Tag Archives: home prices

Won’t You Be My Neighbor?

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David Wilson

Realtor.com quoted me in Are Neighborhood Watch Signs Killing Home Sales? I reads, in part,

Neighborhood watch programs proclaim that a community’s members have one another’s backs, a collective way of saying, “Hey, we got you covered.” So home shoppers who see neighborhood watch signs plastered on telephone poles and in parks should feel confident about settling down in that community, right?

Not necessarily.

A debate is brewing, most recently in Longboat Key, FL, over whether neighborhood watch signs are good or bad for property values. While some think these safety-first signs raise home prices, former Mayor George Spoll is arguing the opposite: that they make an area look crime-ridden, sinking home prices and scaring off potential buyers in the process.

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“It would be hard to say that a watch sign on its own is a good or bad thing, but in particular contexts it could make a difference,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. After all, he points out, “If home buyers have heard that crime is an issue there, neighborhood watch signs may give comfort that the neighborhood is doing something about it. On the other hand, if it’s a neighborhood that is not facing major crime issues, signs may be a confusing signal.” 

Bottom line: If you’re a home buyer and see these signs, do your homework and research crime in the area. Go ahead and ask your seller and Realtor about crime in the area; call local law enforcement or search online on sites such as Crimemapping.com or Neighborhoodscout.com.

What’s Pushing Down The Homeownership Rate?

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USDA New Homeowner

S&P has posted a report, What’s Pushing Down The U.S. Homeownership Rate? It opens,

Seven years after the Great Recession began, a number of key economic factors today have reverted from their short-term extremes. Home prices are rebounding, unemployment is declining, and optimism is rising ­­among economists if not among financial markets­­ that the U.S. economy may finally be strong enough to withstand a rate hike from the Federal Reserve. All these trends point to reversals from the recession’s dismal conditions. Even so, one telling trend for the nation’s economy hasn’t yet reverted to its historic norm: the homeownership rate. The rising proportion of renters to owner ­occupants that followed the housing market turmoil has yet to wane. Compound this with tougher mortgage qualifying requirements over recent years, and it’s not surprising that the homeownership rate, which measures the percentage of housing units that the owner occupies, dropped to a 50­ year low of 63.4% in first­ quarter 2015. However, the further decreases in unemployment and increases in hourly wages that our economists forecast for the next two years may set the stage for an eventual comeback, if only a modest one. (1)

S&P concludes that many have chosen not to become homeowners because of diminished “mortgage availability and income growth.” (8) Like many others, S&P assumes inthat the homeownership rate is unnaturally depressed, having fallen so far below its pre-bubble high of 69.2%. While the current rate is low, S&P does not provide any theory of a “natural” rate of homeownership (cf. natural rate of unemployment). Clearly, the natural rate in today’s economy s higher than something in the 40-50 percent range that existed before the federal government became so involved in housing finance.  And clearly, it is lower than 100% — not everyone should be or wants to be a homeowner. But merely asserting that it is lower than its high is an insufficient basis for identifying the appropriate level today.

I think that the focus should remain on income growth and income inequality. If we address those issues, the homeownership rate should find its own equilibrium. If we push people into homeownership without ensuring that they have stable incomes, we are setting them up for a fall.

Wednesday’s Academic Roundup

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