Category Archives: Sociology

Lenders pursue options for foreclosures: bulldoze them, donate them…

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While some people may be interested in obtaining foreclosures through “adverse possession,” lenders are pursuing other options to rid themselves of a glut of foreclosures:

The biggest U.S. mortgage servicer [Bank of America] will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co. (WFC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Fannie Mae are conducting or considering their own programs.

Disposing of repossessed homes is one of the biggest headaches for lenders in the U.S., where 1,679,125 houses, or one in every 77, were in some stage of foreclosure as of June, according to research firm RealtyTrac Inc. of Irvine, California. The prospect of those properties flooding the market has depressed prices and driven off buyers concerned that housing values will keep dropping…

Bank of America had 40,000 foreclosures in the first quarter, saddling the Charlotte, North Carolina-based lender with taxes and maintenance costs. The bank announced the Cleveland program last month, has committed as many as 100 properties in Detroit and 150 in Chicago, and may add as many as nine cities by the end of the year, said Rick Simon, a company spokesman.

The lender will pay as much as $7,500 for demolition or $3,500 in areas eligible to receive funds through the federal Neighborhood Stabilization Program. Uses for the land include development, open space and urban farming, according to the statement. Simon declined to say how many foreclosed properties Bank of America holds.

This article describes small efforts by these lenders. If there are indeed over 1.6 million homes in some stage of foreclosure and more likely to come, lenders would need to bulldoze or donate a lot more homes to really clear up the supply and help stabilize home prices.

I wonder if the lenders are pursuing these goals with these small moves:

1. Building goodwill within the community.

2. Getting rid of the worst of the worst properties and just cutting their losses.

Neither of these options are bad but it remains to be seen what lenders will do with the majority of foreclosed properties. I think we’re a ways from Warren Buffett’s suggestion that we simply “blow up a lot of houses.”

(h/t Instapundit)

Photos of “unique” Lakewood, California

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The New York Times takes a look at some of the photographs Tom M. Johnson has taken of his hometown, Lakewood, California. Here is how Johnson describes his pictures:

At a workshop in Santa Fe, N.M., Mr. Johnson learned of three steps for becoming a successful artist, ascribed to Horton Foote: Be competent at your medium, understand the history of your medium and come from a place.

“I thought about that driving on the way home,” he said. “I started thinking about Lakewood. This is sort of a unique suburb. I started to appreciate the qualities.”

Mr. Johnson’s parents moved to Lakewood in the 1950s. It was his mother’s dream home. At that time, he said, Lakewood was largely composed of a single middle-class stratum. Now, he said, even as the definition of “middle class” has broadened, so has the mix in Lakewood, where you can find run-down homes as well as manicured lawns.

Mr. Johnson is changing, too. “I see different types of pictures than I did before,” he said. “It’s probably something I’ll continue to work on forever.”

This sounds like it could be interesting: an artist realizes that his unique hometown has a lot of potential. But, looking at these 13 photos on the NYT website, I don’t really see much of the uniqueness of Lakewood at all. In fact, I think these photos could come from a number of suburbs. Maybe I think this just because of the 13 photos offered here.

Lakewood does have the potential to be an interesting subject. Here is a brief history of the community:

Lakewood is a planned, post-World War II community. Developers Louis Boyar, Mark Taper and Ben Weingart are credited with “altering forever the map of Southern California”. Begun in late 1949, the completion of the developers’ plan in 1953 helped in the transformation of mass-produced working-class housing from its early phases in the 1930s and 1940s to the reality of the 1950s. The feel of this transformation from the point of view of a resident growing up in Lakewood was captured by D. J. Waldie in his award-winning memoir, Holy Land: A Suburban Memoir.

Lakewood’s primary thoroughfares are mostly boulevards with landscaped medians, with frontage roads on either side in residential districts. Unlike in most similar configurations, however, access to the main road from the frontage road is only possible from infrequently spaced collector streets. This arrangement, hailed by urban planners of the day, is a compromise between the traditional urban grid and the arrangement of winding “drives” and culs-de-sac that dominates contemporary suburban and exurban design.

It might be difficult to take photos of “boulevards with landscaped medians” or convey the spirit of “mass-produced working-class housing” but, if this is what sets Lakewood apart, these are the photos I would like to see.

In general, it may be difficult to convey the unique character that individual suburbs have. While residents and community leaders certainly know what sets their community apart from nearby communities, picking this out in photographs may be a challenge.

You shouldn’t purchase your own town, even for $800k

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If you had a little extra cash, you might think about purchasing your own town. Scenic, South Dakota is available for $800,000:

So, what exactly do you get for your $800k? Quite a lot, actually. You’ll get a dance hall, a saloon, two jails, a train depot, two stores, and some more empty buildings…

True, the town won’t be mistaken for New York or even Green Acres. However, based on the pictures, it does have a certain Old West charm. One can almost picture John Wayne ambling down the street. It does look like a ghost town–and with fewer than 10 residents, it’s mighty close to becoming one.

But, before you rush to purchase this hotspot, you might want to consider the track record of those who purchase towns:

This isn’t the first time an entire town has gone up for sale. Some may remember actress Kim Basinger’s ill-fated purchase of Braselton, Georgia for $20 million. Basinger planned to turn the town into a tourist draw, complete with film festival. But things didn’t quite work out as she planned. She was later forced to sell the town at a huge loss due to financial problems of her own.

And Basinger isn’t alone. As an article from MSN points out, many have purchased towns only to see that the dream of “owning their own zip code” turn into a nightmare. It’s one thing to be a landlord and have to fix a renter’s leaky faucet. It’s another to be responsible for an entire town of faucets (and toilets, and electricity, and crime prevention, and, and, and…)

This article makes owning a town sound difficult. While this story suggests owners get tripped up by infrastructure, I would think the interactions with residents and other people might even be more problematic. Think back to the experience of company towns in America: places like Pullman, Illinois may have been efficient (and profitable?) but eventually didn’t work. Even in a small place like Scenic, the owner would have to interact with existing residents and take full responsibility for decisions.

Perhaps the gameplay of SimCity would help illustrate the issue: in the early days of the game, it was easy to grow a community and Simcity 2000 offered well-known cheat codes that allowed the mayor to do whatever you want (with unlimited money). But with more recent iterations of the game, it is easier to get bogged down in real matters: paying for infrastructure like roads and water and dealing with the concerns of your citizens and advisers. In the end, even small communities have a lot to take care of in order to get up and running and the services and amenities (and taxes/fees) have to be agreeable to residents.

Are there any “successful” examples of wealthy individuals purchasing a town and maintaining or improving the community? Are there any management companies that would handle these responsibilities for a wealthy owner?

Further details on proposed Illinois toll hike; Illinois tolls rather low

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The Chicago Tribune reports today that the Illinois State Toll Highway Authority wants to raise toll rates in order to raise money for several new projects, including a reconstruction of I-90 (the Jane Addams), adding an interchange between I-294 and I-57 (one of the few places in the US where two interstates do not have an interchange), extending the Elgin-O’Hare, and undertaking several studies for possible new roads (extending Route 53, the Illiana Expressway).

But there is more to this story. While the Authority wants money to undertake these projects, there is another defense for raising rates: Illinois toll rates are lower than other states.

The council urged that tolls on the existing tollway system be raised to levels “consistent with national averages” to generate revenue for the EOWB [Elgin-O’Hare West Bypass]. Currently, Illinois Tollway users pay the equivalent of 3 cents per mile, while the national average is 7 cents per mile, officials say. Using that model could result in a systemwide doubling of the current rate, to 80 cents from 40 cents for passenger vehicles using I-PASS, and to $1.60 from 80 cents for cash customers…

The report also said tolls on the EOWB itself should be “consistent with the level of other new toll projects nationwide,” or about 20 cents a mile. This suggests that tolls on the new highway could be as much as seven times the current rate, or $2.80 for passenger vehicles using I-PASS and $5.60 for cash customers…

In addition, the council’s report recommends that future toll increases be indexed to inflation. The last time the tollway hiked car tolls was 2005, but that was the cash rate. Cars with I-PASS pay the same rate as they did in 1983, the tollway says…
The report also urges consideration of so-called congestion pricing strategies, in which vehicles pay higher tolls during peak hours or for express lanes; extending the tollway’s bond maturity term up to 40 years; and giving further study to tolling adjacent freeways. That could mean imposing tolls on I-290.

I’m guessing Chicago area residents will not like this as it makes driving more expensive (particularly with the price of gas) and there will general grumbling about how the tolls were supposed to disappear at some point. But, roads have to be paid for somehow and whether motorists pay through tolls or gas taxes, they will pay for the privilege of using roads. If anything, perhaps Chicago area residents should be surprised that tolls have stayed so low when other states have raised them. Since we can probably assume that the cost of road building has gone up like everything else, it sounds like tolls should increase.

If there is a larger issue to be concerned about, we could ask about the planning undertaken by the state. A road like the Illiana Expressway has been discussed for decades and waiting this long to undergo a major study and then go through with the construction will cost more now than it would have years ago. The Elgin-O’Hare has been a running joke for a while. Additionally, it would be interesting to see how close or far planners were in estimating the number of vehicles that would use the highways each day. The early expressways in the area, I-294 and I-290 are two examples, have seen much more traffic than was initially anticipated, driving up costs. Overall, more foresight could have saved money.

More difficulty with housing vacancy data

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I’ve written about this before but here is some more evidence that one should be careful in looking at housing vacancy data:

In early 2009 the Richmond, Virginia press wrote numerous articles after quarterly HVS data on metro area rental vacancy rates “showed” that the rental vacancy rate in the Richmond, Virginia metro area in the fourth quarter of 2008 was 23.7%, the highest in the country. This shocked local real estate folks, including folks who tracked rental vacancy rates in apartment buildings in the area. The Central Virginia Apartment Association, e.g., found that the rental vacancy rate based on a survey of 52 multi-family properties in the Richmond, VA metro area was around 8% — above a more “normal” 5%, but no where close to 23.7%. And while the HVS attempts to measure the overall rental vacancy rate (and not just MF apartments for rent), the data seemed “whacky.”

When I talked to Census folks back then, they said that there quarterly metro area vacancy rates were extremely volatile and had extremely high standard errors, and that folks should focus on annual data.

However, “annual average” data from the HVS showed MASSIVELY different rental vacancy rates in Richmond, Virginia than did the American Community Survey, which also produces estimates of the vacancy rate in the overall rental market…

There are several other MSAs where the HVS rental vacancy rates just look plain “silly.” Some Census analysts agree that the HVS MSA data aren’t reliable, and even that several state data aren’t reliable, but, well, er, the national data are probably “ok” – which they are not.

If you want to read more on the issue, there are a number of links at the bottom of the story.

If the estimates are so far off from other estimates generally regarded as being reliable like the American Community Survey or the decennial Census, it would look like a new system is needed to calculate the quarterly vacancy rates.

I wonder how much these figures could hurt a particular community. Take the case of Richmond: if data suggests the vacancy rate is the highest in the country even though it is not, is this simply bad publicity or would it actually affect decisions made by residents, businesses, and local governments?

“Ugly houses” dragging down the housing market

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Here’s an interesting possible explanation for the problems of the housing market: buyers don’t want “ugly houses.”

Maybe Americans aren’t avoiding buying homes right now — maybe they’re just avoiding buying ugly homes. The housing market may be splitting into two sub-sectors: well-kept, good-looking homes and run-down, torn-up homes. Could the latter group be preventing the housing market from stabilizing?…

The disparity between these two groups of homes matters, because Lichtenstein has seen prices of the good properties remain relatively strong recently, as prices of worse properties have declined. This means that it’s those run-down, dilapidated foreclosed homes and short sales that will disproportionally bring down aggregate home prices, while well-kept homes should see much smaller price declines, or even appreciation.

Based on his experience, Lichtenstein asserts staging homes is more important than ever, as sellers need their house to appear as pristine as possible to appear to buyers. But his observation could have another logical conclusion: the market could be ripe for some renovate-and-flip business…

This gives investors two options: revitalize the foreclosures that have sale potential and rent out the others. If the inventory is tackled through these strategies, then price aren’t going to suddenly soar, but they could begin to stabilize sooner.

Would it take all that much work for someone to crunch some numbers to test this idea? As a rough proxy measure, one could use the year the structure was built as a starting point.

Reading this, I wonder if this has been a growing issue for much longer than the current economic crisis. Watch HGTV for a little bit and it seems like most buyers want everything in their new home: great appliances, updates (granite countertops! hardwood floors!), and all in move-in condition. How many homebuyers, whether they are younger and will work a lot of hours each week or older and want to downsize and not spend as much time maintaining a house, want to take on the time and expense of fixing up or updating a home?

In the long run, this could lead to some issues if no one is really interested in dilapidated homes. Communities might then have to make decisions about what to do with empty homes and how to best use the land. As an example, I’m thinking of the areas west and northwest of downtown South Bend, Indiana: the homes aren’t worth the time of investors because prices aren’t going up and few people would want to fix them all up. While this issue might commonly be tied to Rustbelt cities like South Bend or Detroit or Cleveland, perhaps it will be coming to more communities.

A growing interest in acquiring property through “adverse possession”?

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I highlighted a story last week about a Texas man who hoped to become the owner of a $350,000 McMansion through “adverse possession.” One writer suggests there is a growing interest in this method of acquiring land:

People have been making adverse possession claims for decades. The most famous cases happened on the Lower East Side of Manhattan in the 1980s and ’90s, when artists, punks and homeless people squatted in vacant buildings and brownstones.

Under the law at the time in New York State, people could take possession of a property if they lived there for ten years and made efforts to “cultivate and improve” the property, says Kathy Zalantis, a real estate lawyer with Silverberg Zalantis in White Plains, NY. That’s why you saw people who did this during the 1980s and ’90s mowing the grass, planting trees and gardens, and making structural improvements to the buildings themselves, Zalantis says.

Now, interest in adverse possession is growing again. Across America, hundreds of thousands of homes are sitting empty. If you live in New York or have visited since 2008, you’ve probably noticed all those big empty buildings that were constructed during the housing boom but never quite finished, and are now sitting empty. Zalantis says she’s receiving a big surge in phone calls from people who have taken up residence in empty spaces (yes, squatting), including one just this Wednesday.

Most of the calls are from people taking advantage of the foreclosure crisis by moving into vacant houses, apartments and condominiums where the foreclosure process has stalled in the courts, Zalantis says. Now they’re living rent-free. And they’re checking to see if they can take permanent ownership of the place.

It seems like two things are key then to acquiring property by this method: being in the building for a certain amount of time (which appears to vary by state) and doing something to maintain/improve the property. I assume, however, that the rightful owners can come back to the property and kick out the squatters. Therefore, shouldn’t someone who pursues this be pretty sure that the current owners have such little interest in the property that they are willing to lose ownership?

In the case of a lot of single-family foreclosures, I can’t imagine banks would be willing to simply write off their losses and lose these properties. However, if housing prices continue to drop, perhaps some institutions will be willing to lose properties rather than devote resources to trying to squeeze some money out of these homes.

Vacant urban Borders stores and “no net loss”

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There are a variety of perspectives one can hold on the closing of bookstores like Borders. Monday, I noted how the loss of chain bookstores can affect a local economy and its tax base. On the same subject, another commentator suggests cities need to be concerned about replacing these “third places”:

“Third place” is a decades-old term championed by sociologist Ray Oldenburg for venues which bring people together in the tradition of the American colonial tavern or general store. The idea remains central to urbanist thinking, and describes those places, other than home or work, where we gather, debate and trade. “No net loss” is a term borrowed from the vocabulary of wetland conservation, and allows for replacement of lost assets with equivalent resources…

In response to the Borders news, some pundits, like Josh Stephens in Planetizen, have called for a better, non-Walmartian reinvention of the bookstore. In his view, big boxes — even when urban — destroy Mom-and-Pop purveyors. Amazon and Kindle aside, he makes a good case for a new, post-recessionary wave of independent urban bookstore start-ups. For those bookstores, I hope that he is right.

But as to third places — and I am going to assume that “big books” uses can play such a role — there is something bothersome about the final demise of Borders’ urban core locations. While perhaps an opportunity for the independent competitor, what of the potential loss of third place uses in high-value urban downtowns?

Will the prime square footage occupied by Borders have similar third place potential once reclaimed? Will replacement uses provide the equivalent fusion business purposes of books, coffee, lecture and song?

In most cities and suburbs, is there really an acceptable “third place” alternative? Coffee shops tend to be small (and standardized – see Starbucks) and bars/taverns can be seen as attracting a certain crowd. Independent bookstores may be something to hope for but are difficult to pull off.

If communities are simply concerned with their tax base, filling these Borders sites with retail or restaurant uses would likely be just fine. In this perspective, any empty space is bad. On the other hand, this commentator is suggesting that communities should encourage (and incentivize?) certain uses that will at least maintain and perhaps build upon the “third place” nature of bookstores.

On another track, the commentator suggests bookstores offer the “fusion business purposes of books, coffee, lecture and song.” These functions sound more like entertainment or “culture” than “sociality.” Certainly, people can get to know each other while drinking coffee or listening to musicians but the “third place” is about something larger: providing safe, familiar spaces between work and home where citizens can talk with old friends, meet new people, and talk about important issues including society and politics. Third places should be where citizens can develop “bridging ties” as they step outside the realms of home and work. Does this really happen in bookstores like Borders?

Rise in single father families

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The number of families led by a single father has grown in the last decade:

Joe Cioffi, a physician from Fairfield, Connecticut, settled for visitation rights to his son after he and the boy’s mother split up. Soon, he decided that wasn’t enough, so he spent four years struggling to win primary custody…

Cioffi’s custody victory and living arrangement encapsulate two distinct changes driving a 27.3 percent jump in U.S. families led by single fathers in the past decade, according to figures released from the 2010 census. While the number of single dads remains small, greater acceptance of shared custody and more unmarried couples have altered traditional ideas of child rearing, demographic experts said.

“It’s time for us to stop assuming that single parents are always women,” said Andrew Cherlin, a professor of sociology and public policy at Johns Hopkins University in Baltimore. “There is a visible presence now of single men caring for their kids. We didn’t see that a few decades ago.”…

The growth in single fathers remains a small percentage of the larger shift away from the traditional family. The majority of single parents are still mothers. They head 7.2 percent of all American households, not just those with kids, compared with 2.4 percent of those households led by single fathers, according to census figures.

The illustration from this story suggests that men tend to become single fathers as the result of a court case. I would be interested to know whether younger men ever really envision or aim to be single fathers or whether this is usually the result of unplanned events. This would be a great question to ask today’s college students to see how they envision their future families.

Additionally, as the number of single father families grow, how are the fathers and kids treated – socially, it is an advantage or disadvantage to be a child in a single father family versus a single mother family?