Saturday, May 07, 2005

Everything Is Considered Except Lower Prices

The writer in this Redlands story does a typical job of dancing around the only answer to the big affordability problem; lower prices. "It's old news that fewer than one of every five California families can afford a median-priced home in the state. A far different question might be to ask what percentage of families can afford any home at all."

"It would appear that close to half of California families are on the outside of the market. 'That is unhealthy,' said Steve Johnson, director of a real-estate think tank." RE think tanks?

"Another factor helping some people is the fact that some lenders now are offering 40-year mortgages. 'It seems like all we're doing is renting from the bank anyway,' Johnson said. 'I remember when mortgages went from 20 years to 30 years, so I suppose this is not that big a deal.'" (!)

The writer finally came out and said it. "At this point, anything that gets more people into the housing market is helpful."

Another idea is to remake the universe. "Economist Jack Kyser says people with lower incomes could benefit if we were able to 'unlock' parts of the housing supply. 'There are some areas, such as South Los Angeles, which are very affordable and very centrally located,' Kyser said. 'The thing that's keeping this part of the supply "locked' is problems with crime and with poor schools. It won't happen overnight, but if we could improve safety and the schools in some of these areas, we could add a lot more housing supply."

10 Comments:

At 1:40 PM, Blogger John Law said...

don't those neighborhoods become safer when property values rise and the renters are kicked out and sane people move in?

 
At 1:49 PM, Anonymous bob r said...

It seems like all we're doing is renting from the bank anyway.

Sadly, this seems to be a fact. The concept of a mortgage as something to be paid off has faded away. It's considered a quaint notion, kind of like paying your credit card balance each month.

 
At 2:03 PM, Anonymous Anonymous said...

( don't those neighborhoods become safer when property values rise and the renters are kicked out and sane people move in? )

You mean the opposite of White flight?

Interesting that the real estate overlords are praying for a ghetto-makeover to keep the bubble blowin'.

bob r:

I remember learning about the feudal system in school, and wondering how it just seemed to end without any explanation. I suppose it never did really end, and today it's coming back. "People were tied to the land, often times never leaving during their entire lives, unless by marriage."

 
At 3:37 PM, Blogger Melody said...

Here's a funny :)

Real Estate Code Words.
We've always thought of most real estate listing blurbs (short 'property highlights' puff-pieces) as horribly unimaginative, group-think writing at best, and exclamation point (!) riddled assaults on the language at worst. Only in Real Estate can "Cozy Home in a Demand Neighborhood" mean "Overpriced Shitbox the Neighbors want Condemned."

Turns out, there's actually data to back that up. According to a recent study/article from Wired [via Freakonomics] there's more to real estate "prose" than just brutal writing (something we dabble in here, from time to time) and bombast. When given a closer look, a subtle code emerges in real estate ads, where certain words strongly correlate with the final sale price of a home.

So what are these Fantastic! Stunning! and Gorgeous! words that will have you stuffing sweaty fistfuls of cash into your pockets? The answer, and other Charming! details from the article on the other side of the link below, with Pottery Barn Decor!

The terms that correlate with higher price are, not surpisingly, those that convey actual information or have specific meaning, like: Corian, Granite, Maple, State-of-the Art, Gourmet, etc.

Terms that correlate with lower prices are ambiguous and subjective terms like "fantastic," "great neighborhood," "stunning," "charming" and the like. In fact, these phrases often carry a hidden meaning:

"These words, it turns out, are real estate agent code for a house that doesn't have many specific attributes worth describing. "Spacious" homes, meanwhile, are often decrepit or impractical. "Great neighborhood" signals to a buyer that, well, this house isn't very nice but others nearby may be. And an exclamation point in a real estate ad is bad news for sure, a bid to paper over real shortcomings with false enthusiasm."

Not that any of this is particularly shocking news. After all, it's advertising, a world where words started to lose their meaning about the time the printing press was invented.

 
At 4:04 PM, Anonymous cincodemayokindaguy said...

I think I stumbled upon a RE Think Tank last week. I was in a TGI Friday's next to a table of mortgage guys and gals who were regaling themselves on the finer points of getting otherwise unqualified folks into mortgages. Only in New Age Mortgage Finance would you find mango Margaritas served during Think Tank meetings.

 
At 4:11 PM, Anonymous historybuff said...

---

--- if we were able to 'unlock' parts of the housing supply. 'The thing that's keeping this part of the supply "locked' is problems with crime and with poor schools. It won't happen overnight, but if we could improve safety and the schools in some of these areas, we could add a lot more housing supply."---

I think what this fellow means is that we could really jack up the prices in South Central if we could somehow remove the coloreds.

"Unlock the value" then becomes "lose the Negroes".

Looking back, maybe all Herr Hitler was trying to do by extirminating the Jews and Gypsies (and assorted unwashed) was simply "unlocking the value" of their real estate holdings.

 
At 6:43 PM, Blogger Bookish Betty said...

there is a really great neighborhood in Los Angeles called Hamilton Park (if memory serves). Can't say I've been there, but I saw a PBS show on it. The neighborhood has always been predominately African American, and therefore whites have stayed away. The neighborhood has wide streets, nice sidewalks, yards, and darling craftsman houses. It's a point of pride with people to maintain their properties. Now the middle class of all races is moving in. I think it's still mostly black, and the value is being "unlocked" by the middle, white collar types of all races. Maybe Kyser is talking about integration rather than takeovers.

 
At 7:25 PM, Blogger Ben Jones said...

bookishbetty,
I'm willing to give Kyser the benifit of the doubt. My point was he proposes to completely reform S. LA to help with housing prices when a simple 20% down policy would solve the problem in 6 months. Of course, with the bubble price demon locked into mortgages, policy makers are loathe to think such a thing and instead start baking pies in the sky.
Thanks for all the great comments.

 
At 1:24 AM, Anonymous Justin said...

It won't happen overnight, but if we could improve safety and the schools in some of these areas, we could add a lot more housing supply

 
At 1:26 AM, Anonymous Justin said...

It won't happen overnight, but if we could improve safety and the schools in some of these areas, we could add a lot more housing supply.

So next thing this guy is going to say is we should take all the crack addicts and anyone else who can't make mortgage payments and move them to Mexico.

 

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