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Archive for Sunday, July 31, 2011

Boost in 2010 from stimulus now ‘killing’ housing market

Home sales down 25 percent compared with last year

July 31, 2011

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Call it a stimulus hangover.

In 2010, Lawrence’s real estate market started to show signs of life as tax credits for first-time homebuyers — part of the federal stimulus package — did boost sales.

But now as numbers for the first half of 2011 are released, it is clear that Lawrence’s real estate market is no longer stimulated.

“The stimulus created an artificial boost for awhile,” said Gary Nuzum, senior vice president of McGrew Real Estate. “We knew it would help us last year, but we also knew it was stealing buyers from us in future years. And it has. It is killing us right now. I never thought it would hurt us this much but it has.”

Home sales and construction

Homes sales for the first six months of 2011 are down nearly 25 percent compared with the first six months of 2010, according to numbers released by the Lawrence Board of Realtors.

Board president Bob Kocour, an agent with Stephens Real Estate, said the numbers look a little better when compared with 2009, when the tax credits were not in place. But still, this year’s totals are about 5 percent below totals from 2009, which most real estate professionals said was a historically bad year.

“I think we’re down about 50 percent from our peak,” Nuzum said of the number of homes being sold in the market. “Something has to happen in the economy to get people feeling comfortable with being homeowners again.”

The slowdown in home sales has had the predictable impact on home construction numbers. The city issued 59 single-family and duplex permits for the first half of 2011. That’s down from 75 permits in the same time period a year ago.

“That number is pretty discouraging,” said Bobbie Flory, president of the Lawrence Home Builders Association. “I can tell you that this downturn has lasted longer and has been deeper than most people in our industry anticipated.”

Kocour said July numbers do seem to be better than anticipated, and he said the market still has some good things going for it — namely interest rates. But Kocour said real estate agents are nervously watching the debt debate in Washington, D.C. There has been speculation that interest rates will rise either because the debt ceiling is not raised in a timely manner or because credit rating agencies downgrade U.S. debt.

“But hopefully by Tuesday, they’ll have something in place,” Kocour said. “They better, anyway.”

Economy’s effects

Local industry leaders are in agreement about what is needed to provide the market a sustainable boost: jobs.

“There are a lot of people still on the sidelines out there, and it is certainly because of the economy,” Kocour said. “Businesses that normally hire people aren’t doing that, and they aren’t moving people around right now either.”

Kocour said the trend in Lawrence does seem to be that work situations are causing more people to leave Lawrence than to move to the community.

On the building front, Flory said that national economists keep telling builders that there is good reason to believe the market will bounce back. In the meantime, the number of builders constructing homes in the city have dwindled to a “handful,” she said.

“Nationally, we are told that there is all this pent-up demand that is going to burst at any minute,” Flory said. “The reality is that there are still children growing older and leaving home who need a place to live. A lot of people are putting a lot into the pent-up demand theory.”

Here’s a look at some numbers from the first half of 2011:

  • Realtors have sold 551 homes, down from 742 a year ago. The category that is particularly taking a beating is sales of newly constructed homes. They are off almost 60 percent. A total of 34 newly constructed homes have been sold in the first half of 2011
  • The average selling price of homes in Lawrence is up 2.4 percent from a year ago. The average now stands at $182,058. The median price is $161,000. Real estate professionals said the higher prices are because there are far fewer homes being sold to first-time homebuyers, which tend to be lesser priced homes. Nuzum said many of the homes on the market are priced above $200,000. He estimated those homes are selling for at least 5 percent less than they were a year ago.
  • There are lots of houses on the market. In June, there were 1,030 homes on the market. That’s up from 891 a year ago.
  • Homes are taking longer to sell. The average days a home sits on the market is now 100. That’s up from 81 last year.
  • The number of apartments being built in the city is on the rise. The city has issued permits for 126 apartment units. That’s up from 83 during the same time period of 2010.

Commercial projects

There have been several large commercial projects started in Lawrence during the first half of the year. Here’s a list of the 10 largest projects thus far:

  1. Bowersock north bank power plant: $11.3 million.
  2. Comfort Inn & Suites, 150 N. Iowa: $3.3 million.
  3. Wastewater treatment plant improvements, 1408 E. Eighth St.: $3.1 million.
  4. Crossgate Casitas apartments, 2451 Crossgate Drive: $2.1 million.
  5. Hy-Vee renovation, 3405 Clinton Parkway: $2 million.
  6. Northwind Apartments, 200 N. Mich.: $1.3 million.
  7. Single-family dwelling, 1716 Lake Alvamar Drive: $1.1 million.
  8. PKV Dental Offices, 530 Folks Road: $1 million.
  9. LMH information technology/business health remodel, 325 Maine: $867,834.
  10. Plastikon Industries remodel, 3780 Greenway Circle: $800,000.

In total, the city has issued permits for $49.8 million worth of projects. That’s up from $47.6 million during the same period last year. That puts the city on pace for about $100 million worth of projects in 2011. Here’s a look at how that $100 million pace compares with the amount of projects started in past years:

  • 2001: $152.2 million
  • 2002: $141.5 million
  • 2003: $150.5 million
  • 2004: $117.7 million
  • 2005: $131.2 million
  • 2006: $171.4 million
  • 2007: $104.4 million
  • 2008: $146.4 million
  • 2009: $75.3 million
  • 2010: $101.8 million

Comments

heygary 2 years, 8 months ago

Wait until they "close the tax loophole" for mortgage interest! You folks in real estate would be wise to start retooling for another profession!

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heygary 2 years, 8 months ago

Wait until they "close the tax loophole" for mortgage interest! You folks in real estate would be wise to start retooling for another profession!

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vuduchyld 2 years, 8 months ago

I didn't see any statistics on the article on anything outside of Lawrence. Were we the only place affected by the stimulus?

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Kontum1972 2 years, 8 months ago

LMAO...get this i recieved a check from Countrywide...for 202.00 for the scam they ran when the were selling homes....that was 19 years ago....oh justice be not slow

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meggers 2 years, 8 months ago

The overall economy is harming the housing market. To suggest that the stimulus is to blame is akin to saying that coupons and sales harm retailers, because once they expire, people won't purchase their products. If that were true, retailers wouldn't continue to offer such incentives.

In other words, the premise of this article is nothing but politically-driven hogwash.

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Liberty_One 2 years, 8 months ago

Of course falling prices is good news if you are looking to buy a house. There are always two sides to the coin, and people should not focus on the harm to one group without looking at the benefit to another (and vice versa).

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verity 2 years, 8 months ago

I spoke with a realtor about a week ago in what is basically a bedroom community for Wichita (real estate prices are quite a bit lower there than in Lawrence). She said that foreclosures have gone way up since last November and she is having trouble selling a house for $140,000 when someone can buy a foreclosed house that is just as nice for $60-70,000. I wonder if this has also affected the Lawrence market.

It seems to me that 100 days to sell isn't all that bad, considering that other markets in the state are said to be six months to one year. This is only hearsay---but I know the house where I was speaking to the realtor has been on the market for eight months---a really nice house and apparently no bids at all. Another house close by has been on the market around a year.

Part of the problem seems to be that owners will not go down on the price. If you can continue living in the house, that makes sense, but if the house is setting empty, you're out taxes, insurance and utilities and possibly a lot of interest (depending on your tax situation).

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bootlegger 2 years, 8 months ago

Houses in this town are overpriced; build them; watch them sit; and sit and sit............worthless; overpriced cracker boxes............

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jafs 2 years, 8 months ago

It's absurd to talk about the tax break as "killing" the market.

It provided a temporary boost to a slow market, and now the boost is gone, that's all.

The reasons the market is slow have nothing to do with the tax break, or lack of it. They have to do with the economy in general, availability of credit, jobs, etc.

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Carol Bowen 2 years, 8 months ago

  1. We had a glut of homes on the market.
  2. People who could not really afford homes were able to buy them anyway.

Isn't this why the housing market had/s a problem? Why would the builders and realtors want to go back to that market? They should have used the stimulus to plan differently not for more of the same.

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whatupdown 2 years, 8 months ago

Interest rates can only and will go up and this will send home prices down more..... better to rent than own for several years to come, another year and we should be in much higher unemployment and heavy stock loses. http://w3.newsmax.com/a/aftershockb/video.cfm?PROMO_CODE=CACB-1

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irvan moore 2 years, 8 months ago

prices are down, the people down the street just sold their house and took a $40,000. loss after living in it for 5 years. they were ready to leave Lawrence and could afford it so the house sold fast and cheap.

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Number_1_Grandma 2 years, 8 months ago

Land prices are too high in this town. Why? Because of greedy real estate companies, developers and home builders who follow their lead. What happened to supply and demand establishes prices? Then why isn't the price of land (homes) coming down...again, greedy developers and real estate companies here in Lawrence. When people don't (can't) pay their prices; so demand is low, price should drop to increase demand! But they (developers and Real Estate co.) won't lower. Thus causing a crash. I say the hell with them and let them all starve or move out of Lawrence. Then and only then, will we truly have a "free market".

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Paul Decelles 2 years, 8 months ago

Hmmmm, “The stimulus created an artificial boost for awhile,” said Gary Nuzum, senior vice president of McGrew Real Estate. “We knew it would help us last year, but we also knew it was stealing buyers from us in future years. And it has. It is killing us right now. I never thought it would hurt us this much but it has.”

Really Mr. Nuzum? I bet you didn't raise any protest when people were encouraged by brokers and agents to buy more house than they could afford.

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Mike Ford 2 years, 8 months ago

I realize that in my lecturing I appear to deviate from the subject at hand sometimes and that's not my real intention. So many of the people on here argue from a point of abject lunacy at times that I have to get at the source of lunacy. You are not free, you did not come to a land of plenty. You came to a land of at least 700 indigenous nations whose lands you have exploited renamed and ruined. Your country committed theft in it's borrowing of governance ideas from both European, Greek, and Haudenosaunee Confederacy ideas. No one likes plagarists. Mr. Obama did something at the time which is more than Dubya did. There is a group of people who will not own what the Bush Administration did anymore than what Harding, Coolidge, and Hoover did. If you won't join people trying to fix the problem, than you either need to come with something actually viable or shut up. Sorry, Reaganomics didn't work so you need to toss that one.

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yourworstnightmare 2 years, 8 months ago

This statement by Mr. Nuzum makes no sense: "“The stimulus created an artificial boost for awhile,” said Gary Nuzum, senior vice president of McGrew Real Estate. “We knew it would help us last year, but we also knew it was stealing buyers from us in future years. And it has. It is killing us right now. I never thought it would hurt us this much but it has.”"

I guess he would have preferred that no houses were sold in 2010, either.

I fail to see how selling houses in 2010 is hurting them and is stealing buyers. It seems that without the stimulus, no one would have bought homes in 2010, either. Please explain.

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Mike Ford 2 years, 8 months ago

liberty one they stole the land so you'd have a place to live. you're a beneficiary of theft. Calling me racist is your feeble attempt to circumvent reality which is something you, the gop, and the tea partiers are really good at doing. Otherwise you're still in Europe right?

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rooster 2 years, 8 months ago

Gary Nuzum said “We knew it would help us last year, but we also knew it was stealing buyers from us in future years. And it has. It is killing us right now. I never thought it would hurt us this much but it has.”

I guess I must have missed the article last year where gary complained his company was selling too many houses. I sincerely doubt 2010 would have been as nice had there been no tax or other incentives to buy a house.

Seems like Obama is damned if he does and damned if he doesnt. I'll be sure to avoid referring people to garys company since hes in the business of complaining.

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Jimo 2 years, 8 months ago

Or, alternately, you're just constructing the foundation of the next housing boom. Except I'd expect it to be focused more on rental housing for families and a more 'mature' adult market of people who don't want to over-invest their money in real estate.

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Mike Ford 2 years, 8 months ago

if we do that will you return the lands you paid little or nothing for? probably not... you'll have some christian reconciliation ceremony attone for your sins and still live on stolen lands. Quebec tried to secede from the rest of Canada a decade or so ago and the Haudenosaunee and Anishnabek people whose lands were confiscated to create this province were like "No you don't". When the South seceded the tribes in Indian Territory were left to deal with Albert Pike and the Confederates as the North flew the coop. Pro Union Indians like Opathleyahola and John Ross went as refugees to Kansas and when it was all said and done the US punished entire tribes for the actions of small factions within their tribes and took a lot of land away and then forced Kansas tribes like the Sac and Fox of the Miss RIver, Ottawa, Miami, Quapaw, Citizen band Potawatomi, Wyandot, Peoria, Osage, and Kaw peoples onto said land in Indian Territory. You all can always make up policy as you go right?

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demonfury 2 years, 8 months ago

"Kocour said the trend in Lawrence does seem to be that work situations are causing more people to leave Lawrence than to move to the community"

This may be a partially true statement, however, I believe that it has to do with a lot of elements and not all of them are work situations as mentioned above. Lawrence has been in obvious decline for about 5 years now. All of the statistics in this article show that loud and clear. Work situations do cause some movement, but not likely compensate for the numbers listed here. The problem, I believe, lies with how the city, the county, and KU are run and operated. Over the last five years, it's been remarkably disappointing for all three of these. With the exception of a couple of KU sports highlights, it's been dismal at best. Lawrence simply keeps getting more and more liberal, and thereby more and more at risk. There isn't a comfortable balance here anymore, it's leaning WAY left, and the consequences of that are becoming increasingly evident. I see Lawrence in a perpetual downward spiral unless changes are made and made quickly. Unfortunately, the vast majority of people here are liberal Democrats and don't see it that way, they believe that throwing money at the problem will solve it. The statistics in this article are testament to that epic fail. Just look at everything Obama has done, he's the biggest fail of them all and Lawrence is simply following the leader. Everyone wants to blame this situation on GW Bush, and a portion of this is rightfully his doing, but Obama has had over 2.5 years to make improvements and has actually made it worse by throwing money at the problems. And now with the debt ceiling, Obama has thrown so much money at the problems that he now finds himself in a catch 22. Either way, he's hung himself and virtually any chance at a re-election. It's time for a serious change nationally, and locally. We will likely achieve that nationally in 2012, but not locally. Lawrence will continue to decline. I too will be one of these statistics when I move out of Kansas next summer. It's not because of work, I can work from anywhere. It's because of my kids. When my youngest finishes school in May, we'll be moving east for his college. He has decided that KU is no longer a good fit. He was pleased when he learned that Hemenway was retiring, but then very, very discouraged with KU's choice of replacement. Just like Mangino's replacement, it's their ultra liberal thinking and decision making that brought her here. Stupid is as stupid does, huh? So we too will bid ado to ultra liberal Lawrence and ultra liberal KU.

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solsken66 2 years, 8 months ago

This community is flooded with apartment rentals which I feel is not good for the community, but the city keeps approving more and more apartment building permits. Who is getting money under the table or perks?

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jayhawklawrence 2 years, 8 months ago

Try lowering your prices.

Let market forces work instead of blaming someone else.

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bobberboy 2 years, 8 months ago

No. What screwed the housing market is contractors charging too much !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1

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Mike Ford 2 years, 8 months ago

firstly, Mr. Obama wasn't going to get a fair shake from sore losers and still hasn't. If no tax credit then what? whiners would complain regardless.... he inherited a ponzi scheme economy where Dubya had pushed people to take loans out on houses to support pursuit of the mythological american dream. once the house equity market lost value and people had taken a gazillion mortgages out on their homes and no value was left, voila, this current mess. Clowns hate reality. Clowns are making the denial of economic history prior to January 2009 their favorite pastime. I wish I could delete 1980 to 1988, 1988 to 1992, and 2000-2008. Fox, the Gop, and the Tea Partiers must all go to the same memory programming software to delete responsibility for their clown leaders. My parent got the tax credit and that purchase was one of the very few real estate transactions where we live. I wish I could play dumb and blame the next guy....how does that work???? Notleft_Notright..... I have a question for you since you claim to be a liberatarian.... I go to the county fairs and such and start up conversations with the guys at the liberatarian booth. Limited government is fine...but the way the gop does it is that they decide to limit the government by reducing expenditures of the people or groups they don't like in a very racist way. They target their enemies. If everyone sacrifices for everyone's good..that's fine.. however, the gop isn't that objective and I always end up having a long polite discussion with the guys at the lib booth. The other problem is this; how does one rectify the facts that these immigrants want to start from zero after treatying away millions of acres of Choctaw lands in MS, LA, AL, ARK, GA, and OK. DO you simply forget this and give them a pass? My ancestors applied for Oklahoma Choctaw lands that the Dawes Commission confiscated and redustributed in small allotments and ended up staying in AL and MS. I guess those who forget history can be played by others...

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Bob_Keeshan 2 years, 8 months ago

Maybe they'd like to give back all the sales they made last year...

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Richard Heckler 2 years, 8 months ago

What killed the housing market,lost 17 million jobs,took down some 401k's, took out tons of medical insurance coverage etc etc etc?

The Reagan/Bush Savings and Loan Heist(Cost taxpayers $1.4 trillion) http://rationalrevolution0.tripod.com/war/bush_family_and_the_s.htm

  1. Wall Street Bank Fraud on Consumers under Bush/Cheney http://www.dollarsandsense.org/archives/2009/0709macewan.html

  2. Bush and Henry Paulson blew the $700 billion of bail out money? http://www.democracynow.org/2009/9/10/good_billions_after_bad_one_year

To further stagnate the markets:

THINK tax cuts that do nothing to make an economy strong or produce jobs.

  1. Still A Bad Idea – Bush Tax Cuts - The ENTITLEMENT program for the wealthy at the expense of the middle class http://www.dollarsandsense.org/archives/2001/0301miller.html

In the end big debt and super duper bailouts were the results which does not seem to bother Republicans, as long as they are in power.

In fact, by the time the second Bush left office, the national debt had grown to $12.1 trillion:

  • Over half of that amount had been created by Bush’s tax cuts for the very wealthy.

  • Another 30% of the national debt had been created by the tax cuts for the wealthy under Presidents Reagan and George H.W. Bush.

• Fully 81% of the national debt was created by just these three Republican Presidents. http://www.dollarsandsense.org/archives/2010/0111orr.html

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Casual905 2 years, 8 months ago

THe economy is down but 100 million in projects isn't so bad. I don't think we should let single family home sales and construction be the index for Lawrence real estate market. $49 mil is up from last year even in this economy. Seems like somebody is interested in Lawrence. Let's face it there had to be a market correction in Lawrence. There was a time when all you needed to be a building contractor was a cell phone and a friendly banker. They were giving loans to anybody that was breathing. They were starting to build some crap homes on $80,000 lots. Builders and developers were out of control. I think it's a good thing you need 20% down and and good credit, makes for more stable neighborhoods. I can't understand why some are so down on some of the stimulus programs. Would the realtors rather not have had the income generated from housing incentives. I didn't see the autodealers turning those cash for clunkers customers away. The economy needed a shot in the arm to keep it from failing completely. The auto industry was on the ropes along with all the supporting industries and jobs tied to them. That would have been a big hit to already weak economy.

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JerryStubbs 2 years, 8 months ago

This article has some good information but the title seems to be completely inaccurate. There are exactly two sentences that support that premise and I didn't find any thing to back them up in the rest of the article.

1 Our economy is still recovering from the biggest real estate swindle in the world in all of recorded history CHECK 2. People are losing jobs in Lawrence and leaving town CHECK 3. Apartment volume is at an all time high and big projects are still on line for completion CHECK 4 The 2010 Tax credit stimulus (some people say cutting taxes can be a good thing) probably made an artificial bump in sales. CHECK

You would think that real estate people would be thankful sales haven't been stale for three years straight.

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lunacydetector 2 years, 8 months ago

it will only get worse. is it worth riding out the storm and how many years will it take to break even on a house these days, 10 years, 20 years? buying a house these days is just like buying a car......a car depreciates 20% when you drive off the lot.......so to speak.

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oatka 2 years, 8 months ago

Washington never/won't learn. Stimulus, incentives, tax breaks - all serve to distort the market by manipulating supply and demand. They fall into the "For God's sake, make it look like we're doing SOMETHINGg!" category.

When you have a market made up of over 300 million individuals making individual decisions, the market will inevitably right itself and negate all the "gains" that were achieved through the use of "stimulus" or "incentives".

To the gentlemen who spoke of the risk of a permanent recession, it's no longer a risk. It's here.

Factories/jobs are sent overseas (the corporations laid off each others customers), H1Bs and other foreign (i.e. cheap) technicians are brought in and cheap illegal immigrants are allowed in via a wink-wink-nudge-nudge attitude by the government. Many empty factories have been razed to the ground to lower taxes and will never be rebuilt - try building in today's over-regulated environment.

Even if the Democrats are booted out there will only be a 6-month spasm of relief as uncertainties are removed and businesses start hiring again - at a cheaper rate in this saturated labor market - and it will remain saturated until the above problems are resolved.

Sadly, I don't see anybody in the political classes who have the fortitude to start undoing this mess.

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notleft_notright 2 years, 8 months ago

It is not a "free market" if socialist intervention enslaves it. We have lost our freedom to government regulation.

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cato_the_elder 2 years, 8 months ago

Obama and his liberal Democrat pals have proven for all time that Keynesian economics is a cruel fraud that steals from future generations to pay for present-day government largesse. While far too many of our citizens remain mired in economic stagnation since Obama was elected, a bitter price for many to pay, at least a much greater portion of the voting populace has now awakened to the fact that Keynesian economics doesn't work.

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Scott Kaiser 2 years, 8 months ago

"Stimulus." "Cash for Clunkers." More like taking from the rich and giving to the poor. It's STILL taking! "Redistribution?" Please! It only creates more poor. How's that "Hope and Change" working out for YOU?

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Steve Jacob 2 years, 8 months ago

Can you imagine the glut of houses on the market without the tax credit in 2009-2010? Let's face it, first time home owners now need 20% down and a 740 score to buy a house, and that's tough.

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Cait McKnelly 2 years, 8 months ago

This article and this article http://www2.ljworld.com/news/2011/jul... in the same paper on the same day says volumes. It also says volumes that a $1.1 million dollar single family dwelling is on the top ten list of building projects in the county. As recently as 2000, depending on the location, you could still actually buy a small home for 40k. Now you're lucky to get a car for that much, much less a mobile home.

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