Gas Prices Drive Push to Reinvent America’s Suburbs
As gas prices hover around $4 a gallon, the nation’s far-flung suburbs — which have boomed because they could provide larger homes at cheaper prices to those willing to drive farther — are losing their appeal. Soaring energy costs and the foreclosure epidemic have jolted many Americans into realizing that their lifestyles are at risk. For many, ever-lengthening commutes in the search for affordable homes no longer make financial sense. The city of Maricopa, Ariz., located about 35 miles south of Phoenix, is asking builders not to develop just isolated subdivisions behind walls, but whole communities that encourage walking by including stores, schools and services nearby. Suburbs on the far edge of metro areas are turning aside strip malls and creating new downtowns and neighborhoods that favor pedestrians. They are trying to attract more employers and services such as hospitals, colleges and small airports. “Absolutely, suburbs are not going to go away,” says David Goldberg, spokesman for Smart Growth America, a national coalition of groups pushing for conservation and sustainable growth. “But the math is becoming very clear.” Until now, people were willing to drive increasingly far for a home they could afford. “Drive-till-you-qualify collapsed,” Goldberg says. “It’s done. It’s not going to work as a housing strategy anymore.” (www.usatoday.com)
USA Today (7/29/08); Haya El Nasser
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Housing Crisis Hits Exurbs Hard
Victorville, Calif. and other exurbs like it lie at the core of America’s mortgage meltdown. A year ago, it was America’s second-fastest-growing city, behind New Orleans, with a 9.5% surge between July 2006 and July 2007. Now, foreclosures have more than doubled in the county. New home prices in the city have plunged 43%. George Air Force Base, originally built as a flight-training school for World War II pilots, brought jobs and people to the area. But when the base was deactivated in December 1992, the city fell on hard times, losing about 10,000 jobs. The airbase was subsequently converted to serve commercial interests and renamed the Southern California Logistics Airport. This attracted Pratt & Whitney, ConAgra Foods and General Electric Aircraft Engines, among others, along with 3,500 new jobs. There are signs that the city’s stock of bank-owned homes is dwindling, but for Victorville to quickly fill the houses left vacant in undersold developments, it will have to find even more ways to bring jobs to the city, say experts. That’s because long-distance commuters to metro Los Angeles, who once flocked here, are now put off by high gas prices. (www.csmonitor.com)
Christian Science Monitor (7/25/08); Michael B. Farrell
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Housing Crisis Spurs Sharp Jump in Bankruptcies
This month, nearing $1 million in debt, Arthur, a veteran real estate agent and San Jose, Calif. father of three, filed for Chapter 13 bankruptcy. “I have taken upward of 25 calls a day from creditors,” he said. “When you have 25 people grinding on you day after day, it takes a toll.” Arthur can add himself to the list of 5,941 people who filed for bankruptcy in the San Jose division of the U.S. Bankruptcy Court from July 2007 through June 2008. Of the four Bay Area bankruptcy courts, San Jose’s posted the highest increase in bankruptcies — 69.7% — over the 12 previous months. Once, job losses, medical bills or divorce were the primary reasons people declared bankruptcy. Now, a growing number of filings are related to the housing crisis, say local judges, attorneys and credit counselors. For people like Arthur, who asked not to be fully identified, it started with a home he bought 10 years ago for $450,000. As its value rose to $900,000, he used the equity to start his own business. Along the way, the home’s value dropped to $600,000, and business expenses rose. To make his mortgage payments, he began relying on credit cards — at least 20 — for living expenses. “What’s different about this new wave is the number of people who are simply walking away from their houses,” said Northern District of California Chief Bankruptcy Judge Randall Newsome, who has overseen bankruptcy filings for two decades. “It’s unlike anything I’ve ever seen in my career.” “People know there’s no hope” of holding onto their homes, said San Jose bankruptcy judge Marilyn Morgan. In fact, 90% of today’s debtors facing foreclosure don’t even contest it, she said. (www.mercurynews.com)
San Jose Mercury News (7/25/098); Sonia Narang
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Nationwide Housing Slump Hurting South Florida Businesses, According to Survey
After sinking to its lowest level in June, economic confidence among small-business owners nationwide rebounded in July as the number of small firms experiencing cash flow issues decreased significantly, according to a Discover Card survey released on July 28. Still, the housing and credit market turbulence continues to be a factor for many. About four in 10 business owners, or 42%, said the nationwide downturn in the housing market has had a negative impact on their business; 47% said it has not negatively affected them. While no breakout on the survey was available for Florida, small-business owners and experts say firms tied to the building and housing markets are especially hurting. “My nails are down to my cuticles,” said Jay Mack, who owns The Mack Group, an insurance firm in Deerfield Beach. The company’s revenue has been affected both by less insurance being written because of fewer home sales and insurance premiums falling 15% to 20%. “It’s getting harder and harder to deal,” said Charles Webster, president of TEC Florida, an international organization of chief executives that has chapters in South Florida. “For businesses trying to expand, it’s getting tougher to find capital.” When a business wanted to buy a building, it could usually do so with 5% or 10% down. “Now they want 20% down,” Webster said. (www.sun-sentinel.com)
South Florida Sun-Sentinel (7/29/08); Marcia Heroux Pounds
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Housing Out of Reach for Most
A recent report produced by the Region 9 Economic Development District of Southwest Colorado shows that nearly three-quarters of families in Durango can’t afford to buy a home. According to the report, the 2007 median price of a home in Durango was $350,000. The qualifying annual income to purchase that home is $86,900, based on information from Wells Fargo Bank. But in 2007, the median family income in La Plata County was $60,600 and 72% of families didn’t earn enough to qualify. Using the guideline that people can usually afford to spend 30% of their monthly income on rent, researchers estimated that an annual income of $25,800 would be necessary to afford a one-bedroom home in Durango. For a three-bedroom, a person would have to make $43,080 a year. Lewis Marchino noted the difference between that number and the income necessary to buy a home. “That’s why rentals are so key,” she said, “because we have a community that can’t buy even if they want to and even if they’re not in debt and even if they’re making a livable wage. There’s still a huge gap.” (www.durangoherald.com)
Durango Herald (7/27/08); Katie Burford
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The Custom McMansion; Mass-Market Builders Woo Upscale Home Buyers With Deals on One-of-a-Kind Homes
Companies such as John Laing Homes, Toll Brothers Inc. and K. Hovnanian Homes are now getting into custom-home building, a field that takes more time, patience and hand-holding than production building. Custom-home building is more profitable for builders, and in today’s tough market, it also carries less risk. Builders avoid the carrying costs of land, taxes and other monthly expenses that can come with speculative building. And because custom building caters to the upper end of the market, it’s doing better than production building right now, says Steve Melman, an economist at NAHB. Although home building of all types is stagnating, he says that the custom share of the market tends to go up during down times, while production building peaks during boom times. In 2007, the custom share of the market was 24%, up from 19% in 2005 during the peak of the boom. Big builders benefit from economies of scale in buying materials and have developed efficient systems for negotiating with and scheduling contractors. So even though they charge more per square foot for a custom home than they do for one that is mass-produced, big builders can usually undercut the price of their smaller competitors. Cost was the main reason that Terry and Pam Hannock decided to use Toll Brothers to build a house on the lakefront lot they bought in Bluffton, S.C. three years ago. The custom builders they had interviewed asked for between $170 and $200 per square foot; Toll came in at $137. Although they had to pick from a set array of floor plans, they were able to tweak one of the models — a 3,300-square-foot stucco house — by adding an office over the three-car garage, expanding the size of some closets, extending the patio and putting in a pool and spa. (www.wsj.com)
Wall Street Journal (7/24/08); June Fletcher
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