Tag Archives: housing market

Pandemic is Pushing Wall Street Suburbs and Home Garden Space

New Orleans        Rumor or reality?  I wasn’t sure.  My daughter had heard from a real estate agent who specializes in New Orleans historic districts like the French Quarter, Marigny, Bywater, and elsewhere that, contrary to nationwide home sale collapses of 50% during the pandemic, sales were booming in the Quarter.  I found that hard to believe.  Maybe just a one-off thing for that particular agent or your usual hawker hype or something.  What was more interesting to me is that she reported that sales were driven by people leaving the Quarter with its tight spaces and brick patios for anyplace they could find, like Bywater or even farther out, where they could have a garden. Grocery store shortages and health risks were spurring a weird reactive small food sustainability movement, it seemed.

Darned if vulture capitalism as practiced by REITs and Wall Street equity funds didn’t find themselves on the right side of a lucky coin toss, even as we have noted that they have dominated and eviscerated the rental markets in cities all around the country from Atlanta to Memphis to Phoenix.  Remember, these fast operators, led by Blackstone Group, swooped in and bought hundreds of thousands of foreclosed homes from Fannie and Freddie in nearby suburbs so that they could apply a coat of paint and make them rentals, sometimes to the former owners.  Invitation Homes, the creature from the Blackstone lagoon, was spun off for billions, but is still the biggest operator in this space with more than 200,000 properties.  American Homes 4 Rent is another big player with over 50,000 homes.  According to the Wall Street Journal, after they took early hits in the stock market on expectation of rental defaults at the beginning of the pandemic, they have now surged forward, partially riding the same tide that might be rippling from the urban core, as noted in New Orleans.

Families are trying to move to the suburbs because of health concerns and in order to get more space for themselves and children to cope with stay-at-home orders now and to come.  These families are also moving to rent as mortgage markets and general financial concerns make buying during this depression harder to contemplate, despite low interest rates.

Not on the short list from Wall Street, but I bet on the minds of families as well is something of a modern day “back to the land” movement, as least as far as suburbs located near urban centers are concerned.   Small gardens and food security are on the list.  I’ll bet more of them are like my uncle in Kansas City and want the space to have what he calls a Costco-room, where he stores all of his bulk purchases.  No danger with a Costco-room of ever running out of toilet paper!

This new “prepper” sensibility might be a movement.  It’s a shame Wall Street is reaping many of the rewards, but a pandemic makes all of us something of a prepper.  The zombie apocalypse might be fiction, but in fact, it now seems like we are in it.

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Crisis in Home Ownership for Working Families and Minorities

San Jose much for sale but few are being sold (Karl Mondon/Bay Area News Group)

Much for Sale in San Jose   (Karl Mondon/Bay Area News Group)

New Orleans   Something big is happening in housing. Maybe big and bad. Maybe big and unknown, but scary in its uncertainty for the future.

Here are the facts that frighten.

Home ownership dropped again in the last quarter of 2016 and when it did so, it fell below 63% to the lowest level in 50 years.

Mortgage loans to African-American families fell in the review period between 2004 and 2014 from 7% of total mortgages for blacks to only 5% of mortgages issued. Hispanic families budged up slightly from 7 to 8%, Asian families stayed at 5%, and mortgages to white families zoomed up from 58% to 69%.

This analysis of Home Mortgage Disclosure Act data was done by the National Association of Real Estate Brokers. They argue in their report that this drop has to do with a tightening of credit standards after the 2007 housing meltdown. Couple that information with another recent statistic that prices in the housing market now are only 2% lower than their historic highs achieved in 2006 before the bubble burst. For the real estate brokers, it is in their interest to have their cake and eat it, too. A return of high prices means happy days for them. Claiming the decrease in much of minority-based lending is based on a change of standards, rather than a clearer manifestation of discrimination is also squarely in their interest.

The Wall Street Journal reported that one of the reasons that minorities are getting a smaller share of loans is the return of the jumbo mortgages to “more affluent borrowers with loans exceeding $417,000.” Mumbo-jumbo. Report after report also indicates with this surge in pricing what used to be “jumbo,” is now just standard operating procedure. Average housing prices have now hit $1 million San Jose for example. Meanwhile other reports speak to housing and income growth in center cities around the country, including in areas like Detroit and Philadelphia and deterioration of income and housing prices and values in working class areas of cities, along with the paradox of millennials wanting to live downtown which is pushing the prices up now, while Pew Research surveys are also saying they are only committed to living downtown for five or ten years. What then?

Anyway we shake-and-bake these figures, it is hard to maintain a belief that that part of the American Dream that included home ownership is still alive. We can’t have both stagnant incomes and rising home prices with narrower lending parameters and believe that home ownership can increase among low-and-moderate income families. The conservative blame-game that tried to saddle the housing collapse not on Wall Street recklessness but on lax lending standards has mutated into a form of de facto national housing policy.

Does that mean there will be more affordability in the rental market? There’s no indication of any new trend there, and in fact market-rate construction for the millennials is still the driver. Meanwhile neither political candidate has a program around housing, much less affordable housing, and if values are falling in low-and-moderate income communities that are not on the gentrification list, that also means that citizen wealth will continue to drop like a rock.

Housing is now on the trajectory from problem to issue to crisis, and the silence around solutions is depressing and deafening.

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Please enjoy East Coast Girl by Butch Walker. Thanks to KABF.

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