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Why the U.S. Housing Recovery Is Leaving Poorer Neighborhoods Behind

The housing rebound may have lifted home prices across much of the nation. But cities like Lithonia, Ga., are still waiting for the bounce.

Along with other communities in the Atlanta area, the small working-class suburb saw prices run up during the housing boom a decade ago, followed by an epic bust. While nearby wealthier areas are now rising, or even fully recovered, poorer towns such as Lithonia are stuck with a housing crisis that drags on.

Roughly 10,000 homeowners in Lithonia—or 54% of all families with a mortgage—owe more than their homes are worth, according to the online real-estate tracker Zillow. That is a stark difference from wealthy Atlanta neighborhoods like Buckhead, where about 12% of homes are underwater. House values in Lithonia at the end of the first quarter were still almost 35% off their peak, while in Buckhead they were off by only 12%.

Places like Lithonia “were hit with foreclosure first, the longest and the hardest,” says John O’Callaghan, chief executive of Atlanta Neighborhood Development Partnership Inc., a nonprofit that buys and rehabilitates foreclosed homes. Residents there “don’t have good access to mortgage credit,” he says. “They don’t have wage growth. Everything is going wrong.”

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