Leverington Warns About Over Development

Submitted by Gary Leverington, Fitchburg

Dear friends and representitives,

I've grown increasingly concerned regarding the recent discussions of the NE neighborhood development.

What I hear mostly are concerns (quite valid) about the negative impact that building a large number of houses will have on the environment and animal habitat - what's missing are concerns about the impact on housing values.

Certainly current residents (if more informed and aware of the risks) would not be happy to see additional new housing being permitted in Fitchburg. Most are not in favor of it anyway!

And for those listening to the developer's point of view - rather than doing their own due dilligence to learn the true state of affairs about the health - or lack thereof - of the housing market in the Madison area - perhaps the following data linked below will serve as an information source.

Please remember - many people bought at the top in Florida and are now getting their heads handed to them (with a 29 month supply of homes for sale in some areas and home auctions with zero bidders)! They also mistakenly believed (at one point) that they were immune from a decline.

The facts are: Lending standards have tightened dramatically, and many would be buyers can no longer qualify for a loan - additionally - smart buyers are choosing to be prudent and wait for lower prices - and an increasingly large number of owners are facing mortgage resets that will raise their payments by 20-40% and give them little choice but to bail out and place their homes on the market.

Note: The majority of mortgage resets (subprime, ARMs, zero down) will occur in the latter part of this year and in 2008, thus placing additional downside pressure on an already weakening housing market.

Please become informed and refrain from adding additional housing supply into a market at precisely the wrong time (amid slowing demand and a slowing economy).

Just look in the Madison Sunday paper homes for sale section and see the increasing number of ads with the headline "Price Reduced" - do you still think Madison (Fitchburg in particular for purposes of this discussion) is immune from a down turn in prices during a period of falling demand and too much supply!

With more houses potentially on the way - with developers (example NE neighborhood that the public does not want or need!) promoting their own agenda regardless of the facts?

Some of you may choose to go along to get along with the developer crowd - and put your housing values at risk - but I for one do not appreciate the obvious naivete regarding this matter.

I'm aware you do not have an easy job amid developer pressures to continue adding more houses/condos. But the time has come to stand up and support the facts, not pie in the sky wishful thinking that our community is somehow immune to oversupply and slowing demand. It is not.

The evidence is below and the data speaks for itself. Please do the right thing for the people that already reside here - not to mention the land, the deer, the lake, traffic issues and infrustructure costs!

All the best to you in making your decisons.

Gary Leverington / Fitchburg

Here is the link - please print and distribute. Keep in mind - the information in the report is objective. (See Market Wrap Up for Thursday, Sept 27 titled "Markets Betting on More Fed Rate Cuts" by Gary Dorsch.)

Current supportive data is below as well (or read link):

S&P/Case-Shiller Home Price Index Falls 3.9% in July

Sept. 25 (Bloomberg) -- Home prices in 20 U.S. metropolitan areas fell the most on record in July, indicating the threat to consumer spending was rising even before credit markets seized up in August, a private survey showed today.

Values dropped 3.9 percent in the 12 months through July, steeper than the 3.4 percent decrease in June, according to the S&P/Case-Shiller home-price index. The index declined in January for the first time since the group started the measure in 2001, and has receded every month since then.

Stricter lending standards and reduced demand are prolonging the housing slump, now entering its third year. Prices may continue to fall as homes stay on the market longer, economists said. Diminished housing wealth may spur households to pare spending, hurting economic growth.
The housing slump "doesn't seem like it will go away any time soon,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, who forecast the index to drop 4.1 percent. "As far as consumers go, this is another sort of pall over'' their ability to borrow against the value of their homes, he said.

Economists forecast the gauge would slide 4 percent, according to the median estimate in a Bloomberg News survey.

After the report, 10-year Treasury notes stayed higher, with the yield falling to 4.59 percent at 10:13 a.m. in New York, from 4.63 percent late yesterday.

The group's 10-city composite index, which has a longer history, dropped 4.5 percent in the 12 months ended in July.

Summer Declines

Compared with June, home prices in the 20 areas fell 0.4 percent after a 0.4 percent decline the month before. The figures aren't seasonally adjusted, so economists prefer to focus on the year-over-year change.

"The housing market has been weakening now for a couple of years and it just continues on its trajectory,'' said Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, in an interview.

Shiller and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.

The index is a composite of transactions in 20 metropolitan regions. Fifteen cities showed a year-over-year decline in prices, led by a 9.7 percent decrease in Detroit. The area showing the biggest gain was Seattle, where prices rose 6.9 percent.

Prices for single-family homes in the New York metropolitan area were down 3.8 percent compared with a year earlier.

Other Reports

Separately, the Conference Board said today that its index of consumer confidence fell more than forecast in September to the lowest level in almost two years, as declining home values and tougher borrowing standards took a toll on Americans' spirits.

The National Association of Realtors, in a report today, said sales of previously owned U.S. homes fell in August to a five-year low. Purchases were down 4.3 percent, less than forecast, to an annual rate of 5.5 million, the Realtors group said in Washington. Sales dropped 13 percent from a year earlier and median home prices rose 0.2 percent to $224,500.

Existing homes account for about 85 percent of the market and sales of new homes make up the rest. The report on new-home purchases, which are calculated based on signings and are considered a more timely indicator, is due from the Commerce Department tomorrow.

Rate Cut

The measures from Commerce and the Realtors group can be influenced by changes in the types of homes sold. Because the S&P/Case-Shiller index and another gauge by the Office of Federal Housing Enterprise Oversight track the same home over time, economists say these more accurately reflect price trends.

Most economists expect housing to extend its two-year slump and continue to be a drag on economic growth as loan foreclosures rise and tougher lending standards make borrowing more difficult.

The Federal Reserve, cut its benchmark interest rate on Sept. 18 for the first time in four years and said the credit meltdown "has the potential to intensify the housing correction, and to restrain economic growth more generally.'' Weakness in the housing market was part of the reason U.S. payrolls fell by 4,000 last month.

The number of Americans who may lose their homes to foreclosure more than doubled in August from a year earlier, according to a report Sept. 18 by RealtyTrac Inc.

'Heavy' Discounts

Fed Chairman Ben S. Bernanke, on Sept. 20, repeated the central bank's intention to issue new consumer-protection rules by year-end. He also told the House Financial Services Committee that the subprime turmoil has spread through financial markets, ``raising concern about the consequences for economic activity.''

Bernanke made his comments at a Congressional hearing that also included testimony from Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson.

A glut of homes on the market adds to pressure for sellers to lower prices. The inventory of single-family existing homes on the market represented a 9.2-months' supply in July, the most since October 1991, the Realtors group said on Aug. 27.

Earlier today, Lennar Corp., the largest U.S. homebuilder, reported the biggest quarterly loss in its 53-year history. Revenue at Miami-based Lennar fell 44 percent to $2.34 billion, the lowest in more than three years.

"Heavy discounting by builders, and now the existing home market as well, has continued to drive pricing downward,'' Lennar Chief Executive Officer Stuart Miller said in a statement.

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net Last Updated: September 25, 2007 15:25 EDT