Housing Market-What is yours like?

[desdawg]

I haven’t seen much of the mountains this summer. We have been busy trying to work ourselves out of a job. We have had lots of work so far this year but it kind of looks like we will wind up in about 2 months time. The boom and bust housing market is on the bust cycle. And it looks like that will continue for another 5-7 years. Too many people were allowed to buy more house than they could possible afford and now the whole thing will have to go through a correction. And that correction is a long cycle. Fill your piggy bank. About 1-1/2 to 2 years from now will be the true buyers market for real estate. I have added 5 properties to the portfolio so far this year and have one more in escrow. All were purchased for about 50 cents on the dollar. So even now there are bargains out there. But you have to know your markets and watch your P’s and Q’s. The people who pay retail market price today will be upside down in a year or two. They will spend the rest of the cycle getting back to the price they paid. Fortunately I am a bottom feeder. I have a lot of vacant land and will probably spend the next couple of years developing some of it and adding to the rental portfolio. Not my favorite thing to do but I do know how. Soon I will start shopping for inexpensive mobile homes to put on some properties.

Our county government in it’s wisdom started charging an ”impact fee” January 1. Anyone building on an unimproved lot is charged $8800 in addition to the normal permit fees. For a manufactured home it is $4300. People who live in manufactured homes don’t have as much impact on County services for some reason. Go figure. APS, our local electric provider always would do a 1000 foot line extension at no charge. As of July 1 they changed their policy. They will now price the job and pay the first $5000. The property owner pays the rest. On average a line extension is priced at $15,000. So with 10 grand for power, an $8800 impact fee plus normal permit fees and you have just spent $25,000 without turning over the first shovel full of dirt. The construction world has gone bonkers, at least here in AZ. Add that to the country wide housing situation and I think we are done for a while. I am an excavating contractor. We install septics, water lines, electrical services, etc on rural properties. So it is time to resituate myself. At the tender young age of 59 I need to choose carefully. Mainly all I know is real estate and construction.
So for all the potential property buyers my current advise it save your money, clear your debt cause your time is coming to buy right.
I am curious to know what is happening in the rest of the good old USA?

[WileyCoyote]

Wow, you bring up so many topics here that I don't know which one to address first!
:o

1) Housing market - it is temporarily stagnant here but that will change. We live in the sunny south - we have six weeks of winter, if that. All of the retiring baby boomers are moving south to us because they are a) tired of the snow; b) are getting to their second childhood where they want to be active yet not have the children and grandchildren underfoot constantly; and c) they are moving to where they can open businesses with less taxes and fees and more opportunity (they are their own customers and reason for moving, if you get my drift). Young professionals are following them because of the lower costs of housing as well as the increased opportunity for business.

2) As a da###d local government official, I and my cohorts saw the need to impose, NOT the Federal and State governed impact fees, that charge everyone alike - but developer fees. These fees are ascribed to new development only, of 10 houses or more, and must be done in a PDD (Planned Development District) agreement. What we did, basically, was make the newcomers instead of current residents pay their own way - they pay for all of the amenities of infrastructure that they demand by moving here. So much for fire, Police, schools, roads, etc., is added onto the cost of the new house - and put into 11 seperate funds (not the general fund) for those specific uses. That way we don't have 500 new residents claiming that there is no infrastructure or amenities - and longtime local residents having their taxes and fees raised to accommodate the newcomers. NOT "smart growth" (an anathema to any freedom-minded individual) but "controlled" or "sustainable" growth - a slow and steady way to increase the necessary infrastructure as the population increases.

This is protested by the quick-sell developers and real estate agents (whom we summarily ignored and privately refer to as rapists) and strongly supported by realtors and developers who understand that it is easier to sell a property to people who want a functioning FD, PD, roads, libraries, recreation - we make them pay their own way. What could be more libertarian than that (yes, yes, I know - why do they demand these structures from government? Well, they DO, and we HAVE to provide them, according to law - so why not make those that demand them PAY for them?)

The best part about it is that with sustainable growth, our property values of our long-time, generational residents appreciate, rather than depreciate due to climbing taxes and fees, et al, over time.

3) We have also contracted out our inspection and approval services so that the people who want to add on to or improve their older homes are not subjected to changes in government, but only to the Federal and State mandated building codes and inspections.

What we are doing is new and innovative and the topic of discussion nationally amongst not only private developers but public representatives. Which means that they may take what we have done back to their own towns and counties and corrupt it to solely fill their coffers with added fees on top of increased taxes. However, if done right, it enhances not only the old-town growth but the new.
It was the best we could do while suffering under Federal and State mandates.

[desdawg]

I understand the principal of the impact fee. And I like the way it is being done in your area much better than what is happening here. 10 units or more doesn't wind up penalizing the person who is building their own home. What dollar figure did you folks come up with and how was it arrived at? Did you make it different depending upon what type of structure was being added to the tax roles? In a subdivision environment the developer gets to add all of the infrastructure. Out here in the county you pay for your permit fees and property taxes are adjusted ad infinitum. We don't have much for services anyway. Government is clunky and inefficient. It I ran my business in a fashion to resemble government I would be out of business. So taxes in one form or another being ineveitable apparently, in it's pure form where newcomers pay their own way is not a bad concept. But to make it unequal depending on the type of structure being installed then turns this righteous idea into a party politics concept where we get all we can from one group and then change it to get all we can from the folks in the next income bracket. People who live in site built homes are not more high maintenance than people living in manufactured homes. I smell Democratic Party principles in the air.

[CarolAnn]

Our housing market in Wisconsin is finally starting to drop. It was insane - just like most places. I think the local governments let things get out of hand because as housing prices went up, the tax base went up. Now, we'll soon hear them howling because the tax base will also be dropping with the housing prices. But at least sensible people may be able to buy a house again. I've been waiting, and will probably wait another year before I do.

I can't feel too bad for idiots who paid tens of thousands more than the property was really worth. Now they are loosing their buns because they assumed it would climb forever and they'd be able to flip their investment and make a profit. Instead, their stupid "investment" is flipping them!

[desdawg]

Carol Ann, I think you are in a good position. And yes it will take a while yet for the prices to get back down. People will have to sit on the market trying to recoup their purchase price before they acknowledge that they can't. Or they have to be able to ride out the next few years to get back to even. Even the lenders with the repo's will take some time to price their properties so they will sell. I think when the cycle is over we will then see normal appreciation of maybe 4-5-6% a year. These last few years have been crazy. The mortgage lenders made it possible with their creative terms and many people will suffer big losses and ruined credit because they bought into it. I own a lot of real estate but I am a bottom feeder. The way I purchase makes me fairly recession proof. And the majority of mine I own outright. It just isn't very saleable right now. LOL.

[WileyCoyote]

You asked, "What dollar figure did you folks come up with and how was it arrived at? Did you make it different depending upon what type of structure was being added to the tax roles?"

The dollar figure is actually an algebraic algorithm, based on studies of costs per household. Say you need one fully functional, fully equipped police officer for 180 people (not homes, people.) Say that on average there are 4 people living in a house. How many houses does it take to provide for one police officer? 4.5. So you charge $450 per house for police fees. Townhomes normally have only 2 people living in them at most; the fee is halved. Retirement communities that are restricted by age are exempt from school fees, or from designating properties for schools as the other development properties do.

We encourage developers to build communities with centralized commercial districts by permitting a minimum of 35% commercial property in every district. This puts less traffic on the exterior roads for short trips and shopping. They must also designate school sites and recreation sites in their areas so that locals are not impacted with the costs of finding properties for schools and recreation. The town and school district do not pay for nor finance these sites but will build on and staff them. Basically we will have groups of small and self-contained communities - rather like the Germantown and Chinatown districts in large cities - so that people can all work and shop and educate and play in their own area.
Realtors and developers were at first in opposition to this because they wanted to build and sell the usual huge housing developments with the strip malls exteriorly, and wanted the city and county to purchase land for what would be needed in future. We finally got it thru their heads that it is easier to sell a self-sustaining community with built-in and paid-for amenities, than to sell house after house while the increasing traffic and other impacts caused financial problems as well as increasing crime, etc.

Trailers and manufactured homes have limits in town, solely because they depreciate over time. They must be kept up and clean and sound on the exterior, and must be in designated areas so that they do not affect the valuation of properties around them. We have a serious problem here with abandoned trailers left to finish their collapsing on their properties, and the cost to get rid of them (the property owners are usually not tenants of the county or even the state) is prohibitive and should not be government's (read - the taxpayers') responsibility... yet it all too often is. It is not the 'trailers' that cause the problem; it is the lack of amenities, the lack of recreation, the fact that the trailers (and, recently, homes) are jammed in so closely on top of each other without any off-street parking or roads or anything else, that people start living like animals jammed into too-close caves, and that is where the trouble starts. Then they have to drive 20-40 minutes or longer for employment, and their schools are far away, so that children and day cares and shopping and all of the things that families need to survive are far apart and hard to get to. Children are left home alone and get into trouble, real serious trouble, and no police officers are in those areas. When you have properly paid for infrastructure to begin with, and people don't have to drive or find transportation all over town to take their kids to school and then soccer or ballet practice, day care and shopping, restaurants or movie houses, when people can walk to work and school and after-school or after-work amenities, and feel safe and protected with their own police and firefighters "just around the corner", even a trailer park can be a nice place to live. You also aren't spending the $$ to drive everywhere. Everyone pretty much pays the same impact fees, gets the same services, and is provided the same opportunities in every community - and each one is different.

[desdawg]

Interesting. What you are describing sounds like a city environment. The impact fee here is a county fee. Most county property is rural and the fee is charged for anyone building or installing a home in any unicorporated area. About the only county services would be road maintenance and the Sheriffs Department. Wells, hauled water and septic systems are the order of the day in these parts. School Districts are seperate entities and their funding shows up on your property tax bill. Parks and recreational facilities are mostly non-existent. If you want to shop you drive to a City or Town that has these facilities and contribute to the need for road maintenance. We have income taxes, sales taxes, property taxes, building permit fees and now impact fees. At $8800 a pop we should be able to purchase a new cop or a new roadgrader about once or twice a week. In the meantime my workload has disintegrated to a point where pretty soon income tax won't be an issue. I am not opposed to newcomers paying their own way. But it shouldn't matter what kind of home a family lives in, their arrival will impact services equally. I don't know how that fits into the formula. :-/