The local media seems hell-bent on down-playing the problem of the sub-prime lending credit crunch, but it’s no small matter for a city already teetering on the edge of Flint, MI status. Oddly, while this report cites job losses in comparison to post-9/11 fall out (not the only such comparison out there right now), it also takes the lending industry’s word for it that things won’t be that bad in Rochester. Odder still is the uncharacteristically personal follow-up by staff writer Steve Sink, who says his son in Long Island got canned in the lending industry’s cut-backs. He also reminds us that our relatively modest real estate market does not mean that we’ll avoid the crunch forever.
And meanwhile, in the NYT is evidence of just what that crunch might look like in Rochester. It seems that, in addition to a potential nation-wide recession, there is evidence that there will be an unheard-of nation-wide loss in property values:
Now, however, that financial cushion is disappearing for many families. “We are having to start from scratch and rebuild for a down payment,” said Kenneth Schauf, who expects to lose money on a condominium in Chicago he and his wife bought in 2004 and have been trying to sell since last summer. “We figured that a home is the place to build your wealth, and now it’s going on three years and we are back to square one.”
Now, this could be nasty for our region and downtown in particular.
Lower property values have their benefits for buyers, when buying is what you want to do. But when the banking industry starts losing money, there’s no telling what nasty things they might have in store for mortgage-holders, that those lending institutions might recoup their losses. I personally know of one family that has seen their sub-prime mortgage payments double in the last two months. In a nation which has, since 2000, relied on home purchases to inflate the apparent buying power of our economy, that doesn’t bode well at all. This is not a buyer’s market.
And as homes go down in value and are being foreclosed on at the same time, that means a whole lot of empty properties. Empty properties aren’t just bad for the owners (which are the banks, when mortgages foreclose), they’re bad for the neighborhood, lowering property values across the board.
It might not sound like much, but the single most important thing for a city’s well-being is it’s property value. Properties are where local city and county taxes are levied, so when the value goes down, so does the tax base. One percent across the board is a very, very big deal, especially when the city and the county are feeling the exact same crush at the same time.
See, the difference between George Bush and Ronald Reagan is that the economy at least looked like it was doing OK during the Regan Administration. These guys can’t even get letting their rich friends get richer right.
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