Tuesday links 07-24-2007

Charlottesville is in a Drought Watch

Wages in the region slightly up; what’s the benefit in this?

The survey is proprietary, and Carolyn Fowler of HR Diversified Solutions warns the Hook that even if we pony up $200 for a copy of the report, publishing the information is strictly forbidden.

Why housing is expensive

States aim to stem tide of home foreclosures

The projected foreclosure rate — higher than during the oil bust of 1987 but not as high as in the 2002 recession — poses a significant threat to the housing sector, and possibly to the nation’s economy if it spurs consumers to maintain a tight grip on their wallets. “Falling home prices hurt consumer spending,” says Patrick Newport, an economist at consulting firm Global Insight.

The problem can be traced in large part to consumers who took out adjustable-rate mortgages that had low initial rates but which adjusted higher after two years to a rate that was significantly higher than they expected or could afford. Many of those consumers weren’t aware that initial mortgage rates on such loans often are tied to long-term interest rates, which haven’t changed much in the past several years. But adjustments are tied to changes in short-term rates, which the Federal Reserve has boosted 17 times since 2004. (italics mine)

The trend can put neighborhoods at risk. Houses left vacant as the result of foreclosures tend to push property values down and cause neighbors that can afford to do so to sell out and move away, creating a snowball effect.

And Wells Fargo has stopped making these 2/28 loans. Too little, too late?

The company in an e-mail said it ended on Friday retail offerings of so-called 2/28 loans, which at 65 percent of all subprime mortgages last year are the staple of the industry. Payments on 2/28 adjustable-rate mortgages (ARM) are based on rates that are fixed for two years and then are adjusted twice a year for the remaining 28, if the loan is not refinanced.

And perhaps my favorite post of the day – Why 90% of Realtors Fail

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  1. DanS July 24, 2007 at 23:18

    Actually, the link you use for why housing is so expensive is almost wholly wrong, as I document in many places on that site.


  2. Jim Duncan July 25, 2007 at 06:41

    Dan –

    Thank you for commenting.

    I saw Randall O’Toole speak here in Charlottesville several weeks ago. He mixes, in my opinion, valid points with outlandish ones.

    Those who say that urban-growth boundaries are not “the” cause of unaffordable housing are right. The problem is urban-growth boundaries plus an onerous permitting process plus impact fees plus other regulatory costs. It just so happens that places with growth boundaries usually have lots of other regulations as well.

    The combination of all of the above contribute to expensive housing. The benefits from impact fees may balance the costs when used appropriately, but they do increase affordability.

    Better implementation is the key; I haven’t figured out exactly why that is, but filtering extremes is one step I use in my thought process.

    Land ‘no cure for housing crisis’ was in interesting story.