Archive for the 'Other States' Category
Housing and Young People
Yesterday was the first session in a five-part series on public housing policy. Housing: The Hub of Public Policy 2010 is presented by The Connecticut Housing Finance Authority, The Connecticut Department of Economic and Community Development, and The Partnership for Strong Communities; it is hosted by The Lyceum. The pre-event briefing memo touched on many issues and gave examples of what is happening in other parts of the country – it’s an interesting read. We learned about the event through our involvement in HYPE, and stopped by to check it out.
One of the recurring themes of the discussion was Connecticut’s difficulty in retaining our young adults, which is reported regularly via both official statistics and anecdotal experiences. It is a source of concern because of the ratio of workers to retirees in the state – currently 4.5:1 and expected to fall to 2.6:1 by 2030. The baseline assumption for the group was that housing played a critical role in the flight of the youth; our graduates move to other states because they can’t find affordable housing in Connecticut.
We have lived in three different states as working adults, with each move motivated by a specific opportunity. We moved to Boston because of a job, to Charlottesville because of a school, and then to Hartford because of a job. Housing costs only entered the discussion during our most recent move, as we were interested in understanding the cost of living relative to the available salaries. Hartford was more affordable that both Boston and Vermont, the other destinations we considered. So housing was a consideration for us, but it was a secondary factor after the available opportunities, and only became a factor because we expected to be in the area for a long time building a career.
Three other points that were raised during the discussion:
1. Housing costs can influence employment opportunities since companies have an incentive to locate their facilities in low-cost areas.
2. Because Connecticut is so geographically small, and located between Boston and New York, our young adults are often still close to home even if they live in another state.
3. Perhaps many of our young adults will return to the state when they are ready for a more suburban lifestyle.
What’s your take? How important are housing costs to the young adults that you know? What motivates them (you) to choose Connecticut or to choose other parts of the country/world? If you know people who have left the area, what might have kept them here if it had been available?
Real Estate Stories of the Past Couple Weeks
There have been a number of interesting articles about real estate in the financial press over the past couple weeks. Here’s a quick wrap-up of what you may have missed while you were off for the holidays…
Wall Street Journal, December 23rd: Data from the National Association of Realtors shows that Home Sales, Prices Brighten (subscription required). Though the current data is positive, the author expresses concern about “a continuing flood of foreclosures and the eventual withdrawal of government life support.” They note that the housing has been strongest in “middle-class homes with short commutes,” something that rings true in the Greater Hartford markets.
Wall Street Journal, December 24th: The next day, the headlines reversed to New-Home Sales Drop 11.3% as Impact of Stimulus Fades (Subscription Required). This time the data came from the Commerce Department, which noted that the measure was very volatile (it had risen 7.4% the previous month) and new home sales make up less than 15% of total home sales. And in our area, new home sales are far less than 15% of the total.
Wall Street Journal, December 24th: On the same page, we learn that Resession Alters Migration Pattern in US. Although this story isn’t directly about real estate, it is interesting to consider the implication of people moving around the country on local real estate markets. A large map shows the population changes by state for 2004-2005 and then for 2008-2009. Florida and Nevada showed the most dramatic shifts, from strongly growing to modestly decreasing populations. Connecticut appears to be consistent across the two time periods with both reflecting losses of between 0 and 50,000 people.
Wall Street Journal, December 29th: Everyone who loves a good house hunting story definitely needs to read this tale as A Picky Home Buyer Pursues an Epic Hunt for ‘the One’ in the San Francisco Bay Area. It took over two years and 298 properties for Lidia and Doug Pringle to find the right place to call home. Wow.
Calculated Risk, December 30th: During the past two declines in home values (early 1980s and early 1990s), prices did not bottom until the unemployment rate peaked.
The Big Picture, December 31st: Morgan Stanley released a research piece suggesting that the 10 Year Treasury could rise to 5.5% in 2010. What caught our eye was that they estimated that the higher Treasury rates could push rates for 30-year fixed mortgages up to between 7.5% and 8%. These rates are, of course, much higher than buyers are used to seeing. The commentary basically says that Morgan Stanley must be concerned about inflation increasing, and that the charts the commentators use to look at the market show strong increases in inflation expectations over the past year.
Wall Street Journal, December 31st: The Department of Housing and Urban Development have had Rules to Clarify Cost of Mortgages in the works for a while, tightening the requirements around Good Faith Estimates that lenders give to buyers when quoting mortgage rates. Their overall goal is to force lenders to report all of their fees and rates in a way that allows borrowers to more easily compare rates between lenders. It will be interesting to see how this transition goes as lenders and real estate attorneys adjust to new regulations.
Wall Street Journal Blogs, January 1st: The Five Key Housing Issues to Watch in 2010 are 1. mortgage rates; 2. the future of Fannie, Freddie, and the FHA; 3. loan modifications; 4. more loan resets; and 5. the tax credit.
New York Times, January 1st: Some feel that the Federal Government’s effort to modify loans is Adding to Housing Woes. They argue that allowing homeowners to remain in their homes by modifying their mortgage has been counterproductive. Homeowners have their hopes falsely raised and waste money trying to keep a home they simply cannot afford before finally defaulting on the modified mortgage.
So that’s the word on The Street as the real estate markets move into 2010. The headlines seem to have a negative bias, highlighting concerning data, unsuccessful recovery programs, and the unfortunate reality of many Americans struggling. We’ll have to see how it all plays out here in Greater Hartford. And as always we’ll hope for the best and plan for the worst.
Should Rising Sea Levels Influence Real Estate Decisions?
Should the threat of rising sea levels factor into the real estate decisions of home buyer or home owners?
We hear frequent debate about whether the globe is warming, and if so, whether or not our civilizations and lifestyles are the cause. We also hear about large chunks of ice that break off into the ocean. But we do not hear much about specific consequences of rising sea levels in the news. Satellite images show that the amount of land ice has been decreasing in recent years. Reports from low lying areas tell the stories of societies already dealing with higher water. At some point the issue may become “real” for the rest of the world.
Rising sea levels, attributed to melting land ice, present a different type of challenge than we’re used to facing. Rather than being an acute event that ends as quickly as it began, rising sea levels stick around to create a new equilibrium. Coastal cities around the world will need to adapt if the predicted changes actually occur over the next 100 years.
New York City is already thinking about how they will protect their extensive coastline. The Wall Street Journal’s recent article about their efforts raised a number of interesting points. Most heartening is that City leaders are monitoring the latest studies to proactively plan defenses and countermeasures. Though there is no definitive prediction about what will happen, City leaders are currently expecting a climate similar to Raleigh, NC by 2080 and higher water around the City than in other parts of the globe. Despite the research, their ability to act is limited because they “can’t make multibillion dollar decisions based on the hypothetical.”
Assuming we believe there is a threat, the logical place to look for a plan is the Federal government since rising sea levels will directly impact much of the country’s population. Current government policy is to help regions that are impacted by natural disasters. Leaders declare a state of emergency and bring in help from other areas. What happens if our country’s entire 12,383 mile coastline is threatened? Which portions do we protect? When do we begin the projects? How are these decisions made? Given our tendency to punt on hard questions, we’ll probably see little proactive planning followed by various levels of government addressing problem areas as they arise.
There is little a homeowner can individually do about rising sea levels. Their best option is to be thoughtful about the risk for their properties. Beachfront homes clearly are at a higher level of risk than those at elevation. The recent work by FEMA to redraw flood maps has made more home buyers aware of floodplains, but very few in this area consider rising sea levels in their purchase decisions. Which may be appropriate since the City of Hartford sits at an elevation of 59 feet (18 meters).
The threat of higher seas is decades, and perhaps even centuries away. There is plenty of time to plan our personal and national strategies. Some thoughts…
1. The Federal government needs to take a position early stating what they are willing to do. Because of the persistence of nature, and the massive length of our coastline, the fair and practical response is probably to do nothing.
2. Coastal property will transition from selling at a premium to selling at a discount. This should happen whether defenses are built or not, and is just a matter of degree. Markets adapt as new information is available, and once there is more certainty about when rising sea levels will be a problem, buyers will begin to consider property elevation in their purchase offers.
3. It is common for buildings to last decades, or even centuries. Ideally, real estate development will shift to areas that will be less threatened by rising sea levels. Realistically, it probably won’t since there will still be demand in coastal areas until the point when the problem becomes “real.”
Nature has changed the face of planet earth on many occasions. It is a powerful and persistent force that will prevail despite our best efforts. One way to imagine the potential impact of higher seas is by playing with a simulator. Greater Hartford, as an inland metropolitan region, should not feel the impact directly. Perhaps we’ll even benefit as people and investments move away from the coast. But like everything else about rising sea levels there are no definitive answers.