Monday, June 20, 2005

The Homeless? Tough Luck

The homeless? Tough luck

You might not guess it from newspaper articles or real estate ads, but roughly a third of all Nutmeggers rent.

But while one winces at code violations that doubtless infest some places, one shudders at the plight of other poor souls who can't even get in. Many show up each night at the homeless shelter. Others, upon the arrival of warm weather, materialize like mayflies in parked cars, abandoned buildings, and under accommodating bridges.

These folks do not qualify for America's dominant housing assistance program -- the mortgage interest deduction. Neither are they eligible for programs boosting first-time home buyers. In fact, rather than being helped, they often suffer at the hands of government.

For instance, they are regularly doomed by the demolition, rather than repair, of public housing. Or by the budget cuts to Section 8.

And this is just in the cities. In the suburbs there never were any public units, Section 8, or decayed but cheap downtown apartments. Low-income workers there have simply been expected to live "somewhere else."
'Urban sacrifice zones'

"Somewhere else" typically means Connecticut's "urban sacrifice zones." Foremost among these are Hartford, Bridgeport, New Haven, Waterbury, Willimantic and New London. Those cities diligently house, educate, feed, police and nurture poor folks far out of proportion to their overall numbers. This leads inexorably to high local taxes, poor schools, run-down neighborhoods, plentiful crime, and all the other symptoms of economically segregated society.

And in the state's other towns it eventually becomes tiresome to keep reading that one must earn $17.90 an hour to afford a two-bedroom apartment in Connecticut, or that our state is still short a gazillion affordable housing units. We've known that all along. That's why we in the middle class each go to the trouble of inheriting property and getting master's degrees. And frankly we don't want any more affordable units locally.

Not that there isn't always a cadre of sainted Nutmeggers working to change such things. They sit on housing authorities and non-profit boards, they hammer for Habitat, they volunteer for VISTA, they even hold public office. There just aren't enough of them.
'Spending' required

Such housing expenditures (and other vital services) are what the governor and Republican legislators refer to as "spending." "Spending" is much to be reviled.

Democrats often don't buy into that dogma, but are fearful that the voting public does. Taxes to help poor folk buy health insurance may possibly be acceptable, but taxes to help them rent an apartment, maybe in our town, are something else.

Let's not push our luck.

Thus Connecticut coasts amiably along in its bipolar coma: affluence on the one hand, anguish on the other. Lip service abounds for the ill housed, but not programs. We have learned by now that democracy plainly promotes segregation, and that in our highly civilized local religions, the Lord truly does help those who help themselves.

Originally published by Norwich Bulletin written by Collins, a former state representative and former mayor of Norwalk, writes for MinutemanMedia

Real Estate:Is it the 80's again 6/19

FROM RECORD JOURNAL MERIDAN CT. The reak estate bubble: Will it be the 1980s all over again? by: Mary Ellen Godin

When Lise Milinovich went shopping for a home, she saw she was priced out of much of the suburban market. So she paid $159,000 three months ago for a condominium at Quarry Farms on the east side of Meriden that had increased in value $20,000 from the day she signed the contract to the actual closing. But Milinovich knew that if she had bought a multifamily, she could have saved even more through real estate interest tax exemptions and tenants who pay the mortgage. So, even though she bought the condo, she's looking around for multifamily investments to build long-term equity.

As the average home price continues to climb nationwide, first-time buyers are getting a case of sticker shock as they see two-to-three-bedroom Capes priced at $235,000 and up in suburban Wallingford, Cheshire and Southington and in Meriden. Most buyers can't touch the 3,500-square-foot high-end houses that developers are frantically building in Meriden and the rest of central Connecticut. A four-bedroom house on a 2-acre lot in the Stone Ridge subdivision in Wallingford starts at $549,900, which requires that the buyer have an income of at least $140,000 and a $20,000 down payment.

The steep increase of housing prices has some economists predicting the housing boom (defined as when inflation-adjusted prices for homes rise by 30 percent or more in a three-year period) is going to go bust. Busts occur when home prices decline by at least 15 percent over five years. The office of Federal Housing Enterprise Oversight reported that the average U.S. home price rose by almost 11 percent in 2004, up from 7 percent in both 2002 and 2003; and that the number of boom markets increased by 72 percent last year to now include 55 metropolitan areas. These housing boom markets included 21 cities in California, 18 in the Northeast and 11 in Florida.

A similar occurrence happened during the market boom and bust of the late 1980s, which followed the collapse of more than 750 savings-and-loans and cost taxpayers millions of dollars. The failure of the banks was blamed by many in part on their aggressive real estate lending practices that led to foreclosures across the country. But many are hoping this boom won't burst and hurt too many homeowners. The National Association of Realtors maintains that with demand high and interest rates low, and no downturns in the economy, the stock market and consumer prices will catch up with housing prices. Victor A. Matias Jr., a real estate agent with Cross Town Realty in Meriden, said he recently had a customer who qualified for a $159,000 mortgage and it took him three months to find something. The customer finally settled for a fixer-upper.

"Too many people are being outpriced. It's been exponential," Matias said. "The real estate market is exceeding the business cycle." He's seeing more first-time or moderate-income buyers with an annual income of about $50,000 moving toward condominiums in the city or multifamily houses to get tenants to help pay the rent. But with no one building multifamilies and investors — many from New York — snatching them up as cheap investments, the availability of affordable units is rapidly decreasing as their prices increase, Matias said.

Trudy Magnolia, an assistant in the city's Economic Development office, said she fields calls from New York investors inquiring into city-owned multifamily properties for investments. Multifamilies were once seen as one way families could pool resources and own property while living inexpensively. Later they were sold or leased out, giving the sellers more cash to move up or invest. "We look to these to generate cash flow," said Matias, who owns several multifamily buildings in the city. "They're looking at them as tax shelters. You can't enter that market anymore. " Not if or how — but when William Wadsworth, founder of Wadsworth Investments in Wallingford, has only two words of advice for real estate investors: "sell now." Wadsworth is a securities adviser who carefully watches the housing market for himself and his clients. He said today's situation is similar to the 1980s, when he told his clients that the market is not only going to burst, but it's going to be a disaster. He's repeating that advice and has taken it himself. A piece of property he bought for $1 million just after the bust in the late 1980s was sold Thursday for $3 million. "I eat my own cooking," he said.

"Generally speaking, it (real estate) is getting overvalued," Wadsworth said. "It hasn't cracked yet, but the (interest) rate has increased. It's not a matter of if or how — it's a matter of when. The real estate market is higher than it should be. It doesn't make sense." Wadsworth said areas that are very hot right now in California and Florida are primed for market busts, and he advised investors to watch for cracks. He describes cracks as instances where houses sit on the market longer, prices begin dropping; but when foreclosures increase, it's too late. He predicts local market prices could continue rising another 10, 20 or 30 percent, but he recommends taking money out before prices start falling.

"It's better to be out a little early and miss the last five percent," he said. Wadsworth recommends that buyers wait about three to eight years before buying again, when prices return to market value. But licensed real estate broker Teresa Roccapriore-Vitelli, who founded Cross Town, said the market is simply repeating the same cycle it saw in the 1980s — and has already started to correct itself. "The rental and condo market is escalating, and the cost is going up, with interest rates staying low," Roccapriore- Vitelli said. She also feels it won't go much higher and will begin to level off. And she is concerned about the influence real estate agents have on market value, thus encouraging the seller to hold out for more. "Where does it stop?" Roccapriore-Vitelli said. She said she's seen agents set prices at $30,000 higher than market value, and others follow suit. If the appraisal doesn't match the price, quite often the buyer cancels the sale. But appraisers are now adjusting for the recent price spike in the sales of comparable homes, and appraising accordingly.

Another factor keeping costs up and the housing supply tight is the number of homeowners who are refraining from selling even though they may be sitting on a ton of equity. Many know that if their house can get a great price, an upgrade can get a greater price. For that reason, many potential sellers are reluctant to jump into the higher-priced market that brings more in closing costs and property taxes. This phenomenon has led to a boom for local construction companies as people have properties fixed up or add family rooms instead of selling. But Sandy Maier- Schede, a licensed broker since 1973 and partner with Maier Real Estate in Meriden, said she saw more of that phenomenon six months ago, but sees the market loosening up now.
"It's more cyclical because of the time of the year," she said. "There's a hesitant confidence."
She agrees with Roccapriore-Vitelli that the housing market is in a cycle similar to the 1980s, and said one key to real estate is if you buy high, hold on to it.

"There's always a risk" But Maier-Schede doesn't like some of the creative financing tools used by banks or lenders — such as 80/20 mortgages, which offer 100 percent financing broken down with a 20 percent down payment mortgaged at a higher rate and the remaining 80 percent mortgaged at the lower market rate. Sometimes the difference can be five percentage points. These mortgages often drain all the equity out of the home, she said.

Those who bought real estate in the 1980s and saw values drop are now seeing significant gains, Schede said. The rebound of the condominium market is also an example of how the economy caught up to housing prices. She said there are now only 40 units listed in the Meriden market.
Charito Coriano, a partner in Coriano Realty, agrees that many first-time buyers are priced out of the starter market and helps steer her clients to clear up any credit issues that can get them a better mortgage.

"There's always a risk; its a sellers' market," Coriano said. "I hope that by the end of the year there's a change." Matias, of Cross Town Realty, reminds his clients to look realistically at what they can afford before signing any mortgage. "Too many people are living beyond their means and don't have financial freedom," he said. "Let your home work for you, don't work so hard for your home. Don't let it lasso you." But Matias acknowledges a strong motivator for most buyers and investors. "You can't grow any more land." But Wadsworth recommends investing in liquid assets, such as certificates of deposit or bonds, when the housing and stock markets are volatile. Unlike real estate, these can free up cash much quicker.