Archive for Sunday, July 30, 2006

Costly housing

July 30, 2006


No matter how you slice it, buying a home in Lawrence is more difficult than it is in many other Midwestern university cities.

A Journal-World analysis of seven major Midwestern university cities found that Lawrence in 2005 had both the highest average selling price of a home and the largest gap between home prices and average incomes.

The findings didn't elicit surprise from watchers of the Lawrence real estate market, where discussions about affordability have been ongoing for a decade or more.

"We have a challenge with entry-level housing in this market," said Bill Yanek, a member of the city's Housing Needs Task Force, who follows the area real estate market as a lobbyist for the Lawrence Board of Realtors.

The analysis found that in 2005, the average selling price for all Lawrence homes was $187,465. That was more than $7,000 higher than the next highest city on the list - Ames, Iowa, home to Iowa State University. Other Midwestern cities chosen for the comparison were Iowa City, home to the University of Iowa; Columbia, Mo., home to the University of Missouri; Stillwater, Okla., home to Oklahoma State University; Norman, Okla., home to the University of Oklahoma; and Manhattan, home to Kansas State University.

Lawrence income levels also weren't doing much to help residents. The 2005 median family income in Lawrence - as determined by the federal department of Housing and Urban Development - was $62,200. That ranked Lawrence third among the seven cities analyzed. Despite that, the average home price was still three times more than the average income. That was the highest ratio of any of the communities examined, with Manhattan closely behind at 2.9 times income.

New residential development blankets the landscape northwest of Free State High School. In 2005, the average sale price of a Lawrence home was $187,465, the highest of all the cities in our comparison.

New residential development blankets the landscape northwest of Free State High School. In 2005, the average sale price of a Lawrence home was $187,465, the highest of all the cities in our comparison.

Every other community had home prices that were 2.6 to 2.3 times higher than average incomes.

Those numbers, though, may not be as bad as they sound. Kirk McClure, an associate professor of urban planning at KU, said those numbers show Lawrence really has a pretty average market for housing prices.

"Some people, I think, try to describe the problem in a way that makes it sound worse than it is," said McClure, who studies housing markets nationwide.

McClure said most researchers consider a real estate market to be healthy if its housing prices are anywhere from 2.5 to 4 times more than annual incomes.

McClure, though, said people are correct when they say some have difficulty buying an entry-level home in Lawrence.

"We have a problem related to income, not housing prices," McClure said. "You can't blame the housing industry for that. We just have to figure out how to get people more income. It is hard to own a home in almost any community if your job is standing behind a cash register."

What the city doesn't have is a shortage of homes, McClure said. He thinks the city overbuilt homes during the 1990s, when population grew by 22 percent but housing units grew by 27 percent.

Tax rates

Average homes prices in Lawrence may be more expensive than in several other Midwestern university communities, but the city's tax rate is not, the Journal-World found. The property taxes on an average Lawrence home in 2005 ended up being about 1.2 percent of the purchase price of the home. That ranked the city just behind Columbia, Mo., and Stillwater, Okla., which both figured out to 1.1 percent of a home's sale price. The comparison looked at property taxes charged by the city, county, school district and any other governmental unit: Columbia, Mo.: 1.1 percent of sale price Stillwater, Okla.: 1.1 percent Lawrence: 1.2 percent Norman, Okla.: 1.2 percent Manhattan: 1.3 percent Ames, Iowa: 1.4 percent Iowa City: 1.6 percent

Yanek, though, said he thought the number of homes available in the city was an issue that was driving Lawrence prices higher than in other communities.

"I think it is a supply and demand issue," Yanek said. "There are too few homes for sale in Lawrence, considering that we have a huge number of people who want to live here."

Yanek speculated the reason Lawrence may not adequately be keeping up with demand is because of the length of time it takes to get new housing developments approved in the city.

"I think the process is shorter in a lot of areas," Yanek said. "I don't think we're the worst, but in talking with a lot of folks from around the country, I think we are in the league where it is difficult to develop and build."

City commissioners have already ordered a review of the city's development process. Several builders said they believed the city would make changes to create more efficiency in the process.

Lawrence may have been at the top of the list in terms of housing prices, but nearly every community analyzed said the topic of housing affordability was a hot one.

Some community leaders said it was just part of being a university community.

"I think the incomes we have in the community are what drives a lot of this," said Mitch Friedow, a real estate appraiser for Ames.

"We have a highly educated community, and there are people who will pay for expensive homes. It just unfortunately locks some people out from being able to acquire real estate in Ames."

In Manhattan, affordability issues are increasing, said Greg McHenry, deputy county appraiser. Based on 2005 prices, Manhattan had home prices that ranked in the middle of the cities analyzed.

But based on data from the first six months of this year, real estate prices seem to be exploding, fueled by an expected influx of residents that will come to the area as nearby Fort Riley expands. McHenry said average sale prices went from about $163,000 in 2005 to $183,346 through the end of May. What makes that price more difficult is the city had the third-lowest average income of the cities analyzed.

"People are talking about affordability issues all the time," McHenry said. "County and city commissioners are very concerned about it. It is just very difficult to keep up with the demand right now."


BunE 11 years, 8 months ago

Who votes for a guy named "Boog"?

Lawrence is expensive because a lot of people want to live here and the land and wealth is concentrated in a comparative few. That is how it works. No real harm, but to think for a moment that changing the city council will change Lawrence is shortsighted. Controlling growth through government rather than free-wheeling markets creates well...Olathe. In otherwords a sprawling poorly planned suburban nightmare that relies on the automobile. If that is what the voters want, OK. But lets remember that the City council was elected. Isn't "spreadin' 'd'mocracy" what America is all about?


Is the demonization of thoughtful discourse; liberal ideas and government part of a plan to destroy democracy and institute oligarchy?

Here is the problem, The American free market economy does not exist. The United State's economy is controlled by price-fixing collusionists that utilize the military might of the US government to enforce monopolies and ogilopolies throughout the world. Here at home we subsidize business through tax incetives and pass the "savings" on to the taxpayer. We then get to listen to horror stories about how the Chiefs will leave Kansas City unless we buy them nice luxury suites so they can make more money. All the time real wages stagnate for MAJORITY of Americans and we are anesthetized by certain leaders crowing about abortion of gay marriage or something else trivial. Perhaps if we talked about Fair Trade?

Alas, this would reveal the great "OZ" the corporate worshipping of the religion that is shareholder value. "If we can just be profitable in the short term, we can raise more money so that we can work on being profitable in the short term again" If we were really serious about economic freedom and even the american dream, we would revolt against the reduction of things like estate tax and the overclass that it creates. (Why yes I do want to take 1/2 of the wealth of the people who this effects and redistibute it. - Perhaps tax cuts for the people that need it most?)

Why should someone who happened to be born into extreme wealth get to keep it all? That my friends and countrymen is called feudalism. 1/2 of 10 million dollars from mommy and daddy the Industrialists is a pretty good place to start. That is as long as they don't just buy a porsche and some prada.

You can throw communism around like some sort of curse word, and it does ignore the basic profit motive found in most humans, but don't try and call Free Marketeering some sort of cure all; a pancea, It is selfish and short sighted and unsustainable. In a country as wealthy as the US, allowing the poor to die of malnutrition and heart disease is as immoral as Stalin's gulags. We just don't have the guts to address inequality and class in our "classless" society.

For anyone to suggest that the United States has a free market in the true Keynesian sense of the word seems to be, well, foolish.

oldgoof 11 years, 8 months ago

Rational, me think doth protest too much

xenophonschild 11 years, 8 months ago

I love Lawrence, but I'm looking to buy a home arond Perry, or Vinland, or - god forbid - even Oskaloosa. Living out in the country is better, and prices are more reasonable - at least for the time being.

Rationalanimal 11 years, 8 months ago

Simple solution:

release the kung fu death grip the City Communishers currently have on Lawrence's growth. The free market works (much to the ire of Lawrence's communist intelligentsia).

bmwjhawk 11 years, 8 months ago

This is an informative piece. While our town seems to be "leading" in a lot of categories, it doesn't appear ridiculously out of line with its cohorts. It will be interesting to watch the housing market over the next five years.

lunacydetector 11 years, 8 months ago

I think it is safe to say that housing does indeed pay for itself if one were to look at the hard numbers from an unbiased and logical perspective - something that nobody has done just yet. Then it will be justified to open up the markets with more annexation for housing, which will stabilize the market and allow for a less costly single family home. How many people raise their family of four in an apartment anyway? What do the enrollment numbers show for preschool children? Education is the major expense when it comes to any new housing cost/benefit for a city. Until then, a downward trend for lawrence in the future - part of the Progressive idealogy -expect more expensive homes, higher property taxes, and an overall net loss in jobs. We are right on track for "failure" from a layman's perspective -insert "success" for "failure" for the Progressive's perspective.

Jamesaust 11 years, 8 months ago

McClure is correct to zero-in on income as a key factor. But I believe the problem is in some ways worse than represented.

Unlike the other cities (with the exception of Norman, which is practically an OKC suburb), Lawrence has a much higher percentage of households earning income outside the city (commuters).

Making an assumption that the economic health of the community is best measured by the ratio of housing prices versus incomes earned WITHIN the city, I believe the ratio is slightly in excess of 4 times income. That would make Lawrence an outlier on the scale. (Up with the missing "sister" from this feature - Boulder, Colorado.)

Yanek's approach seems plausible. But after the breathless, frontpage story on the loss of 26 people over the last year from the city's population, it would then follow that 2006/07 would see a "catch up" period where supply equalizes with demand and housing prices moderate if not actually fall (relative to regional prices). Is that happening? The observable evidence seems mixed to me - longer time to sell houses, some loss of "froth" but no serious limit on prices and no general improvement relative to the region.

Wilbur_Nether 11 years, 8 months ago

Rationalanimal reasoningly suggested "release the kung fu death grip the City Communishers currently have on Lawrence's growth. The free market works (much to the ire of Lawrence's communist intelligentsia)." The proffered suggestion is, rather than a "simple" solution, a simplistic one instead. Multiple factors are involved, several of which were described in the article. Micromanagement by the Commission is only one. Nor has that micromanagement been unique to this Commission. It appears to me to be endemic to any Lawrence City Commission. Finally, Communism is no longer viable as a political ideology. We won. Which makes a McCarthyistic swipe at some one as a communist a rather hollow accusation.

Rationalanimal 11 years, 8 months ago

Sorry Wilbur, I wasn't intending to offend you by leaving you out by excluding the mention of liberal/socialists. Let me amend: much to the ire of Lawrence's liberal/socialist intelligentisia.

Second, you assumption that my suggestion was simplistic since it is a simple one implies (against principles of logic) that there must be a complex solution for every problem, whether or not the problem actually demands a complex solution. There is a little saying in the science community that essentially says: when faced with two competing theories or solutions, the simplest is most likely the correct and preferred. Sounds rational to me.

Your assumption that every problem requires a complex solution illustrates the very malady that liberals/socialists/communists have; the symptoms of such malady being the cry for more goverment, more taxation, more govt. departments, more welfare, and in Lawrence, more $250,000 Commission sponsored case studies to figure out a problem the solution of which is plainly evident. The solution to this problem is easy, let the free market go to work, and it will do just that, work.

As for the remarks regarding communism (which I find curious that you feel compelled to mention), we did win, but their are a contingency of Americans that romanticize some or much of communisim, aka liberals and socialists. So although we won, although it has been shown that the economic policies concerning communism and socialism are utter and abysmal failures, there are certain individuals, such as the current City Commission that just won't accept the settled outcome. "Maybe if we try really hard next time, maybe tax a little more, put a few more laws on the books, run Wal-mart out of town, etc, etc, then socialism will work."

Communism didn't work, socialism won't work. The reality is, socialism owes its roots to communism, which I assumed everyone knew. My apologies for not including you in my "swipe."

Lastly, crying "McCarthyism" is so 1950's. Although it seems to be the preferred "foul" cry by liberal and socialists alike. My guess is it is the preferred "foul" cry since it is the extent of substantive argument liberals/socialists can muster against capitalism and the free market way of life.

Your right, communism is no longer a viable political idealogy, but lest you overlook the full scope of communism, it also encompassed economics, commerce, transfer of wealth, etc. The communist ideology concerning these topics failed right alongside the political ideology. In fact, one could make a very good argument that the impetus for the political failure was the failed economic, commerce, transfer of wealth policies. Despite this abysmal failure, there are those in this country and throughout the world that have hooked the comatose communist idealogy to life support equipment. The comatose body of communism on life support is called socialism.

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