THIS is a PROBLEM….. #72

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Thoughts

1. This is an underreported issue…why
2. There are often times no good comps. Bad comps lead to bad sales….or inability to get funding. As an example, if you list a home for 150,000 and the appraiser says it’s only worth 80,000. The bank is only going to take on some percentage of the 80k. So, the buyer is going to have to come up with the difference. Why would a buyer do that when they could go somewhere else and buy something that appraises?
3. From an economic perspective. Imagine a situation where you buy a house and it continues to go down in value every year. Contrast that with buying a home in the suburbs…where houses tend to appreciate in value every year. The maintenance gets overlooked. As an example, I buy a house for 300,000…a roof for that house is $14,000. Now, I know I am going to live in the house and sure enough, five years in the future the house would sell for 330,000. Roof has 15-20 years left, I am up $16,000. Contrast that with a home that you buy for 80,000. Roof is the same size and it will cost $14,000 for a replacement. In five years your house is worth $60,000 and you lost the 20k in equity, and the 14,000 for the roof so you are at $-34,000. The difference? One property is in a stable neighborhood and one is in a neighborhood that is in decline.
4. I don’t buy the argument that stronger building code enforcement will magically fix this issue. In my opinion, the more strict the building codes are, the less chance an investor will take a chance on repairs or improvement.

Thoughts II

1. The economics have failed in the big cities. There is more vacant land or homes that are vacant than what a city can take care of as their tax base shrinks.
2. Crime is not the issue, from my experience, as much as the perception of crime. That perception of crime can take decades to overcome, if ever. You aren’t going to put all the bad guys in jail. Accept it. Build around them.
3. Culture is good economically, the more restaurants, bars, clubs, etc. in a location can help improve things more quickly.
4. There is so much land that is vacant….cities should focus in specific areas rather than a piecemeal approach. Take a particular section and use grants to rehabilitate those areas for housing…tax credits are not enough. Do the things that bring people and investment. Tax policy and zoning can be used effectively here.
5. One of the issues I see in the heavily urban areas is that there just isn’t a place for your big box retailers…the streets and blocks are set up in a way that is too small, and your main streets are clogged with too few lanes or stoplight after stoplight.
6. There is an odd issue that I’ve come across. It’s this idea of divine right…or the idea that because your parents or grandparents lived in a place, that means you have some sort of right to live there. That right somehow supersedes any sort of economic reality. So when I tell people to move out of places that are terrible, I am met with…”this is where I grew up, or this is where I’m from”
a. Wealthy people move all the time for jobs. But they can afford to move because the real estate they are selling is either stable or going up. The poor don’t have that ability. So they have city pride, but they are also stuck.
b. Developers and politicians see income demographics on a map and they say, there are poor people here…we need more poor people housing. This is the absolute WRONG approach. You need quality housing that people can own. That means single family homes. This is the only way to “help” those people with city pride. Either they can sell and be rewarded financially when things turn around, or they can stay and live in their community knowing they are building generational wealth. That DOES NOT happen with miles and miles of low income rental housing. It’s a trap.
7. One of the things I learned in Detroit is that it isn’t the people of the community that are the problem. They are the exception: It’s the politicians, technocrats, and outright white collar criminals that really mess up the cities. Intense focus should be placed on these “leaders” to ensure cronyism isn’t taking place.

Source: https://www.jsonline.com/story/news/local/milwaukee/2021/07/15/milwaukees-vacant-homes-threaten-neighborhood-safety-property-values/5026155001/

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