Suburban Blight Coming?

[Chicken Little]

LA Times has an interesting story on the practical implications of the real estate mess...foreclosures causing blight where there shouldn't be blight.

Tulsa has been lucky these last few years, in my opinion.  The real estate bubble didn't reach us, and I believe that almost any family with a job or two can still land a good house with a reasonable payment on a fixed-rate loan.  I theorize that this translates into fewer variable rate, borderline loans, fewer foreclosures, and ultimately, stable real estate prices.  But that's just my theory.  Anybody know better?

Does anybody out there know if Tulsa has seen a lot of bad loans?  Will we scoot through this national real estate crises unscathed or will banks need to start hiring mowing companies?

[iplaw]

quote:Originally posted by Chicken Little

LA Times has an interesting story on the practical implications of the real estate mess...foreclosures causing blight where there shouldn't be blight.

Tulsa has been lucky these last few years, in my opinion.  The real estate bubble didn't reach us, and I believe that almost any family with a job or two can still land a good house with a reasonable payment on a fixed-rate loan.  I theorize that this translates into fewer variable rate, borderline loans, fewer foreclosures, and ultimately, stable real estate prices.  But that's just my theory.  Anybody know better?

Does anybody out there know if Tulsa has seen a lot of bad loans?  Will we scoot through this national real estate crises unscathed or will banks need to start hiring mowing companies?

The number of foreclosure filings reported in the U.S. last month jumped 93 percent from July of 2006 and rose 9 percent from June, the latest sign that homeowners are having trouble making payments and finding buyers during the national housing downturn.

But Oklahoma is not among states following the trend. Foreclosures in the state were up 17.67 percent from June but down 34.38 percent since July 2006.

Nationwide, there were 179,599 foreclosure filings reported during July -- NewsOK

I can't find it now, but I remember KOTV doing a story on how foreclosures were up 49% in Tulsa County over '06.

[pmcalk]

While I think Tulsa will escape the worse, even without the less convential mortages Tulsa is and will see some housing problems.  My understanding is that, banks across the nation have tightened lending for all types of mortgages, even traditional.  So houses that have sold easily in the past sit on the market for much, much longer.  There was a story on NPR the other day about Kansas City, which like Tulsa, did not have a severe housing bubble.  Nevertheless, homeowners are finding difficulty selling:

http://www.npr.org/templates/story/story.php?storyId=13916304

Again, I don't think Tulsa will be as bad as other states, and nothing like the 80s.  Still, I imagine that those 4000 square foot homes out in the suburbs may not get quite the return that some had hoped.  Or they may sit on the market for quite some time.

[Chicken Little]

Good eye, IP.  Thanks.

[iplaw]

quote:Originally posted by Chicken Little

Good eye, IP.  Thanks.

A good friend of mine owns a granite/marble company here in town and he's saying that business doesn't appear to be slowing down at this point, even with his new builder clientele.  He really thinks we won't see any appreciable decrease in new home construction over the next 5 years.

I think one aspect that may drive the housing market here is that people are going to be fleeing the coasts to places like Tulsa where the cost of living is more affordable.  Once people find out banks won't let them over leverage anymore and realize when one can buy in California for 600K or one can buy in Oklahoma or Texas for 200K, we begin to look more attractive.

[iplaw]

quote:Originally posted by pmcalk

While I think Tulsa will escape the worse, even without the less convential mortages Tulsa is and will see some housing problems.  My understanding is that, banks across the nation have tightened lending for all types of mortgages, even traditional.  So houses that have sold easily in the past sit on the market for much, much longer.  There was a story on NPR the other day about Kansas City, which like Tulsa, did not have a severe housing bubble.  Nevertheless, homeowners are finding difficulty selling:

http://www.npr.org/templates/story/story.php?storyId=13916304

Again, I don't think Tulsa will be as bad as other states, and nothing like the 80s.  Still, I imagine that those 4000 square foot homes out in the suburbs may not get quite the return that some had hoped.  Or they may sit on the market for quite some time.

I agree. The market will definitely have to readjust itself after pricing shakedowns return property to reasonable values.

[Nick Danger]

Most of the additions that have been started in and around Tulsa in the last few years seem to have large houses in the $300-400K and up price range. And with the "creative financing" packages off the market, it may be a difficult time for the local builders, and anyone that is trying to sell in this price range. A down payment sufficient to obtain a conventional loan can be substantial for this type of house, and it is getting more difficult to get a mortgage over $417K (jumbo loan). Due to the number of defaults nationally, many lenders are not offering these any more.

There are many variables, but the rule of thumb is that your house payment is approximately 1% of the mortgage amount (including taxes and insurance,and of course depending on the interest rate). For example, the payment on a $300,000 mortgage would be approximately $3,000 per month. And $300K seems to be at the low end of the currently constructed houses.

Are there that many families/individuals in Tulsa, even with a 2-income family, that can afford those monthly payments? What jobs do they have? Even some I know where both husband and wife are in management or professional positions that cannot afford this, especially in addition to their other debt, such as car/boat/other toy payments.

[rwarn17588]

Meanwhile, well-maintained smaller homes are selling like crazy.

Before we moved out here, we had a 950-square-foot home. Our Realtor told us it would sell quickly. We had an offer the same day it went up for sale.

[pmcalk]

^Yet, all over town, builders are tearing down houses under 2000 square feet, and replacing them with huge, $300k-500k homes.

[aoxamaxoa]

quote:Originally posted by Nick Danger

Most of the additions that have been started in and around Tulsa in the last few years seem to have large houses in the $300-400K and up price range. And with the "creative financing" packages off the market, it may be a difficult time for the local builders, and anyone that is trying to sell in this price range. A down payment sufficient to obtain a conventional loan can be substantial for this type of house, and it is getting more difficult to get a mortgage over $417K (jumbo loan). Due to the number of defaults nationally, many lenders are not offering these any more.

There are many variables, but the rule of thumb is that your house payment is approximately 1% of the mortgage amount (including taxes and insurance,and of course depending on the interest rate). For example, the payment on a $300,000 mortgage would be approximately $3,000 per month. And $300K seems to be at the low end of the currently constructed houses.

Are there that many families/individuals in Tulsa, even with a 2-income family, that can afford those monthly payments? What jobs do they have? Even some I know where both husband and wife are in management or professional positions that cannot afford this, especially in addition to their other debt, such as car/boat/other toy payments.

WELCOME!!! Love your moniker

[aoxamaxoa]

quote:Originally posted by iplaw

quote:Originally posted by Chicken Little

LA Times has an interesting story on the practical implications of the real estate mess...foreclosures causing blight where there shouldn't be blight.

Tulsa has been lucky these last few years, in my opinion.  The real estate bubble didn't reach us, and I believe that almost any family with a job or two can still land a good house with a reasonable payment on a fixed-rate loan.  I theorize that this translates into fewer variable rate, borderline loans, fewer foreclosures, and ultimately, stable real estate prices.  But that's just my theory.  Anybody know better?

Does anybody out there know if Tulsa has seen a lot of bad loans?  Will we scoot through this national real estate crises unscathed or will banks need to start hiring mowing companies?

The number of foreclosure filings reported in the U.S. last month jumped 93 percent from July of 2006 and rose 9 percent from June, the latest sign that homeowners are having trouble making payments and finding buyers during the national housing downturn.

But Oklahoma is not among states following the trend. Foreclosures in the state were up 17.67 percent from June but down 34.38 percent since July 2006.

Nationwide, there were 179,599 foreclosure filings reported during July -- NewsOK

I can't find it now, but I remember KOTV doing a story on how foreclosures were up 49% in Tulsa County over '06.

Yes. Let's wait and see what the five year trends are....

[Nick Danger]

quote:Originally posted by pmcalk

^Yet, all over town, builders are tearing down houses under 2000 square feet, and replacing them with huge, $300k-500k homes.

This is also causing major property tax increases for the smaller, older homes that remain in these neighborhoods (primarily in midtown).

[Nick Danger]

For a really informative website on the mortgage markets --
www.ml-implode.com

When I first discovered this site on the 22nd, the number was at 135. Good articles on the lending industry updated daily.

Oh, be sure and visit the forum. Lots of good insider info there. I think most of the posters are in the mortgage business. Especially read this forum thread --
http://www.autodogmatic.com/forum/viewtopic.php?t=1256&postdays=0&postorder=asc&start=0

Scary stuff!

[aoxamaxoa]

quote:Originally posted by Nick Danger

quote:Originally posted by pmcalk

^Yet, all over town, builders are tearing down houses under 2000 square feet, and replacing them with huge, $300k-500k homes.

This is also causing major property tax increases for the smaller, older homes that remain in these neighborhoods (primarily in midtown).

No more than the automatic across the board %5 allowable annually.

[TheArtist]

quote:Originally posted by Nick Danger

Most of the additions that have been started in and around Tulsa in the last few years seem to have large houses in the $300-400K and up price range. And with the "creative financing" packages off the market, it may be a difficult time for the local builders, and anyone that is trying to sell in this price range. A down payment sufficient to obtain a conventional loan can be substantial for this type of house, and it is getting more difficult to get a mortgage over $417K (jumbo loan). Due to the number of defaults nationally, many lenders are not offering these any more.

There are many variables, but the rule of thumb is that your house payment is approximately 1% of the mortgage amount (including taxes and insurance,and of course depending on the interest rate). For example, the payment on a $300,000 mortgage would be approximately $3,000 per month. And $300K seems to be at the low end of the currently constructed houses.

Are there that many families/individuals in Tulsa, even with a 2-income family, that can afford those monthly payments? What jobs do they have? Even some I know where both husband and wife are in management or professional positions that cannot afford this, especially in addition to their other debt, such as car/boat/other toy payments.

In my business I have been constantly amazed at how many people can afford nice homes. I was kind of shocked when the national news was reporting 400,000 home loans as being something special. That would seem mid range for most of the homes I work in. A good portion of the homes I work in are generally 750,000 on up to 10 million or more. And yes I have had quite a few customers over the last few years who "cashed out" in California and pretty much paid cash for a nice home here. I do suppose though that I have reached a point in my career where I have finally gotten to the very top of the market here so my perspective may be quite skewed as to what is "average". Guess 15 years of hangin in there and doing your best can pay off. I am willing to bet one thing though. If the economy does go south, us frivolous artists are some of the first ones to be kicked out on the streets.

As for suburban blight... that seems to be the natural progression most cities take as they evolve anyway. Inner city booms and grows, then spreads out and the core dies, then keeps spreading and then the core comes back while the suburbs become blighted. Lots of poor people with no easy access to jobs because everything is so spread out and most of the jobs are in the core, poor schools etc. and the core becomes more and more desirable and expensive and grows outward again. You end up with a donut effect. Good core, suburban blight, good far suburbs.