Mortgage rates and the housing market

[Hards Alumni]

Thanks for posting the NYT article, 82.

A few comments/opinions:

The allowing duplexes or small apartment buildings in areas that were zoned single family years earlier is, in my opinion, stealing equity from the owners of single family homes adjacent or nearby. I saw the results of this (an old "solution"-not a new one) in some nice neighborhoods Richmond that had beautiful, modestly priced older homes where the zoning rules were changed. The rezoning does NOT benefit the single family homeowners at all.

Regarding older homes-there was a program in Chicago way back in the '70s that I learned about that involved total rehabbing of older homes by contractors who agreed to take on a lot of building trade apprentices. Whether the state, feds, or city subsidized the program (maybe it was a combination of them) I do not know. The idea was to train Chicago residents in good paying jobs while reviving the homes. Often, the rehab was a "total gut job" so there was a lot of labor and training. The balance between materials and labor was very different than new construction. What was not to like about this idea?

So?  Cities can't be built without adding density.  Times change.  Folks can sell their homes and move elsewhere if it upset them.

[NCMUFan]

Having lived in both (Minnesota 7, Wisconsin 15 and counting), I think you're crazy but to each their own

Nah, Wisconsin way to inbred.  For Minnesota you have the Dakotas, Iowa and Wisconsin also moving there.  A little midwest melting pot.  What was Wisconsin's motto a few years ago?  "Escape from Wisconsin".  Lots of businesses and residences took the advice.

[jficke13]

Thanks for posting the NYT article, 82.

A few comments/opinions:

The allowing duplexes or small apartment buildings in areas that were zoned single family years earlier is, in my opinion, stealing equity from the owners of single family homes adjacent or nearby. I saw the results of this (an old "solution"-not a new one) in some nice neighborhoods Richmond that had beautiful, modestly priced older homes where the zoning rules were changed. The rezoning does NOT benefit the single family homeowners at all.

Regarding older homes-there was a program in Chicago way back in the '70s that I learned about that involved total rehabbing of older homes by contractors who agreed to take on a lot of building trade apprentices. Whether the state, feds, or city subsidized the program (maybe it was a combination of them) I do not know. The idea was to train Chicago residents in good paying jobs while reviving the homes. Often, the rehab was a "total gut job" so there was a lot of labor and training. The balance between materials and labor was very different than new construction. What was not to like about this idea?

Not to pile on, but just to observe, I think it's really interesting that the one asset class where people seem to view the steady and uninterrupted appreciation of value as a right is in home ownership. In pretty much everything else that I can think of society accepts that circumstances change to the benefit of some and detriment of others. But for homeownership people can assert, people will agree with, and policy makers will protect the idea that the class of home owners should have a say in directing nearby land use for no other reason than to "protect the value of their homes."

Interesting contrast to, for example, Japan, where homes are viewed as *depreciating* assets, and are built to be used for a few decades before being replaced. Nobody there seeks to protect the value of their home, because it's not an asset. It's a thing that eventually wears out. I suppose this is probably an artifact of our society basically letting home ownership be the store of value that funds end of life housing and care.

[Hards Alumni]

Not to pile on, but just to observe, I think it's really interesting that the one asset class where people seem to view the steady and uninterrupted appreciation of value as a right is in home ownership. In pretty much everything else that I can think of society accepts that circumstances change to the benefit of some and detriment of others. But for homeownership people can assert, people will agree with, and policy makers will protect the idea that the class of home owners should have a say in directing nearby land use for no other reason than to "protect the value of their homes."

Interesting contrast to, for example, Japan, where homes are viewed as *depreciating* assets, and are built to be used for a few decades before being replaced. Nobody there seeks to protect the value of their home, because it's not an asset. It's a thing that eventually wears out. I suppose this is probably an artifact of our society basically letting home ownership be the store of value that funds end of life housing and care.

Couldn't have said it better

[The Sultan]

I don't have a problem with zoning laws being used to "preserve equity," but that can't be their only purpose. The creation of additional, affordable housing is a societal good as well. Not to mention I think many times the idea that someone's property values are substantially impacted when an apartment complex is built a few blocks away is overblown.

[TAMU, Knower of Ball]

Nah, Wisconsin way to inbred.  For Minnesota you have the Dakotas, Iowa and Wisconsin also moving there.  A little midwest melting pot.  What was Wisconsin's motto a few years ago?  "Escape from Wisconsin".  Lots of businesses and residences took the advice.

Funny,  inbred was one of my complaints about Minnesota.  My priest in Minnesota used to joke about the "651 disease". Is what he called the pattern of kids being born in st paul, going to college at St Thomas/U of M/St. Cats/Macalister/Etc. Getting a job in st paul. Then buying their childhood home off their parents before repeating the cycle. All my friends in Minnesota except one followed that pattern (minus buying their childhood home but one actually did do that).

Meanwhile my current social group features two people originally from wisconsin (both of whom lived elsewhere for years and chose to move back), one from Michigan,  one from new York,  three from Illinois, and one from Arizona.

It's almost like that no matter where you live,  you'll find pockets of "inbred" people and people who moved there from elsewhere. And that reasonable people can disagree on which state they prefer

[Spotcheck Billy]

Nah, Wisconsin way to inbred.  For Minnesota you have the Dakotas, Iowa and Wisconsin also moving there.  A little midwest melting pot.  What was Wisconsin's motto a few years ago?  "Escape from Wisconsin".  Lots of businesses and residences took the advice.

The motto was Escape TO Wisconsin not from.

[MU82]

Not to pile on, but just to observe, I think it's really interesting that the one asset class where people seem to view the steady and uninterrupted appreciation of value as a right is in home ownership. In pretty much everything else that I can think of society accepts that circumstances change to the benefit of some and detriment of others. But for homeownership people can assert, people will agree with, and policy makers will protect the idea that the class of home owners should have a say in directing nearby land use for no other reason than to "protect the value of their homes."

Interesting contrast to, for example, Japan, where homes are viewed as *depreciating* assets, and are built to be used for a few decades before being replaced. Nobody there seeks to protect the value of their home, because it's not an asset. It's a thing that eventually wears out. I suppose this is probably an artifact of our society basically letting home ownership be the store of value that funds end of life housing and care.

Reasonable, thoughtful post.

Meanwhile, in housing/mortgage-related news ...

Fed rate cuts don't automatically bring lower mortgage rates, but they often do. Here's hoping that the impending cuts, signaled today in Jackson Hole by Powell, will lead to mortgage rates closer to 5% by the end of this year or early next year.

5% could be kind of a goldilocks number for sellers and buyers. That could help boost home-sale inventory, which is badly needed.

Lots of "coulds" in there - wishful thinking. But I'm an optimist, and I'm hopeful.

[dgies9156]

Think Duluth and Superior are simply reflections of state governments in St. Paul and Madison?

Absolutely not.

That's a fashionable view among a lot of people but the economic health of the area has less to do with state government and more to do with natural resources and access to national and global markets.

Both Duluth and Superior were created as waypoints to transship natural resources. Stuff came off the trains in the Duluth or Superior harbor and went on to boats. Or, they were blocked with other rail shipments and sent to major urban centers.

The timber that was a major regional natural resource (think pine trees) was largely harvested by the 1930s. It takes 60 years to regrow a toilet paper farm and even then you don't get the yields and uses of the timber that had been growing there for centuries. The high grade iron ore from the Hibbing/Virginia area that went to Duluth and Superior was gone by the end of World War II, replaced with taconite. Plus, as global iron ore supplies increased dramatically in the 1950s, Iron Range ore was at a competitive disadvantage. It's why one of my uncles ended up dispatching trains in Liberia.

Few people wanted to live in the Duluth-Superior area (my parents excepted) because of the robust winters and mosquito-centric summers. It's a gorgeous area but it is remote for a reason. Unless government can warm the winters and tame quadrillions of blood thirsty mosquitos, that's not going to change!

[MU Fan in Connecticut]

I don't have a problem with zoning laws being used to "preserve equity," but that can't be their only purpose. The creation of additional, affordable housing is a societal good as well. Not to mention I think many times the idea that someone's property values are substantially impacted when an apartment complex is built a few blocks away is overblown.

NIMBY-ism drives me crazy.

For example, New Haven has a nice small easy to get to airport.  Unfortunately, only 25% of the airport is physically in New Haven and 75% is in East Haven so New Haven can do very little without cooperation.  East Haven, which is not known as a great town, has been fighting any expansion for decades.  New airline, Avelo, made New Haven one of their hubs and has full non-stop flights all day and week and Breeze airline will begin flying out of New Haven in the fall.  There is a plan for a new (small) terminal and parking lots, etc (because the available land is there) and it's funded and East Haven would be the majority beneficiary of new tax revenue.  And they are still fighting in.  The airport was there before all the houses in the area were built.  So people move near an airport and then complain loudly of airport noise. 

End of rant..........

[The Sultan]

Nah, Wisconsin way to inbred.  For Minnesota you have the Dakotas, Iowa and Wisconsin also moving there.  A little midwest melting pot.  What was Wisconsin's motto a few years ago?  "Escape from Wisconsin".  Lots of businesses and residences took the advice.

Someone hasn't been to Wisconsin for awhile. Just drive across the Illinois border and you will see miles of businesses that have relocated there recently.

[MU82]

The airport was there before all the houses in the area were built.  So people move near an airport and then complain loudly of airport noise.

This happens in a lot of areas, and it always ticks me off. YOU chose to live near the airport. Quit yer goddam whinin'!

[The Sultan]

I will also say that, if anything, the State of Wisconsin has over-subsidized the Superior area. Two examples. First, UW-Superior is heavily subsidized by the State. Last I saw, the GPR (tax revenue) per student at Superior was over $10,000. That's more than double any other school in the system. They almost closed the place 50 years ago, but political pressure kept it open. And Superior is smaller now than it was then.  It would be less expensive to have those students go to UM-Duluth and subsidize the difference between Wisconsin and Minnesota in-state tuition.

Second is the expansion of Highway 53 to four lanes. Having driven that route many times, including on summer weekends, there was no need for 53 to be four lanes. But WIDOT had invested so much in the southern part of the state that political pressure was put on the department to invest more up north.

[Scoop Snoop]

I anticipated the knee jerk nimbyism replies. If I bought a home in an area zoned single family, I would expect that the rules would not be changed in the middle of the game. Although I have not experienced this myself, I find it interesting that there is never a shortage of people who self righteously accuse the protesting homeowners of nimbyism.

I think it is naive to believe that the zoning changes were made to help with housing. The beneficiaries are mostly the contractors who managed to get the changes through. Of course, they also really, really wanted to help with providing apartments for rent, right? 

[Hards Alumni]

I anticipated the knee jerk nimbyism replies. If I bought a home in an area zoned single family, I would expect that the rules would not be changed in the middle of the game. Although I have not experienced this myself, I find it interesting that there is never a shortage of people who self righteously accuse the protesting homeowners of nimbyism.

I think it is naive to believe that the zoning changes were made to help with housing. The beneficiaries are mostly the contractors who managed to get the changes through. Of course, they also really, really wanted to help with providing apartments for rent, right? 

But not adding density creates the suburban sprawl and all of the problems that come along with it.  What is the solution?

[The Sultan]

I anticipated the knee jerk nimbyism replies. If I bought a home in an area zoned single family, I would expect that the rules would not be changed in the middle of the game. Although I have not experienced this myself, I find it interesting that there is never a shortage of people who self righteously accuse the protesting homeowners of nimbyism.

I think it is naive to believe that the zoning changes were made to help with housing. The beneficiaries are mostly the contractors who managed to get the changes through. Of course, they also really, really wanted to help with providing apartments for rent, right? 

It can be in the best interests of the local government and the contractors to build apartments.

But I also want to know what you mean by "in an area." If it is in your immediate neighborhood? Sure, I would expect zoning to be consistent. But in the old strip mall on the busier road a couple blocks away? Undeveloped land next to your subdivision? I have oftentimes seen people get up in arms about zoning changes in those instances, using property values as a reason, when there doesn't seem to be much reason to think your property values would be much at all impacted.

[dgies9156]

I will also say that, if anything, the State of Wisconsin has over-subsidized the Superior area. Two examples. First, UW-Superior is heavily subsidized by the State. Last I saw, the GPR (tax revenue) per student at Superior was over $10,000. That's more than double any other school in the system. They almost closed the place 50 years ago, but political pressure kept it open. And Superior is smaller now than it was then.  It would be less expensive to have those students go to UM-Duluth and subsidize the difference between Wisconsin and Minnesota in-state tuition.

Second is the expansion of Highway 53 to four lanes. Having driven that route many times, including on summer weekends, there was no need for 53 to be four lanes. But WIDOT had invested so much in the southern part of the state that political pressure was put on the department to invest more up north.

Brother Hippie:

Blame my parents, in part, for the bolded highlighted part of your comments. My late Dad was Chairman of the Development authority in Douglas County and he and my Mom, who was a school board president in Solon Springs, worked to get the four lanes through to Superior. I believe Tommy Thompson once said that extending that road past Spooner would occur "over his dead body." Well, Tommy didn't die and both my parents were at the ceremony where Tommy cut the ribbon opening the highway west of Solon Springs.

I thought my Dad was going to kill me when I argued the Eau Claire bypass of U.S. 53 was a complete waste of money.

I don't think any of this has increased development, housing prices or opportunities in Northern Wisconsin. As to Superior, you're absolutely right about UWS. UMD is a better and more comprehensive school. When I was in college, years ago, Minnesota and Wisconsin had reciprocity agreements allowing each others' residents to attend college in either state at resident rates. Just consolidate the two schools on the Duluth campus, change the name to Mosquito State University and have both states support it.

I went to both for summer school. UMD had more of what I wanted and needed!

[jesmu84]

I anticipated the knee jerk nimbyism replies. If I bought a home in an area zoned single family, I would expect that the rules would not be changed in the middle of the game. Although I have not experienced this myself, I find it interesting that there is never a shortage of people who self righteously accuse the protesting homeowners of nimbyism.

I think it is naive to believe that the zoning changes were made to help with housing. The beneficiaries are mostly the contractors who managed to get the changes through. Of course, they also really, really wanted to help with providing apartments for rent, right? 

When does the game start and end?

[The Sultan]

Brother Hippie:

Blame my parents, in part, for the bolded highlighted part of your comments. My late Dad was Chairman of the Development authority in Douglas County and he and my Mom, who was a school board president in Solon Springs, worked to get the four lanes through to Superior. I believe Tommy Thompson once said that extending that road past Spooner would occur "over his dead body." Well, Tommy didn't die and both my parents were at the ceremony where Tommy cut the ribbon opening the highway west of Solon Springs.

I thought my Dad was going to kill me when I argued the Eau Claire bypass of U.S. 53 was a complete waste of money.

I don't think any of this has increased development, housing prices or opportunities in Northern Wisconsin. As to Superior, you're absolutely right about UWS. UMD is a better and more comprehensive school. When I was in college, years ago, Minnesota and Wisconsin had reciprocity agreements allowing each others' residents to attend college in either state at resident rates. Just consolidate the two schools on the Duluth campus, change the name to Mosquito State University and have both states support it.

I went to both for summer school. UMD had more of what I wanted and needed!

They still have such an arrangement. It's slightly different because Wisconsin students pay Minnesota rates and vice versa.

[MUBurrow]

When does the game start and end?

This right here.

[Pakuni]

I anticipated the knee jerk nimbyism replies. If I bought a home in an area zoned single family, I would expect that the rules would not be changed in the middle of the game. Although I have not experienced this myself, I find it interesting that there is never a shortage of people who self righteously accuse the protesting homeowners of nimbyism.

I think it is naive to believe that the zoning changes were made to help with housing. The beneficiaries are mostly the contractors who managed to get the changes through. Of course, they also really, really wanted to help with providing apartments for rent, right? 

But the rules aren't changing in the middle of the game. Every zoning ordinance I've seen includes a process by which your elected officials can amend the ordinance or grant variances to specific properties. Those are the rules.
I can understand the frustrations of a property owner who believes a change would devalue their property or lower their quality of living, but they're afforded every opportunity to make their case to their elected officials and persuade them to deny a requested variance or amendment. And I believe most ordinances contain language to the effect that a change should not be granted if it is detrimental to the neighborhood or public welfare.

Again, I get the frustration, but suggesting that this is changing the rules or done capriciously without the input/influence of the neighbors is not accurate.

[lawdog77]

70% of.the new apartment construction is described as luxury apartments. Not helping the disadvantaged, and not decreasing property values. Much ado about nothing.

[Hards Alumni]

70% of.the new apartment construction is described as luxury apartments. Not helping the disadvantaged, and not decreasing property values. Much ado about nothing.

Supply will always impact demand.  Obviously, it would be ideal to build more affordable housing, but you know.

[Scoop Snoop]

But not adding density creates the suburban sprawl and all of the problems that come along with it.  What is the solution?

Fair question. Can we agree that there is no easy solution? I bet we can.

I am familiar with only one metro area and its housing "solutions"- Richmond, VA., even though we have lived in a rural area of Virginia and have for years. So...my thoughts and opinions are no longer based upon being a resident here, but rather as a visitor who has seen the dramatic changes.

1) I have seen badly dilapidated homes that were beyond salvation razed and (I think via HUD) new homes built with "old timey" exteriors to blend in with the rest of the neighborhood. The neighborhood remained almost 100% African American, as the temporarily displaced residents wanted.

2) Long vacant, deteriorating industrial properties have either been repurposed as apartments, mini breweries, restaurants etc. I mention this because I think focusing solely on the residential aspect ignores the linkage between residential and commercial.

3) An area with once beautiful Victorian era townhouses had been very run down by the '70s. It is now restored to its former glory, but not everyone is happy. The charge? Gentrification.

4) Throughout the city, old homes have been rehabbed. People are doing this on their own. If there is lead paint or asbestos removal involved, the cost of properly correcting the problems can be overwhelming. This would be a great place for government to help out so that the homes are not abandoned because buyers are scared off.

5) The Chicago program I discussed in my earlier post regarding using rehabbing as apprentice training as well as restoring old homes needs some government involvement to entice contractors to buy in to the program. Although it was many years ago, I still remember talking to a contractor who was happy to be part of the program and he mentioned the job training benefit to workers who previously in low paying jobs.

My point is/was that shoehorning duplexes and small apartment buildings into single family neighborhoods impresses me as unfair and hardly making a dent in the housing shortage. Old homes often have lead pipes, asbestos, antiquated wiring, and other problems. They typically need new kitchens and baths, HVAC, etc. But there are SO many of them, and to ignore them, I think, is silly. Do homes need huge kitchens and sunrooms? Exercise rooms? A couple of rooms as offices? There is plenty of very good stock needing rehabbing, and residents in those neighborhoods in a apprentice program are able to earn more than they did. I have never been a fan of simply throwing government money at problems. But offering it to help with the costs of rehabbing old homes? Sure! Just put in a requirement that it be owner-occupied for a while. Meaning maybe 10 years.

Thanks for asking the question regarding the solutions. The ones I offer may not work out, but I think that-to use a very worn out cliche'-we need to think outside the box.   

[Hards Alumni]

But isn't this all ignoring the problem that the US has with suburban sprawl?  If there is little to no density being added near to city centers then it stands to reason that housing needs to be added to the edge of town.  The consequences of building like this are everywhere.  More roads, more traffic, and more destruction of farmland/nature.