Is America Finally Downsizing When It Comes to Housing?

Are the days of brand-new McMansions over? Housing stats make the rest of the country sound a lot like Flint.

David Streitfeld of The New York Times reports:

Sales of new single-family homes in February were down more than 80 percent from the 2005 peak, far exceeding the 28 percent drop in existing home sales. New single-family sales are now lower than at any point since the data was first collected in 1963, when the nation had 120 million fewer residents.

Builders and analysts say a long-term shift in behavior seems to be under way. Instead of wanting the biggest and the newest, even if it requires a long commute, buyers now demand something smaller, cheaper and, thanks to $4-a-gallon gas, as close to their jobs as possible. That often means buying a home out of foreclosure from a bank.

Four out of 10 sales of existing homes are foreclosures or otherwise distressed properties.

Maywood, California: How to Fire a City Government

Note: I'm re-posting this item that originally ran on July 21 because the comments are really worth reading. As readers have pointed out, the comparison between Flint and Maywood isn't that useful, but the discussion of city budget's in the comment section is useful and thought provoking. Here's the original post...


Like many cities across the country, Flint is struggling to maintain city services; hang on to police, firefighters and other city workers; and still maintain a balanced budget with a declining tax base and increasing legacy costs for retired workers.

But what if Flint simply fired all city workers and outsourced their jobs? Maywood, Calif., located southeast of Los Angeles, did it.

David Streitfeld of The New York Times reports:

While many communities are fearfully contemplating extensive cuts, Maywood says it is the first city in the nation in the current downturn to take an ax to everyone.

The school crossing guards were let go. Parking enforcement was contracted out, City Hall workers dismissed, street maintenance workers made redundant. The public safety duties of the Police Department were handed over to the Los Angeles County Sheriff’s Department.

At first, people in this poor, long-troubled and heavily Hispanic city southeast of Los Angeles braced for anarchy.

Senior citizens were afraid they would be assaulted as they walked down the street. Parents worried the parks would be shut and their children would have nowhere to safely play. Landlords said their tenants had begun suggesting that without city-run services they would no longer feel obliged to pay rent.

The apocalypse never arrived. In fact, it seems this city was so bad at being a city that outsourcing — so far, at least — is being viewed as an act of municipal genius.

Lenders Versus Homeowners: The Moral Quandary of Foreclosure

David Streitfeld has a story in The New York Times about homeowners who simply stop paying their mortgages and continue living in their homes. (Or are they squatters in the lender's "home" at that point?)

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

It raises some interesting questions about personal responsibility versus the responsibility of banks and lenders during the housing crisis.

From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are “milking the process,” said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry.

These “free riders” are “the unintended and unfortunate consequence” of lenders struggling to work out a solution, Mr. Lundstedt said. “These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure.”

But for borrowers like Jim Tsiogas, the benefits of not paying now outweigh any worries about the future.

“I stopped paying in August 2008,” said Mr. Tsiogas, who is in foreclosure on his house and two rental properties. “I told the lady at the bank, ‘I can’t afford $2,500. I can only afford $1,300.’ "

As this map in the Times story shows, the time it takes for a Michigan resident who defaults on a loan to lose the property is, on average, quite short compared to the rest of the country.

Housing Crisis: Paying Homeowners to Leave

How many Flintoids will line up to take advantage of this? David Streitfeld of The New York Times reports:

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

A Smaller, Greener Flint

Genesee County Land Bank Chairman Dan Kildee. (Photo courtesy of Jon M. Brouwer/Grand Rapids Press)

When temporary Mayor Michael Brown told a Rotary Club luncheon last month that one solution to Flint's woes might be "shutting down quadrants of the city," it sounded more like wishful thinking than actual policy. In fact, a Brown spokesman claimed it was just an off-the-cuff remark.

But a front-page story in yesterday's New York Times indicates that the concept is gaining momentum. It's even got an environmentally pleasing name; it's a "greening strategy."

As you might have guessed, Genesee County Land Bank Chairman Dan Kildee, who also happens to be the county treasurer, is leading the charge.

“Decline in Flint is like gravity, a fact of life,” Kildee told David Streitfeld of The New York Times. “We need to control it instead of letting it control us.”

(Streitfeld's article builds on a good piece by The Flint Journal's Ron Fonger published a month earlier.)

One thing the Times story inexplicably failed to mention is that Youngstown, Ohio has already put a similar plan into action that would be an obvious model for Flint. I mentioned this in an earlier post about shrinking Flint, and Fonger zeroed in on it in his Journal article:

The Land Bank chairman said he's prepared to promote talk about shrinking Flint by helping to bring in an expert on the subject, like Youngstown, Ohio, Mayor Jay Williams.

In Youngstown, the city is demolishing homes but also monitoring neighborhoods that have largely been abandoned, and is offering up to $50,000 in grants for remaining homeowners to relocate, according to news reports.

Flint is in the process of updating its master plan for the first time since 1965, so now would be the time to map out a "greening strategy" and make it official city policy.

For a racially diverse — some would argue racially polarized — city like Flint, it’s bound to be a controversial process. Namely, which parts of Flint get eliminated? And what happens when the predominantly white power structure selects predominantly African American sections of town to turn into verdant pastures? I don’t think I’m going out on limb in predicting that the north end will go before Mott Park or East Court.

And do you offer out-of-state speculators who own abandoned property the same payment as an actual Flint resident living in a house slated for removal? There's no question this whole process would be very complicated.

Are you wondering what this might resemble if it’s handled badly? Look at the mess Flint has made trying to close schools in its shrinking, cash-poor educational system. Shrinking the entire city could make that fiasco seem like a model of cooperation and efficiency.

Don’t get me wrong. I think this is a good idea. Flint has become a poverty-stricken town trapped in the boundaries of a once-prosperous city. Providing services for 34-square miles just doesn't make sense. But it will take leadership in the mayor's office to pull this off, something that's been in short supply for a long time in Flint. (Given his temporary status, I'm not including Mike Brown in this negative assessment. His short stint as mayor has reminded us what a competent, rational leader looks like after the Don Williamson years.)

At least Kildee seems to know what he's up against:

"I am pretty well sold on this, but the challenge is to do this openly, with participation of the citizens," Kildee told the Journal. "Really, the question is whether the city is going to let this happen in the most destructive manner or the most constructive."

UPDATE: Kildee appears to be on the porch of a house on Sanford Place, a dead-end street off W. Third Ave. in Carriage Town. It's not on Google Street View, but here's a shot of the street from Third Ave.


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