sue's Cafe, a small diner near downtown Riverside, California, a thriving business center just 15 months ago.

"This place was crowded every day," Sue, 59, said, sitting in her deserted cafe, scanning a newspaper for apartments to rent. "We had three people helping to deliver food and even then we couldn't keep up."

Many of the one- and two-story office buildings nearby carry large "for lease" banners and the parking lots are all but empty. A local shopping mall stands more than half vacant, its liquor store the only one still doing a roaring trade.

Until recently, the local construction industry strained to meet demand for new homes. Warehouses were full of consumer goods arriving from Asia via U.S. West Coast ports to meet the seemingly insatiable appetite of once free-spending Americans.

Most of the Boctors' customers have lost their jobs or their work hours were cut so much that they no longer eat out.

The Boctors' story is not the usual cautionary tale of the housing crisis.

Unlike many borrowers who took out mortgages without having to put any money down and then borrowed further still against the value of their homes, they put down $100,000 and took out a $440,000 mortgage with a stable, fixed rate of interest.

But the sudden collapse of the local economy, and their business along with it, meant they could no longer afford the mortgage payments. Their house, their dream home for their retirement, was due to be auctioned off on Oct. 13.

Nearly 18 percent of working-age Californians were either officially classed as unemployed, working part-time because they could not find full-time work or had given up looking for a job in the second quarter of 2009, according to official data, compared with nearly 14 percent nationally.

"I do think we've come into a new cycle" of defaults, said Ron Faris, president of Ocwen Financial Corp (OCN.N), a servicer of 280,000 subprime mortgages.

He has noted a shift in the causes for debt delinquency from rising loan costs to joblessness.

Standing on his sun-baked driveway in Moreno Valley, a small town 12 miles (19 km) from Riverside, Nabil Boctor, 65, pointed to four houses on his block that have been foreclosed on and now stand empty.

"The crisis is everywhere and it's growing," he said. "This will take a decade to work itself out and by the time it's over everyone is going to have to feel some pain."

Around the corner, a family was loading a trailer with their belongings, ready to move on.