Less Housing for Residents of Average Pay, Report Says
A study by researchers at the Furman Center for Real Estate and Urban Policy and based in part on the New York CIty Housing and Vacancy Survey finds that the combination of stagnant incomes and rising rents between 2002 and 2005 has landed especially hard on households with incomes of $24,000-$32,000. The number of apartments affordable to households earning $32,000 a year has dropped by 205,000 out of 1.2 million units in just three years, the study found, with the median rent for an unsubsidized apartment jumping 20% from $750 to $900 and the median income in the city dropping from $42,700 to $40,000. Two out of five of the city’s households earn $32,000 or less. Police officers start at roughly $25,000 but jump to about $32,000 in their first year, firefighters start at $32,700, and experienced home health aides, nursing aides, child care workers, bartenders, coffee shop hostesses and tour guides make similar amounts. Over the same period, the number of more expensive unsubsidized units, including rent-regulated apartments, rose significantly. Apartments renting for $1,000-$1,200 a month rose by 58,000, or nearly 34%; the number renting for $1,200-$1,400 rose by 57,500, or 52%; and apartments for $1,400 or above rose by 74,432, or 31%. Last year, the city issued permits for the construction of nearly 32,000 new housing units, a 34-year high. The number of permits issued in the first quarter of 2006 was up 27% over the same period last year. (www.nytimes.com)
New York Times (6/16/06); Janny Scott
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Donations Take the Hit as Housing Prices Rise
With housing prices doubling in the Washington, D.C. metropolitan area over the last five years and neighborhoods that had long been ignored becoming fashionable, local nonprofit housing organizations for the poor are finding it difficult to line up donations. Over the years, the Prince George’s County, Md. chapter of Habitat for Humanity has built on donated lots. Last month, for the first time, it had to purchase a land parcel. “They offer it to us and a month later we find out they sold it,” says the chapter’s board president. “It happens all the time, and you can’t blame them for that — they’re making money.” George Rothman, the president and chief executive of Manna, Inc., a 24-year-old organization that builds and develops affordable housing in the city, says that, “We would buy properties nobody wanted. But now it doesn’t matter what part of the city you’re looking at. There are investors, speculators, corporations.” Groups say they have also seen declines in donated construction materials as their costs have risen, and with so much building going on, finding plumbers and electricians to work alongside volunteers isn’t easy. (www.washingtonpost.com)
Washington Post (6/10/06); Tomoeh Murakami Tse
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Next Stop: 7% Mortgage Rates
With the Fed likely to increase the federal funds rate from 5% to 5.25% at its meeting on June 29 and the financial markets starting to factor in the likelihood of a 5.5% rate in August, long-term mortgage interest rates now look more likely to top out in the low 7% range than at a high 6% rate, according to mortgage broker and syndicated columnist Lou Barnes. While the markets know that the economy will slow down, they are volatile because they also see that it hasn’t slowed enough to bring inflation safely within the range that is acceptable to the Federal Reserve. “Widespread assertions that the economy is slowing are contradicted by tax revenue,” writes Barnes. “Federal tax payments in May were 26% ahead of last year, and corporate payments are up 30% year-to-date. Individual receipts are up 14%, the biggest gain in ‘non-withholding’ revenue — bonuses, capital gains and such." (www.inman.com)
Inman News (6/16/06); Lou Barnes
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Many Lack Insurance Necessary to Rebuild
As many as 70% of home owners don’t have enough insurance to rebuild their homes following a major loss from a catastrophe, according to Austin, Texas-based Southwest Insurance Information Service, a trade group that represents insurers in Oklahoma and Texas. The leading provider of building cost data, Marshall & Swift in Los Angeles, estimates that for insurance purposes 61% of U.S. homes are undervalued by an average 25%. Too many people insure their homes for what they would sell for instead of for what it would cost to rebuild them, says Dan Ramsey, president and chief executive officer of Independent Insurance Agents of Oklahoma. The market value of a home “has nothing to do with what the insurance should be,” he said. The cost to rebuild a home in Oklahoma City would be at least $110 per square foot, Ramsey said, and new building code standards, granite cabinets and other customizations, and demolition and removal costs can drive up the expense. In the case of the Harvey family, whose house was burned down from a spark from a backyard barbecue smoker, the cost of rebuilding was $61,000 greater than initial building costs just two years earlier. (www.newsok.com)
Daily Oklahoman (6/11/06); Paula Burkes Erickson
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The McMansion Glut
With rising energy and mortgage costs, shrinking families and a growing number of retirement-age baby boomers ready to downsize, the golden age of McMansions — oversized homes characterized by sprawling layouts on small lots and built in cookie-cutter style by big developers — could be drawing to an end. The oversupply of McMansions is already acute in places like Loudon County, Va., a fast-growing suburb of Washington, D.C. In May, 4,719 houses were for sale in the county, more than three times the year-earlier level. The number of sales dropped 39% to 484 in the month, and the number of days a home remained on the market increased from 14 to 70. In one county subdivision, a 47-year-old airline pilot put his five-bedroom house on the market six months ago for $1 million, with the goal of downsizing to a $592,000 townhouse nearby. He didn’t get a nibble for months, but finally got an offer from a relocating California family. He sold the 5,600-square-foot home, which he purchased for $515,000 in 2000, for $820,000 and also agreed to throw in his high-definition television and a life-size Spiderman statue. (www.wsj.com)
Wall Street Journal (6/16/06); June Fletcher
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Does Money Grow on Trees? It Could, By Investing in a Yard
A study by Arbor National Mortgage found that 84% of its agents believed a house on a lot with trees could add 20% to the value of the property. Another survey showed that houses with great landscaping could expect to sell for 4%-5% more than homes with just good landscaping and that houses with only fair landscaping would sell for 8%-10% less than good houses. “The business of landscaping has really exploded,” says Gopal Ahluwalia, director of research at NAHB. While landscaping still remains an afterthought for many builders, St. Lawrence Homes in Raleigh, N.C. offers three landscaping packages as standard at Trenton, a high-end subdivision in Chapel Hill. But most buyers go beyond that, according to vice president Rich Ohmann, opting for $3,000-$5,000 in extras, such as lighting, irrigation, pavers and vegetation. The American Society of Landscape Architects suggests that buyers invest 5%-10% of their home’s value in landscaping. (www.orlandosentinel.com)
Orlando Sentinel (6/11/06); Lew Sichelman
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