Wednesday, October 27, 2010

Our Funky Housing Market

Posted By on Wed, Oct 27, 2010 at 1:35 PM

Some economist suggested a year ago that the solution to the housing crisis was to bulldoze a million new houses. The corollary to that might be including 10,000 or so of those from Memphis.

Sen. Bob Corker and a panel of housing experts came to Rhodes College Wednesday for a give-and-take with 150 or so guests. It lasted two hours, which is usually an hour too long. But this one could have gone three hours. Hot topic, good host, wise panel, and an audience that was clearly engaged.

Corker said he had previously done this presentation in Chattanooga, where it bombed, and Nashville, where it worked. The difference, he said, was letting the audience talk. So the expert panel, which included Rhodes grads Jim Vogel and Tim Bolding, kept it short. The audience took over.

Realtor Dick Leike defended the good name of Realtors. Mortgage brokers defended their business, bankers and developers did too, and so on. The one perspective that didn't come out was the homeowner, so here goes.

If you own a house, "the industry" wants you to borrow as much as you, if not more than you can. This maximizes commissions and sales and the likelihood of refinancing, or at least it did before the crash. The federal government subsidizes mortgage interest by making it tax deductible. There's pressure in Congress to give "relief" to borrowers who can't make their payments.

There is no government relief for homeowners who stay put, keep up their property, pay down their mortgage, and don't itemize deductions. There are innate rewards, of course, like a solid house, financial solvency, and maybe a nice neighborhood if your neighbors do likewise.

But if your neighbor lets his house go to hell or into foreclosure or walks away from it, you are screwed.

Twenty five years ago when I bought my house, tax appraisals were too low. Everybody knew it. The assessor knew it. They were not near market value. Wink, wink. It was a tax break for the middle class homeowner. We were paying taxes on pre-inflation values.

As tax appraisals went up, you could shave ten percent or so if you knew how to play the game and went before the Board of Adjustment and challenged your appraisal.

Then it changed. In the last appraisal, the assessor's values began to approach if not exceed actual market value. That meant your taxes went up a lot, even in years there was no increase in the tax rate. Meanwhile, sales prices are going down and the number of houses for sale is going up.

If you own an old house, the incentive is to buy a new one in the suburbs. Less upkeep, newer plumbing and wiring, a newer roof, new appliances, newer schools, whatever. And newer trees. In Midtown, where the oaks are 100 years old, a tree in your yard or your neighbor's yard is a time bomb aimed at your house and driveway and car and garage. Every time the wind blows more than 15 miles an hour, a few more trees or big limbs come down on my street.

We hear a lot about using stimulus money to fix our infrastructure. But there is no stimulus payment for putting on a new roof, trimming or taking down a tree, painting a house, or tearing down a rotten garage. Those things are not exactly indulgences. The stimulus money goes to big contractors and big projects. The tax incentives go to big borrowers. The handouts go to deadbeats and people who borrowed too much.

The builders and developers put in more subdivisions in the burbs. The government gives tax credits to build more housing than Memphis could ever need, use, or afford in and around downtown. The suburban developers and Realtors and politicians badmouth the city of Memphis. And the old neighborhoods get older in every way, from the houses to the residents, as Memphis spreads itself thin over 340 square miles.

That's my rant, senator.

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