Continuing to work through my “to-read” pile, I recently finished an article given to me by fellow Planning Commissioner Jim Herreid. It was the February 11th cover story of BusinessWeek, “Meltdown: For Housing, the Worst is Yet to Come”.
The article starts out with some frightful assertions, such as “Home prices could sink an additional 25% over the next two or three years, returning values to their 2000 levels in inflation-adjusted terms”. This drop would “put the national price level right back on its long-term growth trend line, a surprisingly modest 0.4% a year after inflation”.
The causes of the current situation are listed as lax lending standards, excessive home-equity loans, and lender losses on mortgages, mortgage-backed securities, and even more exotic derivatives. In addition to the drop in values, the symptoms include canceled home sales, home-loan delinquencies at a twenty-year high, and a cut back in real estate lending.
However, some people are already finding a silver lining. The Times of London ran a commentary titled, “Great news! House prices are down.” The author argued that the dropping prices made home ownership more affordable.
In a February 6th Wall Street Journal article, “As Houses Empty, Cities Seek Ways to Fill the Void”, the creative initiatives of municipalities are explored. “Among the strategies being considered to deal with the vacant housing are creating so-called land banks, floating bonds and raising private investment.” “Genesee County, Michigan, which includes Flint, one of the nation’s poorest cities, uses a “land bank” to control its vacant properties.” In Providence, R. I., the mayor’s office is working to have some of the foreclosed condo projects transfered to local community-development corporations, “which will then convert them into affordable housing and commercial space with the city’s financial help”. “In San Diego, a city and county task force is considering ways to buy empty homes – before speculators and investors swoop in – and reserve them for teachers, municipal workers and lower-wage workers, many of whom were shut out of the housing boom when home prices rose out of their reach.”
Northfield is proving proactive in these turbulent times too. The Housing and Redevelopment Authority is securing 14 acres at reduced prices to create approximately 60 units of ownership housing, targeted as starter homes, workforce housing and down-sized homes for empty-nesters. To hear more on this exciting project, listen to Locally Grown this Wednesday (5:30 pm on KYMN 1080 AM) when HRA staff person Michele “Mitch” Merxbauer is our guest.