Reason to Appreciate Rochester’s Flat Housing Market

There are positive things to be said about the stodgy old Eastern U.S. states like ours, including our venerated cities such as Rochester. I’ve been saying for a while now that one saving grace our city has over many others across the country is the fact that, while individual families are certainly hurting across the metro area, overall the market in Rochester has seen significantly less damage from the housing bubble. A harder-hit market would compound the already-heavy toll of a down economy in ways too numerous to mention.

Here is a quick chart, taken from the National Association of Realtors website, of Rochester’s median home price as a function of its relative value to the U.S. national average. You can see just how much harder the nation is being hit by underwater homes and high unemployment. I know of at least one person who moved to Rochester for a fresh start, which is not something you hear about often.. and they can’t sell their house where they’re from.

* taken from Metropolitan Median Prices

Panel Says: Rochester’s Stable, so Let’s Change That

Maybe I’m overly alarmist, but it seems to me that this article essentially says that Rochester’s real estate market is quite stable, so it’s a great time to invest heavily in Rochester. That sounds nice, and with the housing bubble collapsing other places, there’s a lot of capital floating around that needs a home. The question is: are we inviting the sort of heedless investment that made other markets so unstable?

I mentioned the capital floating around the market in a previous post last night, so let me expand on that a moment. We don’t think of free capital much right now because of all the bank problems and the credit freeze up. The story in the media has largely been about the lack of credit, which is to say that the story is about a lack of available loans and mortgages, which sounds like a lack of money.

And the banks are definitely hurting financially, so that is partially correct. But many people who were investing in real estate before the problems began did so because they’re wealthy and need places to put money where it will be safe. At a certain level, investing money in real estate, bonds, or whatever is the same as putting it in the bank. Historically, real estate tends to be a safe bet and less prone to wild fluctuations than some other investments.

So now that markets in California and elsewhere have dried up, there’s capital that needs to be invested somewhere. People could put it in bonds, they could put it in gold, but they’ve got to put it somewhere. And with all the banks closing right now, pinning one’s investment capital to property which will always have at least some value probably seems like a smart choice to some. Investing in Upstate New York markets, where we’ve managed to escape the brunt of the Subprime damage and where property values have not significantly changed over the last few years.

Once you get the investors, you get the short-sellers and the hedge funders and it’s all down hill from there. Investment becomes highly speculative and unstable. Once the market has outgrown it’s actual potential – which wouldn’t be long in Rochester – the market dries up and the investors go elsewhere.

I don’t suspect that we’re going to see any wide-spread damage done, necessarily, and there’s not going to be a second housing boom in Rochester. But I do worry that some local towns and villages may find that the investment that’s plentiful today maybe gone tomorrow, with a project half-started. That should probably sound familiar to those of us living in Rochester.


Victor Development: Tea Leaves Worth Reading?

I would say that, with the recent reports declaring Rochester and Upstate New York generally being strong and stable real estate markets, its worth noting with a special scrutiny the recent Victor meeting to annex part of the village for purposes of denser development. Remember that, just like the last bubble, a burst leaves a fair amount of investment capital in limbo. Even with the credit crunch on, this remains the case, I’m sure.


HUD Homes for Non-Occupants?

It is occasionally stunning to find that Bush Administration lackeys working the gears of our society are so completely inept that even when defending themselves, they say stupid things. Case in point, Senator Chuck Schumer’s fight with HUD over their selling practices:

Schumer unhappy with HUD practices || Democrat & Chronicle: Local News

Currently, the federal Department of Housing and Urban Development allows teachers, police officers and firefighters to buy HUD-offered homes for half their appraised value within the first five days of being advertised. For the next 10 days, the homes then are offered at regular price to anyone planning to live in them. After that, the homes are for sale to any buyer.:: snippage ::

In an e-mailed statement, HUD responded to Schumer’s charges stating that, nationwide, more than half of HUD homes were sold to owner occupants last year.

So, for those of you playing the home game, that’s some number less than half of the total HUD homes sold in the last year that are going to real estate developers, speculators and we may assume, slumlords. Is that OK by everybody? I thought the point of HUD was developing home ownership, but maybe not.