“Ugly houses” dragging down the housing market

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.

Reaction to Newsweek’s list of “dying cities”

Search for “dying city” and “Newsweek” and what you will see in the Google results is not the original article but rather reactions from some of the listed cities. Newspapers in South Bend, Rochester (NY), and Grand Rapids have voiced their displeasure.

This recent list from Newsweek is based on Census data and the cities that experienced the greatest population declines from 2000 to 2009:

We used the most recent data from the Census Bureau on every metropolitan area with a population exceeding 100,000 to find the 30 cities that suffered the steepest population decline between 2000 and 2009. Then, in an attempt to look ahead toward the future of these regions, we analyzed demographic changes to find which ones experienced the biggest drop in the number of residents under 18. In this way, we can see which cities may have an even greater population decline ahead due to a shrinking population of young people.

Here are the 10 cities that had the steepest drop in overall population as well as the largest decline in the number of residents under the age of 18.

Some thoughts about this data:

1. All of these cities, except two (one in FL, one in CA), are in the Rust Belt. Many of these cities are not surprises.

2. The local reactions seem to be expressions of civic pride. People in these cities can’t ignore the population loss but they are right in saying their cities are not going completely to waste. There are some good things going on in these places but broader population trends are working against them.

3. “Dying city” does not equal “dead city.” Dying doesn’t mean that everybody is leaving, just that these cities lead the country in percentage population loss. A real “dead city” would have no population left. These cities are from that point.

4. Perhaps what angers locals most is that articles like these can further negative stereotypes. These places already suffer from perception problems and lists like this do not help. For example, it is any surprise that Detroit continues to lose population after years of commentators saying how bad of shape Detroit is in? People probably leave places like Detroit for reasons more important than punditry (reasons like jobs, opportunities, etc.) but it could play some role.

Conference on colleges and universities as critical part of regional development

A recent conference suggested that colleges and communities could cooperate more closely in order to foster economic development:

Colleges must play a greater, and more deliberate, role in helping regions innovate and thrive in an increasingly competitive and globalized economy, speakers urged this week at a conference on higher education and economic development.

Economic development is “no longer about attracting businesses,” said Sam M. Cordes, co-director of the Purdue Center for Regional Development. “It’s about attracting people, about attracting talent.”

Participants in the two-day conference, “Providing a Uniquely American Solution to Global Innovation Challenges: Unleashing Universities in Regions,” delved into the various ways colleges can help build stronger local economies, including acting as conveners for conversations about regional development, aligning their curricula with local elementary and secondary schools, and producing and retaining well-educated workers.

This is a popular topic these days, particularly in difficult economic times. People like Richard Florida have linked the presence of research universities and their graduates with cities that have a larger concentration of the “creative class,” which then leads to more development. There are a lot of cities and communities that hope they can tap the local college in order to boost the local economy. It looks easy: the local university has a bunch of PhDs and eager students.

But how exactly this is supposed to happen is less clear.  I remember the battle that took place in South Bend in the last five years. The University of Notre Dame wanted to expand and partner with the community to construct an “innovation center” that would blend the university and businesses. However, this became controversial as it involved bulldozing a number of houses, bringing up some of the old issues between the wealthy school and less wealthy city.

It sounds like this conference offered more specific ideas of how the university can partner with local communities and businesses in order to prompt growth. Since each school and community offers unique advantages (and disadvantages), such partnerships are likely to take a good amount of work. Both the school and community need to feel that they will benefit from the time and hard work that is necessary to put something together.