MAY 4, 2008 - During the Spring Downtown Lofts Tour, Donna Eldridge and Mike Costello took a closer look at a motor scooter, offered in the purchase package of a loft at Motor Lofts, 2201 Washington Avenue in downtown St. Louis. "I work in town and this would be great transportation to get around and not drive my car," stated Eldridge. "Sometimes, downtown parking is a real inconvenience and considering the price of gas nowdays, this is the way to go."
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Housing Bubble Popped by Spike in Fuel Costs
ST. LOUIS, (PRNewswire), May 4, 2008 - While predatory lending and sub-prime mortgages have taken the blame for the dramatic decrease in housing prices and the glut of foreclosures nationwide, a new analysis shows that rising fuel costs played a significant role in the collapse of America's housing bubble.
That's according to a new report released by CEOs for Cities titled "Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs," by economist Joseph Cortright.
"The popular narrative on the collapse of housing prices has only blamed exotic lending practices," said Cortright, "but the much more important story is about how higher gas prices have re-drawn the map of urban real estate values. Vibrant central cities just got a whole lot more valuable."
The analysis found that while there is overall weakness in housing prices, price declines are generally far more severe in far-flung suburbs and metropolitan areas with weak central cities. The reason for this shift is rooted in the dramatic increase in gas prices over the past five years. Cities and neighborhoods that require lengthy commutes and provide few transportation alternatives to the private vehicle are falling in value more precipitously than more central, compact and accessible places, the study shows.
In fact, growth in housing prices was fueled by low and stable gas prices from 1990 through 2004. The rise in gas prices from less than $1.10 in early 2002 to more than $3 today has dealt a major blow to consumer purchasing power and weighs most heavily on those metropolitan areas and those suburbs where people have to drive the farthest. The decline in housing markets is strongly correlated with auto dependence.
As measured by the change in housing prices over the last year, distant suburbs have seen the largest declines, while values in close-in neighborhoods have held up better, and in some cases continued to increase.
The study looked at housing values in five cities in both close-in and distant neighborhoods and found that in each case, housing prices fared worse in the more distant neighborhood. For example, the average house in the 60618 zip code in Chicago (5.6 miles from the downtown loop) appreciated from $374,000 to $410,000 (an increase of $36,000) between the fourth quarter of 2006 and the fourth quarter of 2007. A house in suburban Buffalo Grove (60089) that sold for the same price in 2006, declined by $30,000 over the course of the year.
The run-up in gasoline prices has re-written the calculus of suburban housing economics in two key ways. First, there has been an income effect: suburban households spend more of their income on transportation and gas and have therefore taken the biggest hit to their budgets. As a result, they have less income to spend on housing. Second, there has been a price effect: because living in distant suburbs requires more driving, potential buyers are now willing to bid less for houses at the suburban fringe.
The report concludes with five policy implications:
- The relative decline in prices in sprawling suburbs is likely to
persist because of the continued high price of gas, and governments
should plan accordingly.
- The market for higher density and redevelopment in close-in
neighborhoods is likely to grow stronger, and local land use plans
should accommodate this shift.
- Government can help families save money by making it easy and
convenient to live in mixed-use, close-in neighborhoods served by
transit.
- Reducing vehicle miles traveled not only saves families money, households that drive less have more to spend on other things,
stimulating the local economy. Additionally, reducing oil consumption
not only cuts greenhouse gas emissions but lowers the trade deficit.
- Many distant exurban developments may no longer be economical, and
propping up building and homeownership in these areas encourages
unsustainable settlement that makes families even more vulnerable to
future gas price increases.
"These changes will not be short-lived, and they can't be addressed with short-term fixes," said Carol Coletta, President and CEO of CEOs for Cities, a national network of urban leaders, which commissioned the study. "Public policy must recognize the new realities by changing land use planning and investment to encourage re-use of existing urban land and less driving. In this new world of high gas prices, strengthening the urban core is not only a matter of civic pride. It makes financial sense for America's families."
U.S. Cities Increasing Sales Taxes in Record Fashion
ST. LOUIS, (SLFP.com), May 4, 2008 - In 2007, 485 U.S. cities increased their sales tax rate. Of those, 178 were newly imposed city tax rates and 307 were straight increases in existing city tax rates. This represents the largest annual expansion in the number of cities who either increased their existing rate or initiated a sales tax in the past four years, according to the annual sales tax rate study released by Vertex Inc.
North Courtland, Ala., had the largest increase nationwide, rising from a 1.0 percent sales tax rate to 4.0 percent. Seldovia, Alaska, experienced the second largest increase from 2.0 percent to 4.5 percent, followed by Fredonia, Ariz., and Watts, Okla., with increases from 2.0 percent to 4.0 percent.
Several large U.S. cities also raised their sales tax rates between 0.1 and 0.2 percent in 2007, including Boulder, Colo.; Phoenix, Ariz.; St. Louis, Mo., and areas of Denver, Colo. and Seattle, Wash. States with the most number of city rate increases included Colorado, Missouri, Texas and Washington.
Also in 2007, Catawba Indian Reservation, South Carolina, joined Wrangell, Alaska, in having the highest city sales tax rate of 7.0 percent. South Carolina was the only state to raise its state-wide sales tax rate, from 5.0 percent to 6.0 percent.
The report revealed that 2007 sales tax rates remained higher than any previous year among those cities increasing an existing rate, illustrating an overall steady growth in the combined state, county and city average rate since Vertex began tracking the data in 1981. However, the average U.S. sales tax rate among all taxing cities decreased slightly in 2007 to 8.573 percent, as compared to 8.579 percent in 2006, due to the number of cities initiating lower rates on first-time taxes.
General Assembly Passes Legislation to Protect Homeowners from Unscrupulous Mortgage Practices
ST. LOUIS, (SLFP.com), May 4, 2008 - Gov. Matt Blunt has commended the General Assembly for passing legislation he called for to protect Missouri homeowners from fraudulent mortgage practices.
"Part of the American dream is purchasing a home to enjoy with your family and friends but deceitful mortgage practices are turning the dream of homeownership into a financial nightmare for some homeowners," Gov. Blunt said. "I applaud the Missouri General Assembly for supporting my call to end deceitful mortgage practices in our state and hold those who prey on Missouri homeowners accountable for their unscrupulous actions."
House Bill 2188, sponsored by Rep. David Pearce, creates civil and criminal penalties for mortgage fraud and further enhances consumer knowledge about the mortgage process. The legislation:
- Gives the Real Estate Commission and Real Estate Appraisers Commission power to suspend or revoke licenses for mortgage fraud
- Creates the crime of mortgage fraud, a class C felony, with up to 10 years of prison
- Enhances consumer protection laws to protect Missourians from fraudulent scams
- Provides the commissioner of the Division of Finance power to prohibit offenders from doing real estate lending in the state
The legislation now goes to the governor's desk for his consideration.
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