Housing market glut? Softening? (article)

[boiker]

http://money.cnn.com/2006/02/27/news...omes/index.htm

According to CNN, the housing market indicators are showing a softening to the new housing markets. Is this a sign that the economy is cooling off? How can we planners react to this potential change in housing? Are there ways that we can proactively advise our elected officials (after all we are professional consultants) to the potential issues ahead?

What are your thoughts on the issue and how it relates to local community development issues.

[michaelskis]

The housing market in the Kalamazoo, and S.W. Michigan has cooled off. Many of the homes have the highest days on the market in the past 20 years. However, lofts in urban cores have started out selling many of the homes in the outer suburban areas.

It may just be me, but I see a shift happening as some of the Baby Boomer Generation starts to change gears. Their kids out of the house and they are looking to downsize their living arraignments and moving into older urban areas. Unlike any other retired generation in history, the Baby Boomers appear to be more social and interactive in their environment and are starting to live lifestyles similar to the hypothetical “Creative Class” and in search of what the suburbs can’t give them.

Just my thoughts though…

[DetroitPlanner]

What is happening is a perfect storm.

1). Baby boomers are retiring in record numbers, they are assessing their life needs and putting large houses on the market and buying smaller condo where they no longer have to mow the lawn etc...

2). Families cannot afford to buy these houses any longer. With the realities of people being out of work, many are in fear of losing their jobs as well. Therefore, they are buying smaller homes, or renting. This used to be a phenomena that was seen among manufacturing is starting to infiltrate into government, finance, and service sectors as well, as both governments and industries are forced to tighten our belts due to the overall economy no longer being the 'top dog'.

3). Fear of fuel costs is slowing exurban and urban fringe growth. People are more concious of the costs of fuel so they are more readily acceptable to live close to work (what a concept!), along a bus line, and do not want to heat a 3,000 square foot house when a 1,200 square foot house is all they really need.

The City of Detroit has permitted 1,000 new houses this year, most of them are small. Compare this to wide open townships such as Canton or Macomb, and Detroit is the hot market in the region, in spite of the higher taxes.

[jmello]

2). With the realities of people being out of work, many are in fear of losing their jobs as well. Therefore, they are buying smaller homes, or renting. This used to be a phenomena that was seen among manufacturing is starting to infiltrate into government, finance, and service sectors as well, as both governments and industries are forced to tighten our belts due to the overall economy no longer being the 'top dog'.

This must be a Midwest/Michigan thing. I have not seen this attitude anywhere on the East Coast. Things are still go, go, go here (despite the little bump in 2001-2002).

Fear of fuel costs is slowing exurban and urban fringe growth.

I agree with this. However, I would also add "increasing traffic congestion and an intense aversion to it" as a reason for the migration to more centralized residential areas. Driving is no longer "fun" in most urban/suburban areas and people are increasingly seeking to minimize time spent in the car.

[Otis]

Don't see any sort of glut, that's for sure here in Oregon. The Oregonian (Portland newspaper) just reported the real estate market there is still strong. I think there might be some minor seasonal slowing (i.e. things stay on the market a little longer), but no bust or downturn yet. Last summer many properties were sold before they were advertised because brokers had lists of people looking for property.

The two main things I see affecting the real estate market are interest rates and the stock market. If mortgage rates rise appreciably, that may cool things off. If the market starts doing better and gets a sustained rally going, that will pull money out of real estate and into the market. It'll be interesting to see if the current stock market rally is maintained.

[Wannaplan?]

What are your thoughts on the issue and how it relates to local community development issues.

I think everyone around here is waiting to see what happens next with GM, Delphi, and Ford. If there are layoffs and/or plant closures in the next 6 to 18 months, not only will the central cities be affected, but the suburbs will be hit just as hard, if not harder. It's gloomy and doomy here.

[jaws]

CNN is a few months behind the curve. There's not only a glut of housing, housing prices are crashing. See http://www.cyburbia.org/forums/showthread.php?t=23225

And people with solid finances shouldn't be gloom & doom. This isn't a catastrophe, it is an opportunity! More fortunes were made during the Great Depression than the 1920's. Be entrepreneurial and you can make yourself a nice little killing with this.

[PlannerGirl]

The condo market in the DC area is going softer but not yet soft. Too many conversions and high end condos hitting the market at once. Add in the investors dumping the condos they snapped up before they were built for rental and BAM you have a nice slow down. Homes in general new and old are staying on the market longer, gone are the free for all days of a total sellers market. Nice to see a bit of a correction in the NoVa area. Though prices are still crazy

[boiker]

I'm interested to get everyones take on how this effects their jobs as planning professionals, public or private. Have you been encouraged by your elected officials to "forecast" or plan for the softening? Is an econominc development wing of your city or firm tracking statistics that can be applied to the local conditions?

I ask because here, we have not assumed the role of "trend watchers" and forecasters. We allow the market to dictate how much and where it gets built and my silent fear in this slow growth area, the new construction market is outpacing demand and the crash might be a bit harder here than elsewhere.

Are there steps that can be taken to soften the blow of housing "softening"

[Senior Jefe]

New housing sales in my community has been slowing for over 2 years now. Just today I have heard of three existing homes being on the market for over a year. Last summer the average was 6 months on the market for existing houses. Local builders are even buying existing homes to get people into their new homes and then renting the older homes for the cash flow. Builders have been slowing down their demand for permits for 2 years now. Developers seem to be a very optimistic bunch so development proposal keep coming in for review and new lots are still being platted.

We look at the inventory of available lots every spring. But since we always have about a 5 year supply it will take awhile for City Council to get concerned about additonal over-supply. No one but staff is telling the elected officials to slow down. There is always a number of developers asking for approval for their new 1600 unit development.

In a previous job I had 10 years ago I worked in a community that went bust in the early 1980s after a major building boom. There were a lot of subdivisions platted only on paper. The economy was coming back around by the 1990s so a lot of our work was dealing with these old paper subdivisions. It was a real pain since old development agreements were inadequate to deal with voiding old approved infrastructure plans. The developers were long gone and sometimes the lots were sold to individuals who couldn't build because of lack of water, sewer and streets. There was a lot of pressure for the government to pick up the costs and bail these people out. We felt lucky when some builder would buy up the subdivision, get new plans approved and then build it.

The lesson from this is to craft development agreements or your code to protect the taxpayers and to deal with a situation where subdivisions may set for years without any construction.

[Cardinal]

I'm interested to get everyones take on how this effects their jobs as planning professionals, public or private. Have you been encouraged by your elected officials to "forecast" or plan for the softening? Is an econominc development wing of your city or firm tracking statistics that can be applied to the local conditions?

I ask because here, we have not assumed the role of "trend watchers" and forecasters. We allow the market to dictate how much and where it gets built and my silent fear in this slow growth area, the new construction market is outpacing demand and the crash might be a bit harder here than elsewhere.

Are there steps that can be taken to soften the blow of housing "softening"

Maybe it is because I cross over into economic development that I have not seen much of a negative impact. Communities that did not address economic development are beginning to do so. One of the ways they are doing this is through retail. We are now five years into a very turbulent period, with many chains closing or being purchased or undergoing sometimes radical changes. This impacts many cities right in the budget, which gets the attention of the elected officials. I have resurrected my old retail site selection credentials to address that issue.

How will cities address the slowdown? I think one of the likely answers is going to be to cut planning department budgets. If there is less work, then why do we need all those Damned Commie Planners (tm) around?

[DetroitPlanner]

This must be a Midwest/Michigan thing. I have not seen this attitude anywhere on the East Coast. Things are still go, go, go here (despite the little bump in 2001-2002).

I agree with this. However, I would also add "increasing traffic congestion and an intense aversion to it" as a reason for the migration to more centralized residential areas. Driving is no longer "fun" in most urban/suburban areas and people are increasingly seeking to minimize time spent in the car.

We were actually strong during 2001-2002. The post 9/11 time was very good around here as the domestic auto companies really stepped up to the plate. It probably saved the nation's economy.

Increasing traffic congestion just makes the masses move further out into the country. Its counterintuitive. I don't think people in general have a clue in what they are doing when they decide to/ where to buy a home.