NY Times: Housing Costs Rise as Burden
Submitted by
CalculatedRisk on Mon, 10/02/2006 - 8:11pm (11 comments)
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While many of the highest home values were on the coasts, in places like Southern California and Manhattan, many of the biggest jumps in the percentage of people paying a burdensome amount of their income for housing occurred in the Midwest and in suburbs nationwide, making it clear that the housing squeeze has reached deep into the middle class.
[...]
Other places with big jumps included Wyoming, Mich.; Round Rock, Tex.; and Plymouth, Minn.
I know Plymouth Minnesota - no shock to me it's on the list. It's not a 'hell hole' by any stretch. But like the article says it's all three: solidly working middle class, suburban & Midwestern.
There are a couple other nearby suburbs I would expect to be on the list too: Brooklyn Center, Hopkins, Crystal & New Hope - all in the same area, inner ring suburbs just outside the 'urban blight' that is 'North Minneapolis'.
The other side of the Twin Cities (St Paul side) has its copies - Oakdale, North St Paul, Maplewood, Roseville. Similar story there.
I know a number of people in both parts of the city - think tool makers, production buyers for factories, administrative assistants, teachers, nurses... all trying to hang in there by their finger nails.
'Squeezed' hardly describes it.
If there were better jobs in 'out-state' many would leave. Cost of living in small towns like mine are half or a third what they are in places like Plymouth or Roseville. And the jobs out-state, if you are lucky enough to have one, pay almost as well as in Roseville or Plymouth. There just aren't enough of them out-state.
I'm sure the story is similar everywhere across Middle America.
ews from the trenches:
we have a smallish commercial property in a downtown location in washington dc that we intend to renovate and add on to to create a 11,000 sq ft commercial center. we have a bridge loan (prime +1) during the predevelopment stage that will be taken out by a construction loan once the permits are ready. well that was the story from the bank when we closed on the bridge loan. now, due to 'tightening underwriting standards' the property has to be fully leased before they will take out the bridge loan and give us the construction money.
this will make it harder on me, not impossible but it is an example of how the banks are tighenting up and going to make it harder to get things done pretty soon.
question is - will that have a negative or positive impact on values b/c supply should shrink accordingly no?
its going to squeeze me for sure as i have to carry this building empty until i can pre-lease it based on plans and elevations. ugh.
Yeah, that report really lays to rest two argumnets I've encountered. First is that home prices hadn't gotten inflated between the coasts. Clearly, they had, relative to income. I got into a discussion with someone on another site and found these stats that showed that Indianapolis, even though home prices whent up just a few percent during the boom, was one of the cities showing a drop last quarter.
The secoind is that landlords are going to be able to raise rents substantially over the next couple years. I bet most rents are falling a year from now, even commercial rents.
Your situation describes exactly what happens during downturns DC1000. Credit dries up to the point that even optimistic and well-funded builders can't get their work done.
Considering the number of empty, just-built, retail strip centers I see in my metro area, I can't blame the banks for being conservative with their cash.
And this is only the beginning.
joy! lucky for me this isn't the suburbs and there aren't lots of these strips around. and we have plenty of interest. its just hard to get people to sign on the dotted line based on plans....
the credit crunch is certainly on in commercial real estate lending. LTV's are down and DCR's are up. Woohoo!
the banker kept saying "we're just so real estate heavy and we're worried".
I know that economic journalism comes in for its share of knocks for allowing itself to be politicized. In the case in question, I have no such objection. I just thought the presentation of the data left a lot to be desired. New paragraph, new location, but with many of characterizations of the data rather vague. I'm sure I've done worse, but this was weak writing. The folks at USA Today write better than this.
Dear CR
The Oct. 3 Chicago Tribune had a very similar story on rising housing costs with a Chicago slant:
Housing costs busting family budgets Renters, homeowners both digging deeper - Chicago Tribune
They also had this on housing and holiday hiring:
Housing skid's latest victim: Holiday hiring - Chicago Tribune
Why I Hate the NYT, Reason #666: Worthless hypertext.
Here's the data:
American FactFinder
Click on "housing" in left pane, then "financial characteristics."
It's a great way to while away the time if you're suffering from insomnia. The problem I have discovered is that the data downloads zip like a bunny at 3:00 am ET, but the user's brain is in slow-mo. At 12:00 pm ET, I can think like a normal grownup but I keep timing out on the downloads. So I have ideas but no data or data but no ideas.
I did, however, get this far:
2005, Mortgaged Properties
Median Value: 187,100
Median Household Income: 67,852
Median RE Taxes: 1,845
Tax as % of Income: 2.72%
2005, Free and Clear Properties
Median Value: 127,100
Median Household Income: 36,885
Median RE Taxes: 1,166
Tax as % of Income: 3.16%
There's also some startling stuff on percent/geography of households with two or three mortgages, but I can't report back on that until I've rebalanced my brainpower/connection speed ratio.
While the imbalance between housing and incomes can't be sustained at the rate it has been diverging, if you consider housing expenditures as a share of incomes, this has been growing for over a century. As we spend less on food, manufactured goods, and tradeables, we spend more on non-tradables and especially on those things that are to a large degree irreplacable and unique.
things that are to a large degree irreplacable and unique
I'd like to see you come to my subdivision and say that.
Tanta, I'll be digging through the data. Looks like fun!
Best Wishes.