Tag Archives: economic crisis

Florida leads country with 18% home vacancy rate

Posted on by

While foreclosures and vacancies are a problem throughout much of the United States, some states have been hit harder than others. New data from the Census Bureau shows Florida has the highest home vacancy rate in the country:

On Thursday, the Census Bureau revealed that 18% — or 1.6 million — of the Sunshine State’s homes are sitting vacant. That’s a rise of more than 63% over the past 10 years…

The vacancy problem is more dire in Florida than in any other bubble market: In California, only 8% of units were vacant, while Nevada, the state with the nation’s highest foreclosure rate, had about 14% sitting empty. Arizona had a vacancy rate of about 16%.

In Florida, the worst-hit county is Collier — home of Naples — with a whopping 32% of homes empty. In Sarasota County, 23% of the housing stock sits vacant, while Lee County (Cape Coral) has a 30% vacancy rate. And Miami-Dade County has a vacancy rate of about 12%.

The article goes on to say that the problem of vacancies has grown partly due to a slow-down in population growth in the state in the late 2000s. Additionally, the large number of vacancies has helped lower housing values: “The median price for homes sold in January was just $122,000, according to the Florida Association of Realtors. That was down 7% from 12 months earlier and less than half the price at the peak of the market.”

It would be interesting to see new or recent studies that look at how these vacancies impact community and neighborhood life. Beyond the economic impact, how does having a large percentage of empty houses effect interactions that people have with each other?

Also, how exactly are vacancy and foreclosure statistics related? Nevada has the highest level of foreclosures but a lower rate of vacancies – is this because more people have actually gone through the foreclosure process?

(If you want some insights into how the Census Bureau calculates different vacancy rates, see here. This would have been helpful information for an earlier discussion about seemingly different vacancy statistics.)

Update on “baseball McMansions” in Arizona: White Sox also facing issues

Posted on by

Yesterday, I wrote about a new spring training facility in Arizona that one writer dubbed a “baseball McMansion.” While this particular park may have issues, it is not the only one. The Chicago White Sox also recently moved to the same area. Because of the economic recession, the White Sox are having attendance issues and the mixed-use development that was supposed to surround their facility has not been built:

Small crowds on the west side of the Valley are an alarming trend as the White Sox and other neighboring teams try to rebound in the wake of a depressed area.

“The opening of the Rockies-Diamondbacks stadium (Talking Stick at Salt River Fields) is definitely pulling people away,” Sox chairman Jerry Reinsdorf said before 10,074 fans attended Wednesday’s game between the Sox and world champion Giants. “Now you have six teams in the east valley…”

But the Glendale area hasn’t developed into what the Sox thought when they decided to move from Tucson after the 2008 season.”One of the attractions to putting this ballpark here was the plan for what was going to be built around it,” Reinsdorf said. “By now, in our third year, we were supposed to be looking at restaurants and retail and a hotel and condominiums. And the guys who were going to do that went broke. So we’re sort of sitting out here by ourselves.

“All of the projections for the Phoenix area growth had Glendale in 10 years being the population center of the valley, a ton of people west of here. And that stopped. But at some point the economy will come back. This is too vibrant an area. And when it does come back, those projections will come true. So it’s just a delay.”

It may be some time before the White Sox and other teams see an uptick in attendance and building as Arizona has been hit hard by the economic recession, evidenced by foreclosures and a slowdown in development. Reinsdorf sounds quite optimistic about the future – perhaps he has to be if he has put a decent amount of money into this project.

it seems like now would be the time to look into why exactly the White Sox and other teams moved to this area. In their projections about Glendale, was their any allowance for a growth slowdown? Was the main draw the growing population in this area or were there certain financial incentives that made this move attractive? And what will happen to these spring training complexes if population growth in this area is limited for a significant amount of time?

Might the 30-year mortgage disappear?

Posted on by

An article suggests that the 30 year mortgage might “fade away.” As both Republicans and Democrats think about eliminating Fannie Mae and Freddie Mac, it is unclear whether a purely private mortgage industry would retain features like a 30-year payment period:

Life without Fannie and Freddie is the rare goal shared by the Obama administration and House Republicans, although it will not happen soon. Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide.The reasons by now are well understood. Fannie and Freddie, created to increase the availability of mortgage loans, misused the government’s support to enrich shareholders and executives by backing millions of shoddy loans. Taxpayers so far have spent more than $135 billion on the cleanup.

The much more divisive question is whether the government should preserve the benefits that the companies provide to middle-class borrowers, including lower interest rates, lenient terms and the ability to get a mortgage even when banks are not making other kinds of loans…

Hanging in the balance are the basic features of a mortgage loan: the interest rate and repayment period.

Fannie and Freddie allow people to borrow at lower rates because investors are so eager to pump money into the two companies that they accept relatively modest returns. The key to that success is the guarantee that investors will be repaid even if borrowers default — a promise ultimately backed by taxpayers.

A long line of studies has found that the benefit to borrowers is relatively modest, less than one percentage point. But that was before the flood. Fannie, Freddie and other federal programs now support roughly 90 percent of new mortgage loans because lenders cannot raise money for mortgages that do not carry government guarantees.

The issue of a 30-year mortgage would be up for debate within a broader restructuring of an important industry. Both organizations, Fannie Mae founded in 1938 and Freddie Mac created in 1970,  were intended to help Americans become homeowners. Fannie Mae, along with several other government programs, particularly helped to boost homeownership rates after World War II. During this postwar housing boom, government programs helped lower down payments and lengthened the years in a mortgage. If I remember correctly, mortgages prior to this postwar period were 15 or 20 years at most, required much larger down payments, and were available from mortgage lenders or savings and loans associations.

Where this article needs to go next is to ask whether this means fewer Americans will have access to mortgages and homeownership. If the industry is indeed restructured in the coming years, will the homeownership rate continue to drop? If politicians from both sides of the aisle are interested eliminating Fannie Mae and Freddie Mac, does this mean the federal government is pulling away from more explicit endorsements of homeownership? It is intriguing to note that all of this might take place because of a large economic crisis (though both of these programs have had their critics for decades) while Fannie Mae was instituted in response to an earlier crisis.

Zoning, churches, and tax bases

Posted on by

Zoning of land can become a contentious issue, particularly when a community sets limits that some community members find restrictive. An article quickly mentions one of these points of contention: when communities make it difficult for churches to be built.

“Churches do not realize the fight they’re in,” Baker said. “If you go into a commercial district, they say you’re wrecking their tax base. If you go into residential, they say you’re disturbing their peace.”

While the issue is not new, Baker said, “The objections to churches obtaining zoning do seem to be heating up under the [economy].”…

In Houston, churches recently raised objections over a proposed drainage fee by city officials. In Mission, Kansas, churches filed a lawsuit after being charged a “transportation utility fee” to help fix roads.

In the case of Burbank, Mayor Harry Klein told the Chicago Tribune, “It’s obvious—every city likes to see their tax base grow, that’s a given.”

An alderman in Evanston, Indiana, raised concerns last year about the impact of “storefront churches” on the tax base and proposed an ordinance requiring special-use permits for houses of worship to operate in all business or commercial districts.

While this article doesn’t give any insights into how common this is, it does suggest that these cases might be more common now in a time of economic crisis. This may be the case as many communities look to close budget shortfalls and churches also have some more purchasing power with reduced real estate prices. Is there any data to suggest these sorts of incidents are now more common?

This article does highlight the goals of local municipalities: generating tax revenue and expanding the tax base. To require fees to pay for roads or sewers are not unusual when commercial or residential property is involved as these fees help offset the infrastructure costs for local communities. Churches do not generate property or sales taxes for a community so they might be considered dead weight. And if a church wants a potentially lucrative property, then the aims of the church and the community are at odds. Zoning is a means by which local communities have some control over land use and therefore can attempt to use zoning rules to regulate everything from the placement of banks to churches to tattoo parlors.

It would also be interesting to compare these sorts of cases with churches to those of mosques (one example here).

Telling graphs about American infrastructure spending

Posted on by

A number of commentators in recent years have pointed out the relatively small amount of spending on infrastructure by the American government. Here is another take on this, complete with some handy graphs. Additionally, here is some interpretation about government spending on education and technology:

Productivity-enhancing spending, according to Meeker, comes from three main sources: infrastructure, education and research and development investment. We’ve seen infrastructure spending collapse as a share of the budget since the 1960s. What about education and R&D?

In 1970, the U.S. (at the federal, state and local level) spent twice as much on education as health care. Twenty years later, health care closed the gap, and today, total government spending on health care is about 33 percent higher than education spending, which is more or less even with its 1970s levels.

Second, look at technology. R&D spending exploded in the late 1950s and 1960s on the back of government investments in aeronautics and science. Fifty years later, federal R&D has fallen below 1950s levels as a share of GDP, while the private sector has picked up the slack.

So after looking at figures like this, I want to ask what kind of strategies could be utilized to tackle the issue of infrastructure spending, particularly with budget issues looming all over the country?

Chicago population loss among challenges for new Chicago mayor

Posted on by

As Chicago votes today, the Chicago Tribune pointed out the issues the new mayor faces, including a declining population and financial issues:

The U.S. Census Bureau gave Chicago a reality check last week. New data showed the city lost 200,000 residents in the last decade, a 6.9 percent decline. Chicago’s lost more than the entire population of Illinois’ second largest city, Aurora.

A Mexican immigration wave that fueled growth in the 1990s has subsided. Researchers expected those immigrants to bring more growth as they had children. Instead, immigrants are moving from Chicago to the suburbs or bypassing the city entirely. That 1990s influx looks like the exception to a long and steady rule. Chicago has lost population in five of the last six decades. It has fewer people now than it did in 1920.

The city government faces a yawning debt and unfunded pension obligations. It is spending beyond its means. A city that has fewer citizens has fewer potential wage-earners available to support it.

This is a big set of issues to face. But the Tribune seems to be fairly optimistic:

The good news: Chicago is far better positioned for the future than it was during its wrenching Rust Belt days of 1980. The city’s economy is more diverse, and its urban environment richer in the amenities that attract a talented work force, from parks to culture. As corporate headquarters scaled down across the country, Chicago became a global center for back-office operations and business services such as corporate law firms. Its central location and status as a transportation hub give it a crucial advantage going forward. That’s why we need to get the expansion of O’Hare International Airport back on track, pronto.

The city will need some new ideas as well as dealing with existing projects. This airport expansion idea has been in the works for years now and is a move that could bring in new business and opportunities.

And I wonder with an election like this, where there is no incumbent and we seem to have a cleaner break with the past, whether the new mayor really has to introduce massive projects or ideas at the start. Perhaps the first goal could be to improve how Chicagoans and those in the region feel about and view their city. For example, take a look at the crime rate: it has dropped and yet there is perception problem. A dose of optimism, trumpeting what is good about the city rather than what is going wrong, could be a good starting point. And then, something has to be done with the larger issues that the Tribune enumerates.

Charlotte columnist suggests suburbs will face four problems

Posted on by

American suburbs contain the majority of United States residents (and this figure is likely to grow in the latest 2010 Census figures). And yet, there are a lot of questions about what the future of suburbs will be. A columnist/editor in Charlotte suggests suburbs will face four problems in the near future:

Demographics. Population trends favor urban-style, multifamily development. Gen Y’ers have a clear preference, at least for now, for urban living. Meantime, aging boomers will be selling houses and moving to condos or apartments. As illness and infirmity hit, many will have to give up driving. They’ll want walkable neighborhoods.

With the foreclosure crisis, the single-family home market will be sluggish for years. The nation is overbuilt on large-lot suburbia, and underbuilt in cities. The Urban Land Institute’s “Emerging Trends in Real Estate 2011” has this advice to investors: “Avoid commodity, half-finished subdivisions in the suburban outer edge and McMansions; they are so yesterday.”

Fuel prices. Remember when $4-a-gallon gas walloped the economy in 2008? Now, gas prices are over $3 again. Gas prices are likely to keep rising, and already, transportation is the No. 2 cost for average U.S. households. With pay and jobs sinking, more people are likely to want to live where they can drive less.

Carbon footprint. If we’re to avoid creating even more destructive changes in the world’s climate (more droughts, floods, blizzards or heat waves) for our children and grandchildren to live with, more of us will need to live in tight-knit, walkable cities. It turns out city dwellers have a much smaller carbon footprint.

Suburbs on the brink. Although some first-ring suburbs are thriving, others aren’t. Many suburban neighborhoods are seeing rising poverty and crime, dead or dying malls and derelict strip centers and big-box stores. We can’t just abandon them to blight.

These are all possible issues. Some thoughts about each concern:

1. We will have to see what Generation Y and the aging Baby Boomers want in the long term. Will they want to move back to cities or will they be okay with denser suburban development?

2. Fuel prices are up and American driving is down. What happens if most people can access electric cars within 10 years?

3. Carbon footprints – are people convinced that they should change their personal, residential choices based on this evidence? Do Generation Y members choose to live in cities for this reason or for other reasons such as proximity to entertainment and culture.

4. Inner-ring suburbs are experiencing many of the issues that we once thought were limited to cities. Interestingly, a number of these issues are spreading beyond the inner-ring.

The columnist suggests we need to fight the suburban blight, marked by “separate municipalities outside a city, regardless of age or form…development with a specific pattern, typically built after 1945: single-use zones (stores separated from offices and housing, single-family houses apart from apartments); lots a quarter-acre or more; car dependent.”

There are several other issues that many suburban communities face:

5. Budget crunches with the economic crisis leading to a downturn in housing growth. Not much money is coming in and this will lead to cuts in services and amenities.

6. More suburbs reaching build-out and facing questions about whether denser development can fit within a community dominated by single-family homes.

6a. Will American suburbanites want denser development that may threaten their property values?

7. Increasing minority and immigrant populations that challenge the white majority that has dominate American suburban life. Stories like that of a controversy over a proposed mosque in DuPage County could become more common.

8. Of course, lots of empty houses or homes with reduced values (here or here). This limits people’s ability to move, the ability of communities to collect money, and builders and lenders to make money.

USA Today says McMansions are “out of vogue”

Posted on by

Citing recent housing figures, USA Today argues that McMansions are “out of vogue”:

Fran DiBello of Cleveland didn’t need a lot of room. For her, a three-story townhome has everything she could need.

“I really like the style of this home,” she says. “It’s very efficient. The appliances, the heat.”

It also has a view of Lake Erie and an 8-minute commute to work. Ten years ago, this neighborhood wasn’t here; 10 years ago, these homes would have been over shadowed by the McMansion.

“A McMansion was a trophy — often times a house with five or six bedrooms when you only needed two,” says Scott Phillips, real-estate agent with Keller Williams in Clevekand.

The median size of homes purchased in 2008, the most recent year for which figures are available, is 1,825 square feet. For first-time buyers it is 1,580 square feet, according to the National Association of Realtors.

A majority of the homes Phillips sells are less than 1,700 square feet.

Some consider it an outgrowth of being green; others see it as people living within their means.

Another shift in housing trends also means a move closer to the city’s core, Phillips says.

Numbers show that 90% of home sales nationwide are to young professionals looking for urban housing.

“People like to live where they’re closer to the amenities, the parks, nightlife, grocery stores,” he says.

The article seems to invoke several meanings of McMansions:

1. A more suburban home. This is contrasted with a desire for more urban homes in these tougher economic times.

2. A large home, a “trophy” where people bought a bunch of space that they really didn’t need. It is also suggested that this is wasteful of both money and resources (not being “green”).

But overall, the real story of the article seems not be about McMansions but about the most recent patterns: a shrinking median size of homes purchased and a rise in demand for urban housing among young professionals. This is contrasted with the “McMansion,” that exemplar of all suburban housing and of American housing excess.

About these newer trends:

1. This article cites the median size of homes purchased in 2008. The typical figures cited for home size is the size of the average new home purchased. This figure is still over 2,400 square feet though this is down a bit from the peak of several years ago. The median size is rarely cited and this article doesn’t provide any comparison so that we would know how this size in 2008 compares with previous years.

2. I also had not heard of this figure that “90% of home sales nationwide are to young professionals looking for urban housing.” This is remarkable if it is true. It suggests that this group is the primary one driving the market and that they clearly prefer more urban living. This corroborates what the National Association of Home Builders has discussed.

3. Is this a long-term trend or will Americans seek larger homes once the economy picks up? See my thoughts here.

Let’s hope the “new normal” in housing doesn’t look like Merced County, CA

Posted on by

A USA Today article about the “new normal” in US housing uses Merced County, California as its main example. The situation there is not good:

The median home price, $116,000, is down 68% from its peak in 2006. Three of five homeowners with a mortgage here owe more on their loans than their houses are worth, compared with about one in five nationally.

While the situation is particularly dire in Merced County, it is also not great in a number of other places:

Nationwide, home prices are down 30% from their 2006 peak. Moody’s Analytics economist Celia Chen says national home prices will regain that ground by 2021.

Some areas will take far longer. In 22 U.S. metropolitan regions, most in California and Florida, home prices won’t return to their 2006 peaks before 2030, Chen estimates. That includes such cities as Miami, Detroit, Phoenix, Las Vegas and Riverside, Calif.

And a USA Today chart shows the counties with the most mortgages underwater: Clark County, Nevada (where Las Vegas is located) is at the top with 71.1% of mortgages underwater. Overall, there are 17 counties over 50% and the top 30 on the chart are all over 46%.

This is a long-term issue for these places, particularly if housing values for the whole country aren’t expected to reach the 2006 peak until at least 2021.

Exactly how many American homes are vacant?

Posted on by

Two bloggers have a disagreement about how many vacant homes there are in the United States. Check out the debate and the comments below.

The moral of the story: one still needs to interpret statistics and what exactly they are measuring. The different between 11% and 2% is quite a lot: the first figure suggests 1 out of 10 housing units are vacant while the second figure suggests it is 1 out of 50. If you look at Table 1 of this Census Bureau release regarding housing figures from Quarter 4, it looks like the vacancy rate is 2.7%. But there may be confusion based on Table 3 which suggests the vacancy for all housing units is roughly 11% for year-round units. And later in the release, page 11 of the document, gives the formula for the vacancy calculation and an explanation: “The homeowner vacancy rate is the proportion of the homeowner inventory that is vacant for sale.”

There are some other figures of note in this document. Table 4 shows that the homeownership rate is at 66.5%, down from a peak of 69.2% in the fourth quarter of 2004. (It is interesting to note that this rate peaked a couple of years before the housing market is popularly thought to have gone downhill. What happened between Q4 2004 and the start of the larger economic crisis? Table 7 has homeownership rates by race: the white rate has dropped 1.1% since 1Q 2007 while Blacks and Latinos have seen bigger drops (3.2% and 3.3%).