Fear Drives Baghdad's Housing Bust

Under pressure from the Mahdi Army, Motlaq's brother earlier this year accepted 10 million dinars for his home -- about $8,000, compared with its $28,000 value in 2003. By the time he had moved his family out of Baghdad and found a new job, the money was gone.

Several people who sold their houses to escape campaigns of ethnic cleansing -- generally by the Mahdi Army in Shiite neighborhoods and, less frequently, the insurgent group al-Qaeda in Iraq in Sunni areas -- said they first received letters ordering them to leave their neighborhoods. Subsequent letters brought more-dire threats, the sellers said, recounting similar experiences.

The Mahdi Army often uses Shiite neighbors who are friendly with Sunni families to encourage the latter to sell. If the family refuses, its members become targets for violence and the offer price for the home drops. When they agree to sell, they are paid in cash and ordered to leave immediately so that militia members can move in.

"At first I hid the letters from my family and didn't listen," Ismael said, crying as he described his experience during a telephone conversation from his home in Damascus, Syria. "But when they killed my brother, I had to protect my wife and family and leave. If I had done it earlier I might have gotten more."

The $118,000 that Ismael did collect through his neighbor is not enough to buy a house in Damascus, where he moved, nor in Amman, Jordan, or Beirut, where the population boom from Iraqi refugees is driving up real estate prices. Now he lives with seven other family members in a rented one-bedroom apartment, for which he pays $600 a month.

People who move to safer areas of Iraq often cannot afford housing similar to what they left behind. A recent influx of refugees relocating in Anbar province, a region west of Baghdad where violence has dropped in recent months, has doubled the average home price in Ramadi, the provincial capital. Homes in Iraq's largely peaceful Kurdish region can cost up to three times the price of a similar property in Baghdad.

"This money will never get a house in Ramadi," Motlaq said. "When we received the money, it had no taste because it wasn't even close to the real value. The money is being wasted on a tiny rented house because we can't buy anything."

Some people whose lives are not in immediate danger do list their homes with real estate agents in hopes of getting more money, but they are often frustrated by a dearth of potential buyers. After the initial rush to buy property in 2003, optimism about the future of Iraq dissipated, and now few people are willing to take advantage of low prices in the hope that security improves enough to allow them to move back.

Ali Hamid Naif had not been directly threatened when he decided to leave the Sholeh neighborhood of Baghdad last year, but general fears about his family's safety prompted him to move to Ramadi. His neighbors negotiated an offer for his house, but he scoffed at the low price and enlisted a real estate agent's assistance. His home, which was worth about $120,000 in 2003, has been on the market for 13 months for $72,000.

"Right now I am allowing a friend to live there for free so the militia will not move in," Naif said. "The neighbors are trying to help me, but they are offering 20 million [about $16,000], and I cannot sell it for that little."

Real estate agents said many people are unrealistic in setting asking prices for their homes.

"Real estate depends on security, and right now the only people in Baghdad are the ones who can't afford to go somewhere else," Maliki said. "With the security this bad, the only houses that can sell are very cheap."

The reduced property values mean that Maliki is barely able to scrape by on his commissions. When he does make a sale, he must make special arrangements to prevent a kidnapping or robbery during the exchange of money.

"These operations are always undercover, in secret," he said. "I am always afraid. Nobody brings security in because they want it to be low-profile, but usually everybody carries a pistol to the meetings."

Special correspondent Naseer Nouri contributed to this report.