Is It Better to Buy or Rent?
After five years with rents barely budging while house prices in New York, Washington, Los Angeles and elsewhere doubling, renting has become a surprisingly smart option for people who never before would have considered it. Owning a home today is more expensive than renting in the Northeast, Florida and California, according to an analysis by the New York Times that includes the major costs and benefits of owning and renting, including tax breaks. In the San Francisco Bay Area, a typical family that buys a $1 million house will be spending about $5,000 a month, but could rent a similar house for about $2,500, or for a net of only $1,720 assuming that they were earning $800 a month, or 4%, in interest on the money they would have used for a downpayment and closing costs to purchase that home. Dean Baker, co-director of the Center for Economic and Policy Research, and his wife sold their Washington condominium last year for $445,000 and now rent a similar one for $2,200 a month. “A lot of people hugely overvalue the mortgage deduction,” he said, “because they compare it to no deduction instead of comparing it to the standard deduction.” (www.nytimes.com)
New York Times (9/25/05); David Leonhardt
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A Ray of Sunshine Through the Debt
In its survey of 40 million home mortgages in the 50 states, the District of Columbia and Puerto Rico during this year’s second quarter, the Mortgage Bankers Association of America reported that 4.3% of all home owners were late in their payments, down from 4.6% for the same quarter of 2004, and 1% of all outstanding mortgages were in foreclosure, down from 1.2% a year earlier. The survey shows that the lowest late payment and foreclosure rates are in the states with the highest housing costs and rapid housing price appreciation and the highest rates tend to be in parts of the country where the housing costs and appreciation are relatively low and the economy is growing slower than average. The lowest late payment rates were in Hawaii (0.9%), California (1%) and Virginia (1.3%). The highest rates of delinquencies were in Mississippi (8.5%), Louisiana (6.7%), Indiana (6.7%), Tennessee (6.3%), Texas (6.3%) and Ohio (6.1%). Ohio had the highest foreclosure rate (3.3%) and California the lowest (0.17%). (www.washingtonpost.com)
Washington Post (9/24/05); Kenneth R. Harney, The Nation’s Housing
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The Magic Touch
During the past five years, John Beal, a resident of Leesburg, Va., in the Washington, D.C. suburbs and acting president of the Capital Area Real Estate Investment Association, has bought and fixed up about 10 homes in need of such upgrades as new floors, fresh paint and new windows and then sold each one at a sizable profit. “You can do three things with a fixer-upper,” he said. “You can buy it to live in it. You can fix it and flip it. Or you can fix it and rent it out. I’ve done all three and all three have worked for me.” Investors such as Beal are looking for bargains in a market where housing prices have been rising steadily. The median price of a single-family house in the District was $485,000 in August, according to the local Realtors®, up from $375,000 a year earlier. Last year, 15% of mortgage originations were for properties not occupied by the owner, up from about 5% for the 1990-1995 period, according to the Federal Reserve. Beal said he has seen a lot of people try to make a profit in the fixer-upper market but fail because they thought they could do the general contracting themselves or they underestimated the holding costs, the mortgage, insurance, selling expenses and taxes. “They think, ‘If I sell it for $500,000 and buy it for $350,000, I’ll make $150,000. It’s not like that.” (www.washingtonpost.com)
Washington Post (9/24/05); Dan Rafter
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In Housing’s Hottest Markets, Builders Tell Speculators to Cool It
Home buyers are concerned that speculative home buying could have a destabilizing effect on the local property market. “You don’t want to sell [units], and then when you go to settlement, signs start popping up all over the subdivision — sale, sale — that compete with the builder,” said Gopal Ahluwalia, an NAHB vice president. Measures such as providing a limitation in the sales contract on the buyer’s ability to rent or resell a property for a specified period of time are more common for condominium developers, where speculative buying is rife, he said. But some builders are trying to restrict sales of single-family homes to investors, especially in markets like Florida and Southern California, where prices have been rising quickly. Hovnanian Enterprises started at the beginning of this year to stipulate that a buyer can’t resell the property for 12 months in the contracts in all 13 states where it operates. (www.wsj.com)
Wall Street Journal (12/11/09); Allison Bisbey Colter, Dow Jones Newswires
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Lenders Pull Back on Condominium Financing
Commercial lenders are starting to cut back on new condo projects or condo conversions in Atlanta, concerned that there is a glut of the product on the market. As of Sept. 13, there were 2,427 active listings for condos in the Buckhead, Midtown and downtown area, said Randal Lautzenheiser, principal at Atlanta Intown Real Estate Services. More than 1,900 condos have sold in that area since the start of the year. “I continue to be amazed at how much product is being absorbed in the market, but I think it is absorbing more new product than resales,” he said. “I can see lenders looking at those absorption numbers and scaling back on their lending practices.” South Florida’s condo market is dominated by investors, according to Faron G. Thompson, managing director of commercial mortgage banking for Primary Capital in Atlanta. Although most lenders set a 30% limit for investors in a condo project, “it’s not even close to being 30%” in Miami, he said, with investors finding ways to mask their purchases. “I’m not accusing anyone of wrongdoing,” he said, “but those guys who can’t continue to flip those condos and get a premium will stop buying them. Everyone senses that and lenders are beginning to say, ‘Enough.’” (www.atlanta.bizjournals.com)
Atlanta Business Chronicle (9/16/05); Lisa R. Schoolcraft
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Building in Green
Contributing to the Chinese government’s plans to move 400 million people – about half of the country’s rural population — into urban centers by 2030, American architect and industrial designer William McDonough is working on six new districts in such cities as Beijing and Guangzhou that, among other things, will maximize energy efficiency through new types of building materials and a solar-powered energy grid. McDonough has developed a polystyrene made by BASF without ozone-depleting chloro-fluorocarbons but with excellent insulating qualities. “Buildings can be heated and cooled for next to nothing,” he says. “And they’ll be silent. If there are 13 people in the apartment upstairs, you won’t hear them.” McDonough is also working on new toilet bowls that are so slippery they can be flushed with a light mist. Bamboo wetlands nearby would purify the waste, and the bamboo could be harvested and used for wood. The Chinese use three times more energy per square meter to heat and cool buildings than Europeans and Americans, according to professor Yuan Bin at Beijing’s Tsinghua University school of architecture. Although only 23 million Chinese own cars, China produces 16% of the world’s carbon dioxide emissions and is poised to overtake the U.S. as the world’s biggest carbon dioxide producer within 30 years. (www.msnbc.msn.com)
MSNBC.com (9/2605); Sarah Schafer and Anne Underwood, Newsweek International
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