Nothing Going On But the Rent

When I first moved to Baltimore, I decided to rent a place to decide if I wanted to stay. As the months have passed the idea of buying became ever more prevalent in my mind–especially as prices started to decline.

But, alas, I have decided to remain a renter. And it has nothing to do with the fact that bad roofing is making it rain in the supposedly newly renovated home in which I currently reside (but let me tell you it did get the idea rolling).

While I am a strong proponent of homeownership, I think that this market is best if you are planning to stay for a long time. If you are a prospective homebuyer looking to do it the “old school way”–buy a home to raise a family and pass it down from generation to generation, by all means do so. But if you still think that you can buy something and in the near term realize appreciation, I think you are in for a world of hurt.

Despite what oh-so many rosie -colored-glasses-wearing financial “guru’s” say, the bottom is not close by.  I more closely agree with others that we have a ways to go–maybe not $215k for many houses to $70k, but definitely below the current median price of $200k. I think it’s going to have to go back below $200k before we may have hit the end of it—perhaps 170k. (of course, some relatively impervious markets like NYC will add a bit of cushion to the decline.)

Plus, despite what all those “why rent?” commercials say, renting can be very appropriate. Often the maintenance costs and usually the tax costs are passed on to the homeowner–while your rent may subsidize these costs, by in large you are not paying for them. And it is great for a rolling stone like me–who knows I might finally decide to live in Brooklyn or move off to New Orleans. Unloading a house in a market like this is a fool’s errand. Plus, if you have better things to do with your cash (not including buying a big screen TV) in an era where it will probably cost you at least 20% down to buy (not including FHA) then no time like the present time to do it.

In the meantime, I’m sure I can figure out how to grow a vegetable garden wherever I rent just like I could if I bought something. 

 

Huffing and Puffing and Giving In (and other mid-week tidbits)

As the housing market continues to give many of us in and outside of the real estate business agina, it seems Mr. Bush has decided to back off his veto threat of the housing stimulus bill…

I guess just the unsubstantiated rumor that Fannie or Freddie to could be vulnerable to a collapse was enough to make him decide his legacy was already tarnished enough.

The news of the President’s decision to nix the veto threat is making the folks on Wall Street breath a little more freely. ( I can see them chair dancing right now. Ok, maybe just a little shimmy)

Perhaps, that is why the gas station on the corner was able to drop my brand from $4.25 a gallon to $4.19…I better go fill up before they come back to their senses.

Speaking of bank collapses, it seems IndyMac is set to be purchased by Prospect Mortgage.

Now, who really believes that Prospect is going to keep the banking services in tact???

And last, but not least, Secretary Paulson says we can exit this housing mess in a “matter of months.”

If I was a betting person, I’d bet not.

And the Wheels on the Bus Come Rolling Off (and other midweek tidbits)

Hindsight is making lots of people by new glasses. These days getting away from news about the shamble of a housing and mortgage market–and whose fault it is–is making me want to put my brain in a drawer and do away with my subscriptions to the Times, Journal and Sun.

Let the Weeping and Knashing of Teeth Begin

Yesterday’s Wall Street Journal was schock full of articles on the mortgage market–4 full pages of articles about our buddies Fannie and Freddie, foreclosure rates, declining market policies, and worries about FHA underwriting standards. A plethora of quotes and perspectives to either shake your head at or nod in agreeance.

Me. I mostly shook my head.  Especially when I read this quote regarding mortgage insurance declining market policy that does not take into account outliers that may be impacting a relatively good market:

Mortgage insurers say the data they recieve on homes sales aren’t conclusive enough to be more accurate in designating declining markets.

Oh, really? Well, perhaps you should work on that ‘little problem’ first?  You know, before you make it too difficult for buyers to buy in certain parts of town.

Don’t Blame it on the Rain–Blame it on the Federal Legislators

I know I took a deep breath…and held it for a bit when it was announced that Indymac, the country’s second largest thrift was going into recievership.  But I almost passed out, when it was announced that the Fed was working on the “what if Freddie and Fannie Fail” plan.  Not because I was shocked, but because, well, its about time.

Your local representatives and senators over the years have let Fannie and Freddie grow so big(too big for their britches)–that a failure–well, if you think the mortgage market is rough now? Get ready to take in relatives Great Depression style if they go under.

The Sun Will Come out…in November???

According to a recent poll conducted by Harris Interactive, 44% of homebuyers think that the market will improve once a new president takes office. And 48% of all purchase looking to buy in the current market believe so.

If it were only that simple. I’m thinking my decision not to buy might have been okay.

The sun will come out in deed.

Nightmare on Cul-de-Sac Street

So, a blogging buddy of mine just put up a post about the “death of the Suburbs” myth.  He discusses an article written in last Sunday’s LA Times that purports that the suburbs are not dying–and will not die because so many jobs moved to the suburbs in the last 20 years. 

At least the Times journalist and I agree on one thing–Many jobs did relocate to the suburbs and are still located their.  The transistion is a matter of historical perspective and economics. Suburban living became ubiquitous with the American Dream shortly after World War II. Couple that with the decline of cities as residents left for the suburbs greener pastures and it gave way to urban blight and decay. By the 1970’s, So many people had moved out of the city it not only made job retention sense, but economic sense to move a large company out to the The decision was two to the burbs. And lets not forget the incentive of cheap cheap cheap land, and there is the icing on the cake.

But then, the 90’s came and cities like NYC, Charlotte, Atlanta, Cleveland began to incentivize the  relocation of companies to revitalized in-town locations to make it not only “chic” but economically more attractive to be in-town.  Sprawl, traffic, and energy costs associated with sprawling corporate locations became less attractive.

For the last 10 years the trend away from suburban living has increased. People are changing the way in which they view how they prefer to live and work. Energy costs, traffic, and time spent commuting are making many–particularly young professionals, empty nesters, and to some degree young small families, rethink the benefits of far out, automobile fueled suburban living.

I think agree more with this guy. The suburbs may not be dead, but their ’sprawling mcmasion, two cars in the driveway’ dreams may be fading into the distance, and a new vision of transit and pedestrian orientated homestead may be the key to remaining desirable places to live.

We Keep Giving Fish Expecting Different Results

When I lived in DC, my friends and I called the neighboring suburbs in Prince George County, ‘Greater Southeast’ (a reference to Southeastern D.C). Southeast D.C., was for, generations ubiquitous with urban decay—high poverty, high crime, and high blight with few exceptions. Prince George, on the other hand, was known for having the largest population of upper middle class African American residents. The most obvious reason for the population shift was the rising cost of living associated with gentrification.

 

But it was while I was an evaluator for a D.C.HOPE VI project (a HUD program started under the Clinton administration to raze physically and socially obsolete housing projects and turn them into mixed income communities), the reason for the shifting crime pattern became even more evident.  It was not just gentrifications, but use of HOPE VI, as an urban renewal tool rather than a an inclusive “neighborhood revitalization” tool that was creating a storm of long term disaster.

 

Under the program, Housing Authorities are authorized to use Section 8 vouchers to help relocate tenants. While housing authorities are merely “required to provide eligible residents with relocation benefits and community and supportive services.”, there was little incentive to provide comprehensive support to residents looking to return or successfully integrate into new neighborhoods. The challenge of taking apart social networks and asking residents to move to places without them has been largely ignored. Instead, Housing authorities have shifted the pervasiveness of poverty out of the projects and scattered it about.

 

As it stands, less then 10% of former residents actually return to after construction is complete. Less than 20% of the new residents in most of these projects are even low to moderate income (less than 80% of area median income).  Instead, former residents move to new communities with no support network and no means of figuring out how to create a new one. Though the legislation requires such support, providing it with families scattered across counties and cities is nearly impossible, and many families become invisible again–except this time without a social network.

 

Since HOPE VI began, crime has been exploding in the relatively stable near-in suburbs of many mid-sized cities like Mecklenburg(Charlotte) and North Memphis(Memphis); Maywood(Chicago) while it is subsiding substantially in many inner-cities. A study recently conducted by husband and wife team, Richard Janikowski, a criminologist with the University of Memphis, and Phyllis Betts, a housing expert also at the University of Memphis, drives the speculation toward fact. Betts and Janikowski put together a map of crime patterns and a map of section 8 rentals, and voila—they almost perfectly matched.   

 

HOPE VI could be so much. But it is not. HUD should be incentivizing projects to figure out creative ways to re-integrate greater numbers of poor and moderate income residents into the new development (say at least 25%, for example) It should require housing authorities to design comprehensive, multi-tiered strategies to address joblessness, childcare, and eduation while also incentivizing the “step-up” from fully sibsidized housing to possible homeownership. Instead, it gives Section 8 vouchers and permission to housing authorities to simply say “go away.”

 

Don’t get me wrong, the goal of turning physically obsolescent, blighted public housing into modern, decent housing is of great importance, but the program should be more about creating economically and socially healthy communities and less about the beautification of real estate.

 

Its high time we time we stopped giving people fish and asking them to go away. Perhaps, its time we, at both the non-profit and public sector levels spend some more time teaching people how to fish instead.