North Coast Oregon

Articles listed under the tag: housing

Housing Credit Crunch: Who to Blame?

by Tryan Hartill

Although the NW corner of Oregon hasn’t felt much of the housing crunch yet, most of the rest of the country is starting to feel it.

This will be a multiple part series on who to blame it on. Here is a quick overview…..

Blame the Brokers!!!

It’s hard to pick which one to start with first, but Brokers start with “B” so here we are.

If we compare the Real Estate market to the illegal drug market, brokers would be the dealers. They find the customers and find the loans. They make a commission off the sale that is generally paid for by the lender through a higher loan amount. They must also make sure the borrower has the means to pay back the loan and if the property they want to buy will hold it’s value in case of foreclosure. They also must disclose certain facts about the loan to the borrowers per Federal and State Laws. Many follow the rules and run their Broker business with the highest lending practices, and some don’t.

Mortgage Brokers are involved with roughly 2/3 of all Home Loans.

Blame the Banks!!!

Banks are involved in almost every home loan, as they ultimately come up with the money to allow the borrower to buy a house. About 1/3 of all home loans are given directly to the borrower from the Bank. With the rest involving a middleman (Brokers). In years past they have worked more directly with borrowers, but have “outsourced” much of the lending process to Brokers in the last few years.

Blame Wall Street!!!

Many large Wall Street firms buy the home loans from the banks, sometimes hundreds or thousands at a time. They then bundle them in packages for investors depending on the risk of the loans. A package of high risk loans would usually mean a high risk/reward for an investor and the opposite for a low risk package of loans. A large chunk of retirement money, that has been invested by everyday Americans, went into “buying” these home loans through Wall Street firms.

Blame the Govmint!!!

Opinions are all over the lot on this one. Some say that the Government does not go far enough to police the industry. Barney Frank, who chairs the House Financial Services Committee, has introduced a Bill that would ban money of the incentives and rewards given throughout the Mortgage Industry. Ron Paul takes a different approach and blames the Fed for controlling the money supply and lowering interest rates too low in 2001.

You can find loads of information to back up your view on this one.

Blame Borrowers!!!

Going back to the Drug Market, borrowers are the final buyers and the users of Home Loans. A responsible borrower would match their future payments to their future income. “Sure that 4,000 square foot house on the hill would be nice, but we just can’t afford it, this 1,400 sq. ft. fixer upper is closer to what we can afford”. Some borrowers have different take….”ohhh look at the beautiful house…. We could have a nicer house than the Johnson’s!!!.... We’ll take it!”. The demand for these borrowers has never been as high as in the last few years, so lenders have come up with all sorts of interesting new ways to make it a reality.

Blame Sub-prime!!!

Getting people the house they want, even though they might not be able to make the payments, has been done more and more using sub-prime Mortgages.

People that meet certain credit and income requirements, and if the house they are buying will generally hold it’s value, can get a Prime Mortgage. These have the least amount of risk for the lender and have a lower interest rate attached. People that can’t meet the requirements have to go the sub-prime route. In years past this was what the “hard money” loan industry took care of. Hard Money loans are usually only asset-backed and have a high interest rate. The borrower and the lender both go in knowing that there is a good chance that the loan will not be re-payed, but the house/property will be used for collateral in case of foreclosure. Hard Money loans made up a very small percentage of home loans and this part of the industry was basically a “Pawn-shop or title loan” for your house.

Blame the Expectations!!!

Housing prices don’t always rise 10% a year. If you look at any housing graph you will see that housing has stayed fairly flat, with a gradual rise up over the years, mainly from inflation. Only in the last 5 years do you see it shoot up 10-20% per year. Even if housing costs dropped 50%, we still would be in line with the prices in the late 90’s. This can be compared to you getting a yearly $500 bonus in your December paycheck, but in January your check goes back to the normal amount…..and then going to your boss and chewing him out for giving you a January pay-cut.

Affordable Housing

by Tryan Hartill

Lots of talk recently about affordable housing. Much of which centers around Seaside, where people living in some of the apartments are being kicked out for condo development.

On a side-note, I’ve always been confused as to what the difference is between Condos and Apartments. Isn’t a Condo just a bigger Apartment?

Anyway back to the issue at hand. Several Seaside citizens approached the Council and voiced their concerns, to which the Mayor replied:

“We don’t know what to do, but we’re looking to see what we can do…...”

Those damn Transplants!

In order to address this issue we need to first look at why housing is becoming just a dream in the distance for many locals. The biggest reason is because people want to move here and the supply of housing just isn’t big enough. Even though our area offers jobs that are at, or only slightly above minimum wage, our local economy is doing very well at the moment. And our quality of life is much higher than average. (Just try to drive around Seattle at 5pm and you know what I mean…)

The opposite of this is Longview Washington, which looks like any industrial town in America. With a plethora of big-box, industrial parks and tract style development, with you guessed it; lots of affordable housing.
The Median income per household in Longview is $35,171.

Astoria is at $33,011 and Seaside is at $31,074.

Even though the employment rate of all 3 towns is nearly identical, folks who live in Longview make more money and have cheaper housing.

Is that what we want….to be like Longview? Ah…No!

Another reason why housing seems so high is what we consider a “home” these days. Years ago 5 or 6 people lived in one house (Gasp!) today the average population of one house is under 3. Over the last 6 years Astoria has 500 more houses…but as everyone has noticed the population is dropping. I don’t know what the numbers are for Seaside, but I would guess their numbers would even be worse than Astoria’s.

If someone were to get cynical about all this whole situation, they would tell anyone who complains about affordable housing and low-paying jobs, to move 50 miles up the river.

But this answer is politically impossible, so now we will move on to what local Governments can do to make housing more affordable, hopefully without turning this area into another Longview/Kelso.

• Expand building sites for housing.

• Fast track, reduce red tape and offer “carrots” for developers interested in building affordable homes.

• Tax Breaks.

• Generate development Districts. (Example PDC)

• Change zoning to allow tighter development.

• Rent controls.

If you read between the lines, 5 out of the 6 involve more development. If you are one that wants to halt development because you like the area to stay as it is, 5 items are off the table.
The only one left is rent controls, if you don’t agree with that either, then you and affordable housing are not compatible.

Next is a quick overview of the 6 major ways that local Governments can bring the cost of housing down…...

Economic Development part II

by Tryan Hartill

Since the other post has lots of good comments and this topic has much discussion I am starting a new thread with Cary’s comment.

Here is a link to the other post if you haven’t read all the comments and questions yet:

Economic Development Part I

Cary wrote:

An important issue has been touched on here. “Affordable housing” is vitually not available in our area anymore. The availability of property to develop has directly contributed to the increase in property values. There is more demand than supply. If you already owned property here, this is somewhat of a good thing for you.(maybe not if you are on a fixed income and can’t pay the property taxes) If you didnt own property it is not good at all.

There are several larger developments that are finally hapening in the county that should be a bit more “affordable.” There is not much left in Astoria unless the city decides to sell some of their land and expand(which they have plenty) or do some serious zone changing. The only larger single family housing project In Astoria right now is a development my family is doing across the steet from the job corp at Tongue Point. (the back side of Blue Ridge) This project is maybe 50 home sites, but it will take a few years to be ready to build a house on it.

Right now it seems that Astoria wants to see a whole bunch of really high density units at high prices. The only “affordable” housing has government assistance. Unless something changes, the only place with enough land and low enough taxes for affordable housing is Warrenton.

I dont see property values decreasing here anytime soon and I dont think we want that either.

The only thing that we can do is to stabilize the situation. We need more housing available to get control of the rapid increase in property values.

Here are a few things we need…...

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