(April 1, 2013) – Traditional "Large Lot Zoning" is "Greener" than "Smart Growth" within Urban Growth Boundaries . . . Copyright 2009 – 2013 . . . Tom Lane . . . Photographing California, Arizona, Nevada, New Mexico, Colorado, Utah, Oregon, and Seattle, Washington
(Revised Dec. 3, 2010) Areas of the US with high unemployment and high foreclosure rates must sell their inventory before recovery. While many people are anxious to buy foreclosures, new rules from banks suspending foreclosures will slow the recovery.
An entire “cottage industry” has developed in foreclosed neighborhoods, where rich new residents are buying furniture and plants for their new new homes from struggling local businesses, as described by AP’s Tamara Lush in “Where Fewer Foreclosures are Bad For Business – Gardeners, Plumbers, Real Estate Agents No Feeling The Punch.” Tara Lush writes about a prospective “snowbird” from Vermont, Gene Richards, who wants to buy a cheap foreclosed $30,000 condo in sunny Lee County in Southwest Florida (Click here for official Lee Co. website):
“Consider how the local economy depends on people like Gene Richards of Burlington, Vt., who wants to invest in a $30,000 foreclosed condo in Lee County, (Florida). Richards is still waiting for the foreclosure sale to be approved.
If he and other would-be buyers of foreclosed homes could complete their purchases, they could send money flowing through Lee County. Richards planned, for example, to spend thousands on renovations. That money would have helped support the jobs of a plumber, electrician and carpet installer.
He also intended to buy new beds and sofas at area stores. For now, those retailers won’t get that money. Neither will the management company that would benefit from his plan to rent the condo to seasonal residents — people who would shop at stores and eat in restaurants in Lee County.”
Lee County is like many areas with high foreclosures in the U.S. In Southwest Florida along the Gulf of Mexico, it’s primary industries are tourism and construction, much like Bend, Oregon. And, both Oregon and Florida are famous among real estate economists for their very strict statewide growth management acts. The only way either area can recover is by canceling or at the very minimum suspending growth management, and selling foreclosures to those escaping from large cities. Lee County has the highest percentage of homeowners in default in Florida. Google map: http://maps.google.com/maps?f=q&hl=en&geocode=&q=&ie=UTF8&ll=26.552908,-81.918182&spn=0.429953,0.411987&z=11&source=embed
However, with the banks’ new rules, the situation looks horrible. It could take years if not decades for the nation’s current foreclosures to sell. Furthermore, in areas without jobs, they will never sell, unless rich people move in to retire (such as Bend, Oregon or Reno and Las Vegas, Nevada, with unemployment rates at 15%).
Three years after the housing bubble collapsed under the weight of lax mortgage underwriting, some 5.5 million families have lost their homes or are in the process of losing their homes to foreclosure. Estimates vary, but analysts say there are at least that many more foreclosures likely before the wave subsides.
And the number could go far higher: Without a change in government policy, some 11 million borrowers are at risk of losing their homes, according to a research report earlier this month by Amherst Securities, which advises investors in mortgage-backed securities. That’s roughly one-fifth of the 55 million mortgages outstanding on the 80 million homes in the U.S.
Almost everyone involved agrees the the foreclosure mess will likely take years more to resolve, potentially postponing any meaningful economic recovery.
Furthermore, banks could lose billions of dollars due the paperwork mess. In some cases, they can’t prove that they actually own the foreclosed homes, as discussed by Corbett Daly and David Clarke of Reuters in “Foreclosure Mess Could Wreak Havoc.“
And, nobody in any capacity will make any money. Home prices are expected to bounce around their current lows for the next three years, according to an analyst with Fiserv Case-Shiller Indexes.
And, there are 23 months of homes on the market, four times the normal average of 6 months, considered to be the supply from a typical supply and demand ratio.
With high unemployment, there’s low demand for foreclosures. These interactive maps from NPR show the percentage of foreclosures, unemployment, and median household income, by county. Clearly, the Rocky Mountain states and Great Plains are doing the best, with their fiscal conservative policies, and less emphasis on smart growth and urban growth boundaries.
All three maps are seperate tabs from the same NPR web site:
Note: Click on the link and hover the mouse over every county for detailed stats, i.e. the counties I clicked on for Lee County, Florida; Sandoval County, New Mexico, and Deschusets County, Oregon below. However, I had trouble with this using Apple’s Safari; try different browsers before giving up:
As discussed all over this blog, there’s very little demand for high density smart growth. People prefer privacy in the suburbs. It’s just human nature. Whether smart growth lives or dies as a trend in urban planning depends on supply and demand. In the Boeing smart growth lifestyle center in Renton, Washington, where I have photographed at this post, the street level storefronts are not leasing:
The Normandy Park and Burien Urban Renewal Districts are not selling in the Seattle area. No demand for these $300,000 for these condos next to a 4 lane state highway and power lines:
The Burien Urban Renewal District won’t sell, and part of the land that nobody will buy turned into an Amusement Park. Would you want to live next to this?
Hard to say if the Activspace concept has any demand or not, or if people will just work from home. This is in Seattle south of the Zoo, and is highly visible as it’s adjacent to Highway 99. These are for artists and musicians to rent. Not sure if they are for cooking overnight accommodations. Read more about the company founders in the Seattle business Journal: http://www.bizjournals.com/seattle/stories/2004/11/01/smallb1.html
This neighborhood, Creekside in Kent, Washington, next to the Green River and adjacent to the urban growth boundary with condos and homes, is not selling due to low demand. Their signs are the top photo of this post. We drove by here at night, and dozens of homes had no lights on. For more discussion urban growth boundaries, click this post. The places have small lots in the shadow of Mt. Rainier:
With low demand from high unemployment, the housing surplus will not become exhausted for many years, if not a decade or longer.
Listening to a replay of Bob Brinker’s Moneytalk tonight (Fall, 2010), caller Mickie from Palmdale, California offered a great suggestion on how to solve the foreclosure crisis.
He said that for those who have been drained of their assets in … what readers of this blog call the overpriced smart growth areas … just sell and buy a cheap townhome in Florida … just as Gene from Vermont is trying to do in Lee County, Florida.
Mickey suggests to buy a condo (or house) for a reasonable amount, and become financially secure – indefinitely.
That’s a great idea. Well, if you can find work, of course, and unemployment is high in cities with excessive foreclosures (see map below).
But for baby boomers about to retire, tellecommuters, and students who would otherwise throw rent away in expensive superstar cities, such as Boulder, Boston, San Francisco, and Seattle, why not?
Why not save money, go buy a cheap house for 60 grand, and divert resources to the desert foreclosure areas in the Southwest, or along the white sandy beaches of Florida?
The caller stressed that the problem that he faces, as a realtor, is the banks cleaning people out – their 401K’s, IRA’s, cash, everything. The end result is a payment plan for someone who is upside down in his/her mortgage, something that was worth 300K at the peak of the bubble (over twice that in some areas).
Mickey is absolutely correct. Why put up with the system in coastal California, Oregon, Washington, or southern New England?
Mr. Brinker responded that lots of people were very unlucky in buying at the peak of the bubble, especially in south Florida, southern California, Arizona, and Las Vegas (which you and I know as the smart growth areas, with urban growth boundaries, and/or state/federal limits to growth).
Brinker asked caller Mickey what he would do.
Mickey said he would like to see the banks take more of a write off, but that’s asking the banks to eat crow. And, he offered his suggestion that the Middle Class, before giving up their retirement assets, just go to Florida, Nevada, and Arizona, and buy a townhome – with cash. Then, they’re not bordering on homelessness, they have a secure investment to back themselves up.
He’s absolutely correct. Why suffer at the hands of your banker in Superstar Cities such as Boston, Bend, Boise, Berkeley, Boulder, Seattle, and San Francisco? While many 60-somethings own their homes in these places, many 40- and 50- somethings are losing them. Why not save your retirement assets and move?
Again, the problem is jobs. However, more Americans are now tellecommuting, and many with good credit 50+ could cash out of San Francisco, and move to places like Bend, and purchase a bankrupt coffee shop and start a business.
Bob responded by stating that allowing people tax free access to their retirement accounts, for the specific purpose of buying property, was an interesting thought. Bob stressed that this should be for a limited amount of time, and not forever, and that it could even be allowed regardless of age.
Of course, a free market individual might be opposed to such a scheme, since it has a specified desired outcome (home ownership). However, those of us free market advocates, who know that socialistic smart growth and other growth controls caused the housing bubble, would probably support this, knowing that this would release foreclosed properties from the banks to the people, and give work to the plumbers and gardeners of Lee County, Florida, and Deschusets County, Oregon.
Of course, we would simultaneously want to see smart growth and urban growth boundaries greatly modified in scope, if not canceled in their entirety.
Bob concluded by stating that he’s not all for the plan yet, but that now is the time for new ideas, since the $8,000 credit for new housing ended.
I think Mickey has a terrific idea. Another group who could benefit from his suggestion are those barely scraping by in superstar cities – even in the suburbs – paying $900 per month in rent (plus utilities, the Internet, and a cell phone), while earning just $9 an hour in retail. This is a result of urban growth boundaries, smart growth, impact fees, and other policies that push rents and food costs well above the national average.
It is true that places such as Bend, Vegas, Reno, Palm Springs, and Phoenix have cheap homes, and that rents and grocery items are also less costly, depending on the part of town.
To prove or disprove Mickey’s thesis, we would need to do a cost of living calculation of a foreclosed area, excluding the ACCRA statistics that do not count the issues that Mickey brought up, such as lost retirement funds, being underwater in a mortgage, and the below market average cost of foreclosed properties.
The ACCRA Cost of Living index is a simplistic indicator for comparing one area to another, and does not take into account whether or not one is upside down on their mortgage. Someone owing $150,000 in one Superstar City could buy something for $75,000 somewhere else.
I don’t have any photos of the white sands of sunny Lee County in South Florida. However, if you travel down into the Yucca Valley (below), there’s a lot of almost white sand, and you should have quake insurance as the San Andreas and other faults are nearby. This area (the Town of Yucca Valley, along with Joshua Tree, 29 Palms, and a few others), had potential, until the foreclosure crisis. Their golf course has closed, and despite its proximity to Palm Springs and Los Angeles, nothing is going on except ATV’s and rock climbing at Joshua Tree National Park. Since the high desert is 20 degrees cooler in the summer than Palm Springs, this area could ultimately develop into a retirement mecca for Los Angeles and Palm Springs transplants.
Right now, it’s loaded with cheap foreclosures, on acreage, for under $100,000. Property crime, meth, foreclosures, and unemployment are major issues, so one may have to drive 30 miles down to Palm Springs, where those issues are also bad due to the recession. Overall, Yucca Valley is no Bend, Boulder, or Durango in terms of levels of educational attainment, yet it is a very cheap place to live, and it has potential.
The mountains of Joshua Tree National Park are in the distance, and beyond that is the descent to the Palm Springs-Palm Desert metro area (30 mile commute from Yucca Valley to Palm Springs, down 3,000′ in elevation).
Portions of this area have a severe foreclosure crisis, such as Reno, which is full of foreclosures, along with adjacent Carson City and Gardnerville. Reno is blocked to further construction by geographic constraints and federal lands. Here, you can clearly see the end of housing next to the federal lands at Keystone Canyon Recreation Area (near where the familiar white “R” is on the hillside NW of town). This recreation area is administered by the USFS and the Washoe County Parks and Recreation department. Mountain biking trails are serviced by the Poedunks, an IMBA affiliated mountain bike trail club.
Overall, Reno and Vegas are both underrated by outdoors enthusiasts. Reno has excellent hiking and mountain biking opportunities at hundreds of locations along the Eastern Sierra, and also at Lake Tahoe. Here’s Keystone Canyon:
As an example of the amenities, here’s a photo near Genoa, Nevada and the Eastern Sierra. Looking south, with the towns of Minden, Gardnerville, and ultimately, the Antelope Valley with Topaz Lake, Coleville, and Walker:
North on 395, here’s the welcome to the eastern Sierra sign. I don’t know about foreclosures in places such as Bishop, Crowley Lake, and Mammoth Lakes. Overall, there are few jobs and limits to new home and business construction are very strict. For example, along US-395, there is no Wallmart, Target, or Costco between Reno/Carson City and Ridgecrest, California.
Bend has properties for rent and for sale. They may never be rent or sold due to the excess restrictions on construction and land use in Oregon, although the City of Bend is more pro-growth than most medium sized Oregon markets (i.e. Eugene-Springfield, Medford-Ashland). This is near the Old Mill District:
Arizona is a mess, with foreclosures and construction company permits. Zebra striped baracades and red diamond reflectors are a very familiar as one sees them over and over on dead end roads: