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Photo by jmlwinder on Flickr.
DC Water is spending big: DC Water is spending $2.6 billion on tunnels to keep stormwater out of base­ments and the Anacostia River. When completed, the tunnels will be 12.8 miles long. (Post)

Bonds' platform: "I'm black": One of Anita Bonds' primary issues is that she looks like about half of residents and different from the other half. (Post)

Benning is better: DDOT's study of extending the streetcar to Ward 7 concluded that a terminus Benning Road would draw significantly more riders than at Minnesota Avenue. It would also cost more, but likely be worth it. (City Paper)

MPD not releasing marijuana data: MPD's data problems are continuing. The crime map came back online last week after a long hiatus but they can't pull data on 2012 or 2013 marijuana arrests. (DCist)

Landmark Mall redevelopment far off: The owner of the Landmark Mall in Alexandria would like to build a mixed use development, but Sears and Macy's would have to sign off on that and they aren't interested. (Post)

How smart is Street Smart?: The annual "Street Smart" road safety education campaign kicked off yesterday with ads of "tired" faces with tire tracks on them (ha). But would it be more effective to give people information they don't know? (TheWashCycle)

Count traffic for $200: Folks are trying to create a $200 traffic counter that anyone could buy, temporarily place to count cars or bikes, and upload the info to an open database. They're running a Kickstarter to fund the project. (A4B&W)

And..: Head Roc wrote a song about Marion Barry, who liked it so much he tweeted it 12 times. ... Car sharing is becoming more popular nationwide. (NPR) ... Is the 30-year fixed mortgage a bad thing? (Bloomberg)

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Nick Casey is a Project Manager at the Center for American Progress. He and his wife live in Takoma DC. Nick is originally from the west side of Cleveland and attended Denison University. His posts do not necessarily reflect the views of his employer.  

Comments

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Granted we don't know the specific objections, but im surprised Macy's and sears are against redevelopment of that space. That mall is a ghost town.

by ChrisB on Apr 10, 2013 8:44 am • linkreport

Nick, always nice to see another Great Lakes refugee in Washington. Besides Mr. Hawkins, that is.

That being said, I think the piece on DC Water should have been more about the launch of the tunneling machine -- the tunnels themselves are old news?

by charlie on Apr 10, 2013 8:54 am • linkreport

'“Both stores, today, are not ready to commit to this,” Simon said. '

could mean they are negotiating details.

by AWalkerInTheCity on Apr 10, 2013 9:10 am • linkreport

The 30 year mortgage is a TERRIBLE thing. The obvious benefit is that it has made homeownership more affordable, but at the same time, increased prices over what they would otherwise be.

Without the 30 year mortgage, the suburban sprawl we see today would not be nearly as bad, as a 6000 SF house would be unaffordable to most everyone. Average house size drops probably 300 sf if you get rid of the 30 year mortgage.

More importantly, without the 30 year mortgage, people do not go underwater on their homes. Even someone who bought in the peak of the market in 07 in a place like Miami, and paid 300k, would know only owe 165K or so, so even if the value halved (which it did) they would be okay.

Benefits of removing 30 year mortgage: Less sprawl, less people underwater in their homes, more home equity, cheaper/more affordable homes

Negatives: Phasing out the 30 year mortgage over the next decade would ensure that real estate prices are stagnant over the next decade.

by Kyle-W on Apr 10, 2013 9:10 am • linkreport

The traffic counter would probably be more beneficial for bicycle counting than automobile counting. The "legalese" of road improvements effectively requires local street/road jurisdictions (i.e. DDOT, SHA, VDOT, Virginia cities) to conduct official counts to use in the improvement documentation, of which this wouldn't qualify. That said, these devices could potentially be used to create unofficial data which could then be used to alert the local transportation department to a given problem spot.

by Froggie on Apr 10, 2013 9:14 am • linkreport

Now that we got the tbm in dc, lets just go ahead and start on the blue line once the water tunnels are done.

2. Why don't we just legalize mj?

by h st ll on Apr 10, 2013 9:19 am • linkreport

@Kyle-W; yep, the drag is getting rid of it.

I'd say you are allowed to get one 30 year. It is pretty simple, really. Just have Fannie/Freddie refuse to buy any mortage where the buyer has a 30 year mortage before.

Once you remove the guaratee, the market for 30 years will vanish.

Doesn't entirely solve the problem you pose, but helps lessen the impact.

by charlie on Apr 10, 2013 9:20 am • linkreport

@Kyle-W: a much beloved movie, Its a Wonderful Life, is basically about the 30-year mortgage. One of the points of the movie is that without that financing device, the town would have been entirely owned by the villain, Henry Potter.

by goldfish on Apr 10, 2013 9:24 am • linkreport

@Charlie

Not certain how much that helps, and seems to create a vehicle for fraud (wife buys second house, put the house in your kids name etc)

Interesting idea though. I would tend to think if we just slowly unwind the 30 year (IE in 2014, the max insured is 29 year mortgage, and in 2015 it is a 28 year mortgage.)

If we can at least get down to a 20 year max, I think that would make a large difference in the factors I mentioned above.

@Goldfish

That was quite the summary on Wikipedia!

by Kyle-W on Apr 10, 2013 9:30 am • linkreport

Negatives: Phasing out the 30 year mortgage over the next decade would ensure that real estate prices are stagnant over the next decade.

Also, this would likely drive up rents as well.

by oboe on Apr 10, 2013 9:33 am • linkreport

@Kyle-W; agreed, fraud is a concern. Same trick as being done today (parents give kids the money for down payment). That being said, as we can see from Fannie/Freddie hiring all sorts of auditors, the trickle down has done a good job of knocking out a lot of mortage fraud (banks don't want to get stuck with the mortage if GSE wont' buy it).

by charlie on Apr 10, 2013 9:34 am • linkreport

Anita Bonds:

If a candidate's race is so important, why not just require by law a certain number of each race to match the percentage of the overal population that this or that racial group holds? What if the current population trends continue, and the percentage of African Americans decreases to 40%, or 35% of the populatijon? Should we then have our local parties discourage African Americans from running in promaries in that scenario, since "people want to have their leadership reflect who they are"? Of course not, because there are many things that a person can bring to the table besides their race, and we've seen many people willing to vote for people who are of different racial groups.

We are more than the color of our skin: people vote based on candidates' policy positions, temperament, past electoral and professional experience, etc. I'm not sure Bonds meant it to be boiled down solely to race, but her statements are awkward and clumsy. It also reveals that she views the world predominantly through a racial lense (understandable, given her work in the Civil Rights Movement, and during the early years of DC home rule). However, there has been a great deal of change in DC since those days, and we need to works towards greater cooperation and socialization between the African American community and the other communities in this city. This shouldn't be a game of what is your race, and do you meet the council's veiled quota.

She is exactly what we do not need on Council at this time.

Traffic Counter:

I like this idea, and encourage it. I bet we'll be surprised at the data, especially if it conflicts with gov't estimates/statistics. A great way to crowd-source city/transportation planning and infrastructure use.

by Adam on Apr 10, 2013 9:35 am • linkreport

I see nothing in the article that suggests the 30-year mortgage in itself is responsible for any of the various problems noted above.

1) Fraud? That can happen with any kind of financing.
2) Lack of equity? That's a result of believing that homeownership is a good thing. With any type of financing, there's going to be incentives to reduce the need for equity because people don't have savings. Keep in mind that the biggest problems in 2009 resulted not from 30-year fixed mortgages but from ARMs with escalating rates that people couldn't refinance.
3) Sprawl. To the extent it's mortgage related, again not 30-year fixed but any mortgage financing.
4) Fannie/Freddie. Issue is not 30-year fixed, it's all loan guarantees (they also guarantee ARMs).

by ah on Apr 10, 2013 9:43 am • linkreport

The 30 year mortgage is an invention of the government and a public policy device, and one that has actually worked reasonably well until recently.

I actually think the 30 year mortgage in general is a good thing, but I think its life is coming to an end, which is why I refinanced to a thirty year mortgage with the lowest interest rate I could find recently, because I figured it would probably be one of my last chances to do so.

That “continuous workout mortgage” proposed in the article is, however, nothing but criminal theft, taking money from homeowners to give it to banks.

by JustMe on Apr 10, 2013 9:44 am • linkreport

@oboe; I don't see the 30 year and rents.

We've got a large pool of people who aren't qualifying for mortages because of impaired credit, and yes, they are driving the rental markets.

(That is different than young people -- with crappy jobs and no money -- not being able to get it and wanting from live in the city)

@AH; you don't need a GSE with a 15 or 20.

Also this:

http://marginalrevolution.com/marginalrevolution/2013/04/sentences-about-household-wealth-cyprus-fact-of-the-day.html

by charlie on Apr 10, 2013 9:47 am • linkreport

By reading above, it is pretty clear people don't seem to understand mortgage financing.

30 yr mortgages are no more inclined to be fradulant than any other financing.

30 yr mortgages are historically the more expensive option, more so than 15yr, or 3/5/7 yr ARMS.

And the credit bust and forclosure drama of the past 6 years had zero to do with people with 30 yr mortgages, as their financing was stable. It had everything to do with all the folks getting "liar loans" and zero down, bottom basement rate 3/5/7 year ARM's, that people couldn't afford when they adjusted.

by rgh on Apr 10, 2013 9:51 am • linkreport

@RGH, what is clear is people don't understand banks wouldn't issue 30 year loans with a GSE backing them up. Financally, they don't make a lot of sense.

From the consumer side -- which you are looking at -- yes, all true.

And it still a present issue given GSE risk to the taxpayer and the trillion or so the Fed owes right now.

Housing turns out the be a terrible form of wealth.

by charlie on Apr 10, 2013 10:01 am • linkreport

@rgh: yes.

Also, housing wasn't really seen as an investment in this country until some bubble action on the coasts in the 70s-80s (which coincidentally coincide with rising inequality and deregulation).

Home prices, as long as there is available land (which there is, everywhere), should not beat inflation. Buying a house is not a ticket to earning money.

See this astonishing graph on housing prices from robert shiller (the expert on finance/bubbles): http://oi45.tinypic.com/2h30vb7.jpg

by Nick on Apr 10, 2013 10:12 am • linkreport

Bonds scared me yesterday with some of her comments. She seemed to me the worst type of politician, we a serious chip on her shoulder, and the opportunity of some real power. Her comments on transportation, bikes, etc., though terrible from my perspective, were the least of my concerns with her.

I'm down with building a gigantic holding tank for combined overflow, I just wish I could be paired with a serious push to de-pave, replant, and hold more water onsite. Seems to me there's more bang-for-your-buck if you go that route.

by thump on Apr 10, 2013 10:12 am • linkreport

Adam,

My take on Anita Bonds' comments is that she is just a bad campaigner. Someone told her that to win she needs to reach out to African American voters. Then she goes on air and just says, hey I'm black vote for me because of it. This is just another awkward comment from her.

Perry Redd's comments at the WAMU/Kojo debate were more troubling. He said, "What we have learned from history is that when white people are in control of any elective body they do not care for the most vulnerable."

by Nick Casey on Apr 10, 2013 10:15 am • linkreport

Sears (along with its sister, KMart) is circling the drain. It will probably be gone before Landmark Mall.

by Frank IBC on Apr 10, 2013 10:15 am • linkreport

About 6 out of 13 residents in this city are black, and 6 out of 13 councilmembers are black. I don't really see the problem here.

Maybe the more telling fact is that there are no hispanic or latino council members when 1 out of every 10 residents in this city is hispanic or latino.

by Scoot on Apr 10, 2013 10:17 am • linkreport

did anyone read the blooomberg piece - they arent calling for a shift from 30 yr fixed to 15 yr fixed, but for indexing payments to neighborhood values somehow, so that the lender shares in the equity risk (both upside and downside)

by AWalkerInTheCity on Apr 10, 2013 10:20 am • linkreport

Charlie: you don't need a GSE with a 15 or 20.

Why not? If lenders don't want the risk of long-term locked-in rates I don't see why a 20 year fixed rate is going to be very appealing but a 30-year is not.

If there's no government guarantee the more likely result is either ARMs with adjustments after no more than a few years or short-term fixed rate loans (i.e., less than 10 years). Although I'm not convinced that private sector collateralization won't resume - Freddie and Fannie weren't the only games in town prior to 2008 and there's no reason they have to be now, other than their government advantage of treasury backing.

by ah on Apr 10, 2013 10:22 am • linkreport

@AH, well you've hit the real problem -- it is the securitization of mortages. We want the GSE to back the mortages so they can be traded.

by charlie on Apr 10, 2013 10:30 am • linkreport

I don't see the 30 year and rents.

If your average homebuyer doesn't have access to financing, it's likely that the housing stock will be bought by institutional buyers (as we saw post-bubble, and continue to see). With the consolidation of who owns the rental market it's likely you'll see the kind of cartel behavior you see in other fields.

While it's likely house prices will fall in areas with extremely weak rental markets, it's just as likely that in the areas where people want to live, people will make the same monthly payments (or higher), they'll just make them to institutional property owners rather than building equity.

by oboe on Apr 10, 2013 10:31 am • linkreport

Seattle has an interesting RainWise iniative in terms of using tax rebates for small scale stormwater management. I definitely see it as a way to go in a city like DC where you have a lot of property owners that might make positive choices with the right incentives. Imagine if basically every rowhouse owner put in a little rain garden.

by Alan B. on Apr 10, 2013 10:33 am • linkreport

@Oboe

How would stagnant housing prices cause rents to increase? I would venture that it would lead to more building of Multi-unit housing, and less SFH (as prices are stagnant) so possibly rent decreases... (as we are seeing in NOMA etc.)

@Charlie

My parents helped us with money for our downpayment. We are going to finish repaying it this summer. Was it fraud, I don't think so. It was our money, and the loan would have been forgivable if we ran into issues.

@Ah

1. I was only referencing Charlies idea that if people are only allowed (1) 30-year mortgage that opens the door to fraud to acquire a 2nd, 3rd, 4th 30-year mortgage. Of course a 30-year is no more likely to be fraudulent than a 15 or 20-year.

2. No, lack of equity is because you pay practically nothing to principal. My wife and I refinanced from our initial 30-year to a 15-year at 2.875% this past fall. Our principal payments increased from ~$330 to $1170 per month. We are paying of $14,000 a year in principal. That is actual equity, not any sort of bubble induced "equity".

3. Not true at all. If my wife and I were looking to buy a new construction home, with a 30-year, we could qualify for a typical sprawling 4,000 SF on a quarter acre in Ashburn. For a 15-year, we could qualify for an unrenovated rowhouse in Petworth, or a smaller townhome in Fairfax etc. You take away the ability of GS-12 types to buy mcmansions in Ashburn and further, builders will stop building them.

@rgh

See my comment in this post re: fraud.

Also, the bust did not have EVERYTHING to do with liar loans etc. Take my example of the owner in Miami. Under a 30 year conventional mortgage on a $300,000 home bought in 2007, they still owe $270,000, and it may now be worth $150,000, so they walk away. If they had a 15 year, they would only owe $160,000, and are much less likely to walk away.

by Kyle-W on Apr 10, 2013 10:40 am • linkreport

@Charlie

My dad just refinanced their home in Oakton. He was absolutely mystified at the crap they needed to complete the process. My parents are 800 credit score, could afford 3x their current mortgage types.

I kept telling him exactly that, the banks/brokers are crossing ALL t's and dotting ALL i's because they are terrified of having loans pushed back on them in the future.

by Kyle-W on Apr 10, 2013 10:42 am • linkreport

@AWITC

The article was crap, I agree :) Not a very good idea imo.

@Nick Casey

Here is hoping that Perry Redd's pandering will win some of the vote that is SOLELY voting on color alone, as that is what he is hoping for clearly. I tend to think Zuckerberg will win votes in W5/7/8 as well. I am still quite torn as to how this thing is going to wind up.

by Kyle-W on Apr 10, 2013 10:45 am • linkreport

Kyle,

There's a lot to like about Zukerberg. Everyone knows why he is running. The same can't be said for most candidates.

by Nick Casey on Apr 10, 2013 11:02 am • linkreport

@thump Agree 100%. But, EPA is forcing DC Water to build the tunnel. DC Water has asked EPA to include "green infrastructure" in its consent decree. Unfortunately, EPA talks a good game re: "green infrastructure" but its consent decrees always push expensive "grey infrastructure" solutions like the tunnel DC Water is building.

@Alan B DC has a program similar to Seattle's, called RiverSmart homes: http://green.dc.gov/riversmarthomes. They will do a free audit of your home and garden and subsidize the cost of rain barrels, rain gardens, new trees, previous pavement, etc.

by rg on Apr 10, 2013 11:19 am • linkreport

Negatives: Phasing out the 30 year mortgage over the next decade would ensure that real estate prices are stagnant over the next decade.

Sounds more like a positive to me. Stable real estate prices would result in more affordable housing.

by Naomi Jagoda on Apr 10, 2013 11:21 am • linkreport

Getting rid of GSE's would not lead to the end of 30 year mortgages. If that were true, there wouldn't be jumbo 30 year mortgages. You get a lot more rigorous review when you get one, but they're happy to give you one once you've cleared their hurdles.

Of course, many people couldn't clear those hurdles. And they would likely be excluded from 30 year mortgages. But it's not true that all 30 year mortgages would disappear.

by TM on Apr 10, 2013 11:48 am • linkreport

I'm not familiar with the layout of Landmark Mall, but the anchors of Lakeforest Mall in Gaithersburg )Macy's, Sears, JCP, Lord & Taylor) also own their space and the coming redevelopment will simply demolish the mall around the stores.

by King Terrapin on Apr 10, 2013 11:51 am • linkreport

@TM,

Excellent point. What you'd likely see is the same general home price trends, but with the borrower taking on more rate risk.

by oboe on Apr 10, 2013 12:03 pm • linkreport

Interesting discussion of what happens if 30 year govt backed mortgage disappears:

http://www.americanprogress.org/issues/housing/report/2010/11/19/8581/future-of-housing-finance-reform/

by oboe on Apr 10, 2013 12:04 pm • linkreport

Adam, for many, race is as important as gender and sexual orientation....along the lines on which many choose to vote. So Anita's comments, while not particularly PC, shouldn't be that surprising. Minority and underrepresented groups usually will prefer to have one of their representatives...represent them. But that also applies to regional/hometown preferences.

MPD not able to release mary j arrest records? Surprise! Surprise!

BTW, although I didn't submit the link, I thought the back and forth between Mara and Silverman had much more juice than the story about Bonds. I believe Silverman was against candidates before she was for them. Go figure.

by HogWash on Apr 10, 2013 12:17 pm • linkreport

Re: 30 year mortgages

There are a lot of separate issues here:

* Federal subsisdy -- currently, mortgages are implicitly subsidized by Fannie/Freddie. This is bad because it distorts the market and creates huge risks for taxpayers.

* Floating vs. fixed rates -- the bloomberg article opines for floating instead of fixed rate mortgages. Fixed rate mortgages eliminate the risk of higher monthly payments for homeowners but in the event of a real estate crash, creates a situation where homeowners can't re-finance to reduce monthly payments. Floating rates introduce the risk of higher payments for homeowners if rates rise due to things like inflation. So, homeowners would get a double whammy from a bad economy caused by inflation -- loss of jobs and higher mortgage payments. Currently, both fixed rate and floating rate mortgages are available to homeowners, in addition to fixed/floating hybrids.

* Banning mortgages -- seems like some folks on this thread are proposing this. This would unnecessarily put the American Dream of homeownership out of reach for most people. It would reduce the principal form of credit available to consumers, making credit available only to people savvy enough to know how to get a commercial loan or otherwise access commercial credit markets.

* Banning securitization -- there's really no reason to do this. Securitization is associated with bad things because in the past there was fraud in the way mortgage securities were packaged and marketed. Eliminating the fraud is important but securitization is good because it reduces rates for borrowers by allowing for greater diversification for lenders.

* Homeownership/mortgages as an investment -- historically, homeownership through a mortgage has been the principal form of wealth creation for Americans. The following example shows how the economics works (assuming your monthly tax-adjusted interest, taxes, insurance, and maintenance equals monthly rent for an equivalent home): 1) Put down $20K to buy a $100K house, 2) Historically, house appreciates by the rate of inflation, about 3% (avg over last 100 years) or $3K a year, 3) So, the return on your down payment (ROE) is $3K/$20K = 15% or an inflation-adjusted return of 12%. It's not possible to make anything close to a 12% inflation-adjusted annual return on your money with any other investment. By comparison, the real return from the stock market is historically 5%.

by Falls Church on Apr 10, 2013 12:19 pm • linkreport

@Falls Church: Does your calculation assume that the nominal mortgage interest rate is 0%?

by JimT on Apr 10, 2013 12:47 pm • linkreport

Oh never mind, I see your point.

by JimT on Apr 10, 2013 12:48 pm • linkreport

@FC

I think one person proposed banning mortgages. We can just ignore the libertarian view here, that would be an absolute deathblow to the construction industry. I see no positives whatsoever from this, and no one but the most extreme would propose this.

I just think we get rid of the thirty year, and go back to 15 or 20 year max. That makes securitization much more palatable, and woudl enable to US Govt to remove themselves from the market. Investors would buy a 15 year amortizing securitized package, as they know the default rate is going to be very low, and when defaults do exist, positive equity will be there to cover the shortfall.

by Kyle-W on Apr 10, 2013 12:51 pm • linkreport

Falls Church,
Your points aren't wrong, but you're leaving a lot out of it. Yes, leveraged investing, whether it be in homes or pork bellies, increases the impact of increasing asset prices. If your hypothetical homeowner had to put in 50k on that house, their return would only be 6%. If it weren't for the government subsidizing your ability to make that leveraged investment, you wouldn't get that return.

So the question isn't "does homeownership pay off once you have government subsidies in place" but rather "should we have those subsidies in place in the first place"?

Your point about the "American Dream" is telling. "Everyone" wants it, but it wouldn't exist unless we forced it by law.

The "American Dream" model works for a lot of people, but by putting so much force behind it, we've not considered alternative models. We could make investing in other assets just as favored if we wanted. That way, you're not falling behind if you chose to rent (or can't afford to buy). We could grant renters the same sort of tax benefits we grant homeowners.

The pro-homeowners always claim that owners "have more of a stake" in a community. But I think that's overplayed. Europe has much lower home ownership rates, and it's not like they don't have a sense of community. If anything, having lower homeownership means less nimbyism, which sounds like a better community to me.

by TM on Apr 10, 2013 1:03 pm • linkreport

King Terrapin, the article says two of three have to agree for anything to happen to the mall property. The enclosed "mall" is between the anchors and the plan is for that to be redeveloped while Macy's and Sears remain to do what they want (eventually the rest of the property would be redeveloped as well).

by selxic on Apr 10, 2013 1:06 pm • linkreport

@Kyle-W:

I think one person proposed banning mortgages. We can just ignore the libertarian view here, that would be an absolute deathblow to the construction industry. I see no positives whatsoever from this, and no one but the most extreme would propose this.

I just think we get rid of the thirty year...

I'm confused. When you say "get rid of the thirty year" what do you mean? If the US govt removed itself from the market, 30 year mortgages would still exist.

by oboe on Apr 10, 2013 1:07 pm • linkreport

@Oboe

The entire article was 30 year mortgages vs adjustable short term mortgages. Not many here are advocating for the only mortgage products to be available to be short term Arms. All of the positive benefits of the 30 year mortgage apply to a 15 or 20 year mortgage, but you get the added benefit of:

Less sprawl, more home equity, (If you buy a 320K house, with a 260K mortgage today, in five years, you have $169,000 in equity (353,000-184,000) and less risk of huge price swings.

If the government stops backing 30 year mortgages, they cease to exist. At least at any sort of reasonable interest rate. I would venture to guess that if the US Govt backed 15 year mortgages, and not 30 years, the spread would widen from the current .5% to something like 2.5% or more. A lender is not going to pick up the interest rate risk, and the credit risk, without a substantial premium. Much like junk bonds, a 30 year would have to trade at that substantial premium.

by Kyle-W on Apr 10, 2013 1:16 pm • linkreport

If the US govt removed itself from the market, 30 year mortgages would still exist.

In greatly reduced numbers:

"Fannie Mae and Freddie Mac, the government-controlled companies that issued and guaranteed more than 71 percent of mortgage-backed bonds last year. Between those companies and Ginnie Mae, which guarantees loans insured by the Federal Housing Administration, the government backed nearly 97 percent of U.S. mortgages"

http://www.bloomberg.com/news/2010-08-16/treasury-fixing-mortgage-finance-system-juggles-limitless-bailout-economy.html

by Lorraine Woellert on Apr 10, 2013 1:18 pm • linkreport

I'm surprised nobody brought up using eminent domain to build the new Landmark Mall property... oh wait: http://www.huffingtonpost.com/2012/11/07/virginia-eminent-domain_n_2087619.html

by Adam L on Apr 10, 2013 1:34 pm • linkreport

Less sprawl, more home equity

I don't see how getting rid of 30 year mortgages lessens sprawl. If anything, that would encourage builders to seek out property with the lowest possible cost, i.e., what exists far far out of the city, to reduce the payments.

by goldfish on Apr 10, 2013 1:37 pm • linkreport

@Goldfish

Well, people can afford less under a 15-year mortgage than a 30-year. The mortgage payment of a 30-year at 3.5 for $615,000 is the same as a 15-year at 3.0 for $400,000.

If builders know that ALL former $615,000 buyers can only now afford a 400,000 house, there would be smaller lots, and smaller houses. Smaller lots near the beltway means more homes near the beltway=less demand in Haymarket=less sprawl.

by Kyle-W on Apr 10, 2013 1:47 pm • linkreport

Yes, they dominate the market, but that doesn't prove that without them the 30 year mortgage would disappear. It just proves that most loans are conforming and that given the opportunity to obtain a GSE-guarantee, the banks will take it.

A better test for how mortgages do without GSEs would be to analyze the mortgage market for homes that were once within the conforming range, and then weren't.

Until fall of 2011, you could get a loan of up to $729k in DC and still be conforming. This was a temporary measure put in place in 2008. After it expired, the limit went down to $625k.

Was it harder to get a 30 year mortgage for 729k after 2011? Probably. And you probably paid a bit more for it, but it didn't go away. Granted, this is generally a well off customer base, but it goes to show that simply because people use a subsidy, doesn't mean they need it.

by TM on Apr 10, 2013 1:48 pm • linkreport

@Kyle W: even the smallest the lots cost $200k within the beltway, but far away can be had for $50k. The size of the house is independent of its distance to the city core.

Removing 30-year mortgages does not repeal "drive till you qualify;" rather, with the higher payments, it amplifies it. In the olden days before mortgages, people did not drive because there weren't any cars. Point is sprawl is not due to finance, but due to transportation.

by goldfish on Apr 10, 2013 1:57 pm • linkreport

I don't think it's surprising that a candidate would rely on race as their "platform", but I find the fact that they do so is sad and indicative of a problem. People will vote how they want, but the candidates at least should be able to provide a set of cogent policies or issues of interest. Why is it so hard to say "Race shouldn't be an issue: I would work for ALL District residents on issues such as A, B, and C"?

by Alan B. on Apr 10, 2013 2:00 pm • linkreport

If the government stops backing 30 year mortgages, they cease to exist. At least at any sort of reasonable interest rate.

This simply is not true. The government does not back mortgages over a certain amount (I think it's about $750k, but it keeps changing). 30-year jumbo (or super-jumbo) mortgages are readily available, and the rates are about 50 basis points (0.5%-pts) higher (or less). This was true before the financial crisis and remains true today.

by ah on Apr 10, 2013 2:02 pm • linkreport

@ah

These are also typically borrowers with extremely good credit scores, and people who make a lot of money with a lot in liquid assets. These loans are also not securitized normally.

If you think that if the government removes guarantees of 30-year mortgages, that rates don't skyrocket, well, we would just have to agree to disagree on that one.

by Kyle-W on Apr 10, 2013 2:13 pm • linkreport

@Goldfish

I am well aware of land costs inside the beltway. My point was that the $200,000 lot would often be used for 2 homes, instead of 1, and that the $1,500,000 lot would be used to build 15 apartments, instead of 8 townhomes.

Even for people "Drive until they qualify" they would qualify for a smaller home, on a likely smaller lot, meaning more density in development. More people in Centreville, and less people in Gainesville. Even Gainesville would fill up less quickly, putting less pressure for development even further out in Warrenton.

by Kyle-W on Apr 10, 2013 2:25 pm • linkreport

If the US govt removed itself from the market, 30 year mortgages would still exist.

30 year fixed rate mortgages generally do not exist outside of government policy to encourage them. In most other countries, if you want to finance your home over 30 years, you need to rollover the mortgage every 5 or 10 years at prevailing interest rates.

by JustMe on Apr 10, 2013 2:35 pm • linkreport

Kyle-W: lot size and use -- such as single family vs. apartment building -- is dictated by zoning; the size of a house built there is not. Most lots out in the outer reaches are zoned 1/2 or 1 full acre, and this will not change very easily due to pressure from the existing owners.

The result of the change is that the houses would be smaller. But they would still be just as far out, because the roads to go to them are very good.

As you drive around in the exurbs, the larger McMansions are much more noticeable than the smaller houses. The small houses tend to be older, but they are there.

by goldfish on Apr 10, 2013 2:36 pm • linkreport

Kyle-W: ...OTOH the higher payments mean that fewer people could afford a house, so there would be fewer places built for them and more renters. This would enrich the commercial landlords and the building industry would have to adapt to smaller houses and build more apartment buildings, both of which are less profitable for them.

It is indeed a presciption for "Potterville."

by goldfish on Apr 10, 2013 2:44 pm • linkreport

@Goldfish

Sigh. If I had known you were just going to ignore everything I wrote, I wouldn't have bothered explaining. There are certainly arguments in favor of a 30-year. There is plenty of closer-in land that is laying fallow. People qualifying for smaller mortgages certainly would lead to less sprawl.

Would Ashburn still exist? Of course it would. Would people who are currently in SFH's live in Townhomes, and townhome dwellers live in condos... Yes. Would those condos tend to be in less sprawly places, again, yes. It wouldn't have completely changed the make-up of the DC region, but it would have had effects on the fringes.

by Kyle-W on Apr 10, 2013 3:09 pm • linkreport

If the government stops backing 30 year mortgages, they cease to exist.

Not so fast:

"Meanwhile, Americans who still want the low-payment, predictable, 30-year-fixed mortgage undoubtedly could get it even if government support dissolves. It'll just cost more.

How much more? No one knows for sure. In a Christian Science Monitor report, Bill Gross, a bond-fund investor who co-founded PIMCO and is a critic of the Obama plan, says that without government guarantees, homebuyers could pay 3 percentage points more on interest rates. That means a 4.9% rate today would be 7.9%."

(http://realestate.msn.com/article.aspx?cp-documentid=28110830&page=2)

by oboe on Apr 10, 2013 3:11 pm • linkreport

Here's a listing of the anchors of the enclosed malls in Montgomery and Northern Virginia. They seem rather vulnerable should JCP and/or Sears go under.

Wheaton: JCP, SEARS, Macy's, Target, Costco

Montgomery: SEARS, Macy's, Nordstrom

White Flint: Lord & Taylor (Bloomingdale's, Border's closed)

Springfield: SEARS, Macy's (rest of mall being demolished)

Landmark: SEARS?, Macy's

Fair Oaks: SEARS, JCP, Macy's, Lord & Taylor

Dulles Town Center: SEARS, JCP, Macy's, Lord & Taylor

Neither Ballston nor Tysons I or II has JCP or Sears.

by Frank IBC on Apr 10, 2013 3:28 pm • linkreport

@Frank, forgot Pentagon City. Also has no JCP or Sears

by JES on Apr 10, 2013 3:51 pm • linkreport

Correction to Springfield: JCP, Macy's, Target.

The Sears (or KMart) is in nearby Springfield Plaza.

by Frank IBC on Apr 10, 2013 3:52 pm • linkreport

Dulles town center has a Nordstrom. It will be fine.

by mark on Apr 10, 2013 5:47 pm • linkreport

Yeah, three viable anchors to two not-so-viable anchors. Sounds like they're OK.

I wonder if Macy's will some day decide they don't need five stores in the Tysons - Ballston - Pentagon City - Landmark - Springfield cluster.

by Frank IBC on Apr 10, 2013 6:31 pm • linkreport

I wish the candidates had been asked about these $2.6 M tunnels. It's starting to hit every everyone hard. Very hard.

Too tough an issue?

by Tom Coumaris on Apr 10, 2013 8:34 pm • linkreport

Tom,

What's the issue? We're under a consent decree to clean up the rivers, and the tunnels are the mandated solution.

by Alex B. on Apr 10, 2013 8:42 pm • linkreport

It's worth noting those all weren't originally Macy's.

by selxic on Apr 10, 2013 8:54 pm • linkreport

Alex B- The issue is how to fairly pay for them if they're the only solution to the problem. Not everyone contributes to the overflow problem the same where we can just bill it by water intake. People should pay more proportionally to how much sewage they use and how much groundwater flow they cause during storms.

The free commercial basement sump pumping and the concreted-over rear yards are huge culprits. Meter and charge for the commercial sump pumps and add a fee per sq' of concreted rear yard. Otherwise everyone's water bills are going to get enormous because of these tunnels.

by Tom Coumaris on Apr 10, 2013 9:15 pm • linkreport

@ Selxic - Yes. (And I forgot to count the two Macy's at both Tysons malls, so it's a total of six.)

Tysons I - Originally Hecht's.

Tysons Galleria - Original tenant.

Ballston - Originally Hecht's.

Pentagon City - Original tenant.

Landmark - Originally Hecht's.

Springfield - Added in 1991. Springfield is rather unusual among regional malls in this area in that neither Hecht's nor Woodward & Lothrop were ever tenants.

by Frank IBC on Apr 10, 2013 10:33 pm • linkreport

Do any of you remember or have ever been to Landover Mall; same situation basically the mall was torn down about 12 years ago but Sears is still there cause they own the land.

If the owner of the rest of the land wants to redevelop either get Sears and Macys to agree, buy them out or though luck. If Sears and Macys are fine with how things are now so be it; its their land and the stockholders or whomever decisions it is; not the public, not this site not anyone not involved with the company.

by kk on Apr 11, 2013 1:52 am • linkreport

Plans for the redevelopment of White Flint Mall showed the original buildings for the Bloomingdale's and Lord & Taylor remaining on their sites, minus the mall and other structures related to the current shopping center. In this case, the land was owned by the two department stores.

However the Bloomingdales, which closed in January 2012, is already being torn down. I guess Federated sold the site.

by Frank IBC on Apr 11, 2013 1:16 pm • linkreport

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