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Good Expectations For The Local Baton Rouge Housing Market

Mayors across the country expect mounting foreclosures and falling home prices to depress economic growth.

Source: BY KEVIN G. HALL – Miami Herald

The nation’s mayors fear that rising numbers of bad home loans and falling home prices will depress economic growth in dozens of communities across the country next year — by more than a third in 65 metropolitan areas.

Florida, one of the states to benefit most from the housing boom, will be hit hard, with an $80 billion drop in property values costing state and local governments roughly $836 million in tax collections, according to the new economic forecast from the U.S. Conference of Mayors.

In the ranking of regions by projected amount of economic growth lost, Florida’s cities hold up relatively well, probably because strong performances in tourism and international trade are helping offset the housing slump. The state’s tourism agency said Monday that visitors to the Sunshine State this summer increased nearly 5 percent over last year.

Miami-Dade and Broward counties ranked 111th on the list of 361 areas, and the two counties’ combined economy is expected to grow by 2.2 percent next year — down from the recent boom years but above the national average of 1.9 percent forecast. The report did not disclose its methodology.

The mayors, who begin meeting Tuesday in Detroit, hope to call attention to the cascading problems arising from falling home prices, an expected 1.4 million foreclosures and the pending reset of millions of adjustable-rate mortgages.

Lauderhill Mayor Richard J. Kaplan, who is in Detroit for the meeting, said city governments could help soften the blow out of the real estate market in several ways.

Options the mayors will discuss include changing state laws to allow cities to better maintain abandoned homes and working with lenders to help keep borrowers out of foreclosure.

”Florida law limits us significantly in trying to prevent one house from destroying an entire neighborhood,” Kaplan said. In many cases cities have no authority to repair windows or pick up trash strewn across the lawns of unoccupied property, Kaplan said.

The housing market’s influence on the broader economy has been widely debated.

A recent Center for Responsible Lending study said a foreclosure can bring down the values of all homes within an eight of a mile by .9 percent.

The mayors’ report, prepared by Global Insight, offers fresh detail about specific metropolitan areas.

The cities with the biggest percentage losses are Myrtle Beach, S.C.; the California cities of Merced, Madera and Napa; and Sarasota-Bradenton. In total dollar terms, New York, Los Angeles and metropolitan Dallas are expected to see the largest lost growth.

A number of metro areas aren’t projected to lose growth because of the crisis; they tend to be areas that didn’t experience the housing boom, including Akron, Ohio; Baton Rouge, La.; and Charleston, W.Va.

Mayors hope their report will put additional pressure on lenders to rework problem loans and head off massive foreclosures, which would further delay recovery in the housing sector.

”The report demonstrates that it’s very important for the investors who own these loans to step up to the plate and work out modifications where it makes sense. If they don’t, the economic impact is only going to get worse,” said David Gatton, a senior advisor at the U.S. Conference of Mayors. “Every time you have a foreclosed property, it drags down the value of properties around it.”

Miami Mayor Manny Diaz pointed out that the city of Miami had already implemented a number of foreclosure prevention programs. He said nation’s mayors had the bully pulpit and would use it to further enlist the participation of lenders, and the U.S. Congress, to help homeowners to work their way out of mortgage problems.

”It was the lending industry, the mortgage industry and financial institutions that created this situation; they should come to the table to offer solutions. And Congress needs to step up and regulate and make sure this kind of thing doesn’t happen again,” Diaz said.

Weak market demand and the large inventory of homes for sale nationally would have reduced home values by $676 billion next year, but rising foreclosures and difficulties in reworking mortgages that are scheduled to reset to higher interest rates are expected to drive prices down even more and result in another $519 billion in lost home value, the report says.

The mayors expect a 7 percent drop nationwide in home prices for next year, with some parts of California experiencing declines as high as 16 percent.