During this bottom, who catches a break?
New series on solving the financial crisis
| Where are land prices headed? Which landowners catch a break? We trim, blend, and append five 2011 articles from: (1) The Atlantic, May 9, on prices of -- they say housing but it’s actually land -- by M. McArdle; (2) Bloomberg, May 9, on underwater by J. Gittelsohn; (3) School of Cooperative Individualism, May 16, on crisis origins by E. Dodson; (4) New York Times, May 11, on nonprofits by M. Cooper; and (5) Wall St Journal, May 11, on ground rent by J. De Avila. |
by Megan McArdle, by John Gittelsohn, by Ed Dodson, by Michel Cooper, and by Joseph De Avila
- Housing Prices Still in Steep Decline
According to data from Zillow.com, home prices fell 3% in the first quarter of 2011. This is the largest decline since 2008.
Four years on, why is the housing market still falling? The expired tax credit for buyers simply moved some of the pain into the future. We didn't actually make the process less painful.
House prices are still well above their historical levels. The government cannot legislate that imbalance away. You don't have to be a "Work the rot out" liquidationist of the Andrew Mellon school to think that eventually, prices have to fall to market clearing levels, and that slowing the process down might not improve it much.
To see the whole article, click here .
JJS: Four years on, land prices are still falling because four years is a typical length of the bottom in the 18-yr land-price cycle, something most myopic pundits have never heard of. Could it because almost all discussion is slanted toward the POV of the speculator, not the actual user of land? If a house is a home, not a gamble, then it hardly matters if it’s current selling price is less than what the homeowner paid, because the homeowner is not selling but settling in to enjoy community for the long haul.
- ‘Underwater’ Homeowners Increase to 28%
More than 28% of U.S. homeowners with mortgages owed more than their properties were worth in the first quarter as values fell the most since 2008, Zillow Inc. said.
Homeowners with negative equity increased from 22% a year earlier as home prices slumped 8.2% over the past 12 months. Home prices have fallen almost 30% from their 2006 June peak.
According to the S&P/Case-Shiller Composite 20-City Home Price Index, home prices in February were 33% below the 2006 July peak.
In Las Vegas, 85% of homes with mortgages were underwater, the most of any city tracked by Zillow. Other metropolitan areas in the top five were Reno, Nevada, at 73%; Phoenix at 68%; and Modesto, California, and Tampa, Florida, both at 60%.
Property values rose in only three of the 132 regions tracked by Zillow: Fort Myers, Florida, where they gained 2.4%; Champaign-Urbana, Illinois, up 0.8%; and Honolulu, up 0.3%. Fort Myers prices increased after falling more than 60% from their 2006 peak because they “over-corrected”.
To see the whole article, click here .
- The origins of the U.S. financial crisis
Working as a market analyst and business manager for Fannie Mae until 2005 left me with some unique perspectives. My narrated Powerpoint presentations include relevant graphs and charts to help tell the story and offer solutions. The series provides a clear picture of how the problems evolved and what we could do to prevent the even more serious economic depression that threatens. Despite what one hears in the media and from various sectors of our government, many measures of our societal health continue to deteriorate.
To see the whole article, click here .At the main page of Authorstream, click on the BROWSE link, then enter my name -- Edward Dodson -- in the search line. This series and several other presentations I have developed will appear.
JJS: Essentially, the basic solution is understand that the value of land is commonwealth, a spending that, on behalf of society, government should recover and share. Everybody who excludes others from land -- something we all have an equal right to -- should have to pay rent or “land dues”, without exception.
- Squeezed Cities Ask Nonprofits for More Money
A growing number of cities are seeking money from nonprofit institutions that occupy valuable land but by law do not pay property taxes.
The mayor of Providence, R.I., Angel Taveras, said, “Every citizen, every city worker, every taxpayer, every business and every organization -- including tax-exempt institutions -- must share part of the burden of saving our city.”
As nonprofit universities and hospitals -- eds and meds -- grow in size and importance in many cities, manufacturing has disappeared and development has moved to the suburbs, leaving much of the best land in some cities off the tax rolls.
The effort to get nonprofit institutions to contribute more comes as many nonprofits are feeling the same pinch as cities: their endowments shrank as their investments lost money, contributions from donors and governments dried up, and demand for their services remained the same or rose.
The question of the payments has become a new wrinkle in the often-contentious relationship between town and gown.
Boston is sometimes known as the Athens of America for its universities. As the capital of Massachusetts, it is home to many government buildings. That leaves more than half of Boston’s land exempt from property taxes.
While Boston has long collected voluntary payments from its nonprofit institutions, it has done so haphazardly, with some universities paying millions of dollars, while their peers paid little or nothing.
To see the whole article, click here
JJS: Everybody should pay rent or “land dues”, without exception. No individual would be too poor, since all would receive a Citizens Dividend or “rent share”. And no institution would be too special, since nobody can show that eds and meds are more special than, say, farms and factories. It wouldn’t matter if land were private and owners paid a land tax or if land were public and occupiers paid a lease fee -- it’d be pretty much the same.
- Battery Park City in Land Deal
Like many other properties in the city, a group of 11 condo buildings in Battery Park City doesn't own the land underneath the buildings. In this case, the buildings lease the land from the Battery Park City Authority, a public agency that was formed in the 1960s to develop the then-nascent neighborhood.
The condos reached a deal with the Battery Park City Authority that will lower the combined ground rents. The buildings will pay $525 million in combined ground rents over the next 30 years, rather than the estimated $804 million scheduled in the previous agreement.
Most buildings with ground leases have long-term agreements spanning around 100 years with predicable price rises. That wasn't the case in Battery Park City. In 2027, rates were scheduled to be reset at 6% of appraised fair market value of the land underneath the buildings.
Since, no one knew how much the property owners would have to pay in 2027, lenders hesitated to finance prospective homeowners and residents who wanted to refinance their mortgages.
While the rest of Manhattan's market began to rebound in 2010, Battery Park City regressed partly because of the ground rent issue.
To see the whole article, click here
JJS: Actually, when land users pay the full rental value, then prospective occupiers buy only the building, not the land, and since buildings depreciate, the mortgage would later likewise be smaller for older, used buildings. In a geonomy, residents would still benefit from “real estate” (Earth’s worth), but they’d benefit equally from all the land in one’s region. Such economic justice would make life much simpler.
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Editor Jeffery J. Smith runs the Forum on Geonomics.
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Also see: While big US insurers outsource some profit …
Guess which tax gets singled out?
MRT network driving up land value |
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