Citizens for Balanced Growth

Category: Broader Reporting, Analysis on Balanced Growth Issues (Page 3 of 5)

“Prince William County: sleepy suburb of 400,000”

by Michael Neibauer, Washington Business Journal

18 January 2012

Prince William County is a jurisdiction of 400,000-plus residents, the second largest county in Virginia, and yet it remains a sleepy suburb. People eat there. They shop there. They rest their weary heads there.

And then they wake up and go to work someplace else. Despite its exploding population, recently released data suggests Prince William is very much a bedroom community.

According to the county’s 2010 Citizen Satisfaction Survey, roughly 70 percent of Prince William County residents commute outside of the county to work — 23.1 percent in Fairfax County, 10.3 percent in D.C., 6.9 percent in Arlington, 6.4 percent in Alexandria.

Commercial and industrial property accounts for less than 15 percent of Prince William County’s real estate tax base, half that of Arlington and 8 percent less than Fairfax County.

And then there’s Prince William’s top 10 employers. Three are retailers, reports the 2011 Comprehensive Annual Financial Report: Wal-Mart, Target and Wegmans. One is Potomac Hospital. Another is Minnieville Private Day School. The remaining five are local or federal government-related.

In other words, except for government work, the top employers in Prince William are either places where people shop, drop off their kids for school, or go when they’re sick.

What does it all mean? It means that Prince William County is a place where people want to, or have to for the more affordable housing prices, live, but is not yet a place where big business sees a future. It means Prince William is more dependent on residential real property taxes to fuel its annual budget, and it suffers a swifter, harsher blow when the housing market turns sour.

Nevertheless, confidence is high among Prince William leaders. The county reports having a total of 45.1 million square feet of commercial space, including retail, as of the 3rd quarter of 2011, a .4 percent increase over the prior year. Vacancies were down as existing space was absorbed and developers slowed their construction. At-place employment was up 7.8 percent in 2011 over 2010.

“Expectations are that the commercial real estate market will continue to improve over the course of the next few years as the local economy grows,” County Executive Melissa Peacor and Director of Finance Steven Solomon noted in the annual financial report, released in December.

The Metropolitan Washington Council of Governments projects Prince William to hit 555,000 residents by 2030. Perhaps by then the county will have shed its sleepy image, or at least welcomed some big time employers into the fold. I-95 and I-66 may never be wide enough to handle the traffic if it doesn’t.

Michael Neibauer covers economic development, chambers of commerce, transportation and politics.

“Supervisors started overseeing county government in 1869”

by Heidi M Baumstark, Bull Run Observer

14 October 2011, pp. 4, 6

“We see their names on signs, in newspapers and elsewhere. They are the elected representatives of the Prince William Board of County Supervisors who oversee the county government.

“Every four years, Prince William County voters can elect board of county supervisors. Currently, the eight-member board, overseeing seven magisterial districts, consists of Corey A. Stewart, chairman at-large; Maureen S Caddigan, vice chair and Potomac District; W.S. ‘Wally’ Covington III, Brentsville District; Martin E. Nohe, Coles District; John D. Jenkins, Neabsco District; Michael C. May, Occoquan District and Frank J. Principi, Woodbridge District.

“Tish Como, librarian in the Ruth E. Lloyd Information Center (RELIC) Room at Bull Run Regional Library in Manassas extensively researched the board’s history; she wrote an article in one of RELIC’s publications about its history. In an April 2004 issue ‘Prince William Reliquary,’ Como’s study said the board was established by the Virginia Constitution of 1869. In 1870, members were elected every May by townships to take office in July. There was only one annual mandatory meeting, held the first Monday in December, but the board could meet at other times.

“For almost 100 years, from 1870 to 1967, there were six magisterial districts: Brentsville, Coles, Dumfries, Gainesville, Manassas and Occoquan. Those first county supervisors in 1870 were Joseph B. Reid (1870-75), Brentsville; William M. Lynn (1870-72), Coles; John W. Chapman (1870), Dumfries (now Potomac); A.H. Johnson (1870) Gainesville; Francis M. Lewis(1870-79), Manassas and Burr Glasscock (1870), Occoquan.

“In October 1870, the Supervisors’ Minute Books were first recorded and offer a window into the issues facing county residents.

“In February 1967, a seventh district was created. Francis M. Coffey was appointed supervisor of the new Neabsco Magisterial District when new boundary lines were drawn due to increasing population.

“From 1870 through 1893, the board met at Brentsville Courthouse. Beginning on Jan. 6, 1894, the members met at the newly constructed Manassas Courthouse.

“Today, televised meetings are held generally on the first, second and third Tuesday of the month at 2 p.m. in the board chambers at the James J. McCoart Government Center in Prince William. Public hearings for such issues as zoning or special-use permits are held after public notices have been published in local newspapers.

“In January 1904, all county officials were elected in November, and county supervisors served four-year terms beginning the following Jan. 1.  Instead of only one mandatory annual meeting, the board was to hold meetings at fixed periods and as often as necessary.

“In the 1960s, as the governing body of the county, the board issued the Prince William County Annual Report (available in the RELIC Room.) Flipping through the pages with black-and-white photos, the report offers a glimpse of life in the county, regarding issues on transportation, public safety, social welfare, education, health and leisure. They also publish voting and county government employment numbers.

“The 1966 report states, ‘Records of [voter] registration are showing a marked increase in Prince William. Total registration in December 1964 for the county was 12,660.’

“Como’s research showed the county population in 1870 was 7,504; a century later in 1970, the population had grown to 111,102. According to the Prince William County Standard Data Set, as of June 15, 2011, an estimated population figure for Prince William County topped to 409,345. (As of April 1, 2010, the population of the City of Manassas was 37,821; for the same date, the population for the City of Manassas Park reached 14,273.)

“The City of Manassas and the City of Manassas Park, which were formerly towns within Prince William County, became separate, independent cities with their own governments, prior to June 1, 1975. Cities have their own government-governed by an elected city council that appoints a city manager.

“On June 12, 1975, the board adopted a new redistricting plan in response to a court order for the seven magisterial districts, five in the eastern end and two in the western end. The Manassas District was dropped, and a new district named Woodbridge was added to the redistricting plan.

“Kathleen K. Seefeldt, a Prince William County resident since 1970, served as Occoquan District Supervisor from 1976-91. Elected in November 1991 as the first chairman at large (and eighth member) of the board, Seefeldt held this position until Sean T. Connaughton was elected to that position in November 1999. Reelected in 2003, he served until he resigned in September 2006 to accept President George W. Bush’s nomination to become the U.S. Maritime Administrator. Currently, he is the Virginia Secretary of Transportation.

“Seefeldt said, ‘I was on the board for 24 years. There was a great deal of catching up to do with matching infrastructure with the growing population. Local groups formed to offer input in budget and land-use matters. It was grass-roots participation, giving citizens the opportunity for input at the front-end, to develop a vision and future for the county.’

“Corey A. Stewart is now the chairman. He first served as Occoquan District supervisor from 2004-06; he replaced Connaughton in a special election and was reelected in 2007.

“Over the past 20 to 30 years, there are only a few supervisors who are native Prince William County residents. A reflection of how much this community has grown and the county has urbanized, the board has become more diverse.

“Tony Guiffre of Haymarket served as the Gainesville District Supervisor from 1984-87. At the time, he lived in Catharpin and ran for the elected position because he wanted to improve the local government.

“Guiffre explained that development was springing up at anytime, anywhere, at any price.

” ‘Many citizens didn’t want this. There was lots of growth without restrictions and taxes were increasing; people wanted controlled growth,’ he said. There were also environmental concerns, such as ground-water issues.

“During his tenure, some new developments in the western end of the county included Heritage Hunt, Virginia Oaks, Robert Trent Jones Golf Club in Lake Manassas and the Gainesville Neighborhood Library in James S. Long Park, which opened in 1987.

“The James J. McCoart Government Center (named after a former Neabsco District supervisor) was built in the eastern end of the county.

“Guiffre said he enjoyed his time on the board. ‘Representing local county government is a lot of work, but it was very rewarding, especially working with the constituents. The supervisors are hardworking, dedicated people. The experience gave me a new respect for elected officials,’ he said.

“More information about the county’s board of supervisors is online at , under the ‘government’ link.”

“PW earns highest credit rating”

The Gainesville Times

21 July 2011, p. A3

“Standard and Poor has announced that it has given a ‘AAA/Stable’ rating for Prince William County on its Virginia Public School Authority (VPSA) bond issuances. With this new rating, Prince William has now received AAA status from all three of the major credit rating agencies (Fitch, Moody’s and S&P) – a measure that only 72 out of the 17,669 local governments throughout the country have achieved.

“Credit ratings are tied strongly not only to the financial management of a local government, but also to the economic climate. To this end, S&P noted, ‘The county’s financial position is, in our view, strong and has remained consistent throughout the recession owing to conservative financial management. The county’s revenue stream is diverse, with property taxes accounting for approximately 70 percent of general fund revenues.’

“Regarding the stability of the AAA rating, S&P reported, ‘The stable outlook reflects our opinion of the county’s consistent financial performance throughout the recession, despite a significant decline in [real estate] assessments in 2009 and 2010. We expect the county’s capable management team will maintain a solid financial position, as it beings to see growth in the tax base and economically sensitive revenues.

” ‘The county’s strong wealth and income levels, continued economic development, and participation in the diverse Washington, D.C. Metropolitan Statistical Area (MSA) are also stabilizing factors. We do not anticipate changing the rating within the two-year outlook parameter.’

“Prince William County continues to be viewed by rating agencies as a key economic engine in the Metropolitan area, and throughout the nation. ‘Anchored by the military and government, the county’s economy continues to show above average employment indicators,’ reported Fitch Ratings.

“Moody’s reported that it ‘believes that Prince William County’s efforts to diversify the economy and resulting commercial development will partially offset the impacts of the region-wide real estate downturn … Industries targeted for significant expansion include life sciences and data storage, as well as the defense-related sector as Quantico Marine Base is located within the county.’

“The county’s finances and budget are managed by County Executive Melissa Peacor, Deputy County Executive Chris Martino, Budget Director Michelle Casciato and Finance Director Steven Solomon.”

“PW earns bond upgrade”

by Tara Slate Donaldson, The Gainesville Times

6 May 2010, pp A1, A11

“A lower interest rate saves you money every time you borrow.

“That simple truth highlights Prince William County’s big announcement Tuesday — that the county’s bond rating has been upgraded.

“The bond rating agency Moody’s upgraded the county’s status from Aa1, which is good, to AAA, which is excellent.

“The news caused major excitement for county officials this week. And while it may result in bewildered looks from residents, the results will be tangible.

“A good bond rating means the county can borrow money at a lower interest rate. That will save the county taxpayers money in the long run as the county borrow to build schools, roads, and other facilities.

“County Executive Meslissa Peacor said that if the county had achieved the AAA bond rating earlier, it would have saved $44 million over the course of its 20-year building projects.

“Supervisors credited Peacor and her staff with the upgrade.

” ‘It’s a huge feather in their caps,’ said Coles Supervisor Marty Nohe (R).

“Board of County Supervisors Chairman Corey Stewart (R) said Moody’s cited county officials’ good financial management as the reason for the upgrade.

“Spending cuts, stable tax rates, a hefty reserve fund and the continuity of management were listed as the county’s strong points, Stewart said.

“By ‘continuity of management,’ the rating agency meant that when County Executive Craig Gerhart retired last summer, the board replaced him with Peacor, who had served as his deputy and the county’s
budget director.

“Other executive vacancies within the county government have also been filled by promotions of longtime county staffers recently.

” ‘This validates the efforts of this Board of County Supervisors and the management staff we have put in place to run county government,’ Stewart said.

“The chairman noted that even during the economic downturn, the county has lowered its crime rate, added money to its reserve fund and cut taxes from 2007.

” ‘We now have been rewarded with a bond rating that most jurisdictions long for but never attain,’ he said.

“In addition to the Moody’s upgrade, the county also got an upgrade from Fitch. That rating agency had already listed Prince William as AAA but had given it a ‘negative watch’ status.

“A county official likened that to AAA-minus.

“On Tuesday, Peacor announced that the negative watch had been dropped by Fitch, giving Prince William its perfect AAA back.

“Only seven other localities in the state have AAA ratings from both agencies.”

“Va.’s growth plows over country life”

by Brigid Schulte, The Washington Post

7 February 2011, p. A1

“As a young woman in the 1960s, Sister Cecilia Dwyer came to an isolated Benedictine monastery in western Prince William County to begin her life as a nun.

“Stately pin oaks lined the monastery entrance just off a sleepy country lane called Linton Hall Road that wound through six miles of farms and woods. By day, two cars might pass. At night, the country sky was velvety black and pasted with stars. She and the other sisters lived in almost total silence.

“These days, Sister Cecilia, now prioress of the monastery, has a hard time turning left out of her driveway. In the past decade, the woods and farms of Linton Hall have given way to thousands of new houses, four huge shopping centers, three new megachurches, and, by the end of the year, nine new public schools. Signs proclaiming ‘Acreage for Sale’ and ‘Luxury Homes Coming Soon’ dot Linton Hall Road, now a jammed, four-lane thoroughfare.

” ‘We’ve become completely surrounded,’ Sister Cecilia said the other day, nodding to the housing developments that encircle the monastery. ‘And the lights of the Safeway at night – well, we’re not used to it.’

“To understand what Virginia is becoming, head to Linton Hall, one of the fastest-growing areas of fast-growing Northern Virginia. The community, which seems to have sprung from whole cloth overnight, added 27,000 residents in 10 years, according to census figures released Thursday.

“Many of the newcomers are Hispanics, Asians and African Americans, the groups fueling growth in the new Virginia. While the non-Hispanic white population in Northern Virginia grew 6 percent in the past decade, the Hispanic population jumped 78 percent, the Asian population, 74 percent, and the African American share, 31 percent.

“As a result, the Old Dominion, site of the capital of the Confederacy during the 1860s and a place where some officials encouraged ‘massive resistance’ to integration during the 1960s, is becoming a multicultural mecca.

“Nowhere is that more evident than in Prince William, site of some of the most famous battles of the Civil War and now a majority-minority county.

“In Linton Hall, the diversity is on display at Bristow Elementary, a school built in 1998 that crams 1,200 students who speak 20 languages into an ever-expanding sea of trailers.

“As school was being dismissed Friday, three friends waited down a little wooded path for their children.

“Donna Wilson, 35, who moved into the Kingsbrooke development when it was still a ‘ghost town’ in the late 1990s, is white. Aber Dabbah, 36, who was drawn to the open spaces and affordable houses in 2001, is from Abu Dhabi. And Yolanda Urquhart, 44, who moved from Manassas in 2007 to get her kids into better schools, is black.

“The traffic is a headache, the women agreed. A couple of years ago, the Census Bureau rated Linton Hall No. 1 in the nation for having the longest average one-way commute, at 46.3 minutes.

“But this is the kind of place, they say, where their kids stay out all day playing, coming in only when it’s time for dinner. They feel safe. Their lives revolve around block parties, activities at the Kingsbrooke Clubhouse and pool in the summer, and neighborhood get-togethers in winter.

” ‘One of the reasons we moved here is, you just feel at home,’ Urquhart said.

” ‘I’ve lived in other places where I’ve felt like an alien, the outsider,’ Dabbah said. ‘But here, it’s very diverse. . . . There’s a lot of neighborly love.’

“Dabbah’s son, Zach, a third-grader, agreed. ‘It’s really fun here,’ he said. ‘You can ride your bikes in the street. There’s a basketball court. And I have a million friends.’

“Wilson expressed some dissatisfaction. A wave of foreclosures and owners who couldn’t sell in the recession have changed the character of her once close-knit block. ‘But at this point, I’ve been here so long and my mortgage is so low, where am I going to go?’ she said. ‘Besides, the kids love each other.’

“Schools in the area are 40 percent minority, but poverty rates are relatively low, with 6 to 18 percent of the children qualifying for free and reduced-price meals. That socioeconomic parity, school counselor Robin Vaneman said, has kept racial tensions largely at bay.

“If there are any ill feelings in Linton Hall, it is among longtime residents who live in the sliver of what remains of the ‘rural crescent.’

“Judy Curry, 45, and her daughter, Cassandra, 16, live in an old house on an acre and a half of land. Their home is one of the few, Curry said, that’s not a cookie-cutter house in a fancy development.

“Cassandra grew up fishing with her dad in the pond just out the back door. Curry organized Girl Scout campouts in the woods behind the house. She loved that the handful of neighbors thought of Cassandra as their own granddaughter and that everyone looked after everyone else.

“She doesn’t know any of these new neighbors, all of whom, she said, stick to their isolated developments.

“Linton Hall, said Curry, standing under the neon glare of a new Starbucks, is just not the same.

” ‘I hate it,’ she said. ‘When Cassandra graduates from high school, I’m going to move to the woods in North Carolina.’

” ‘Yeah, we moved out here to get away from everything,’ Cassandra said. ‘Then everything followed us here.’

“Wally Covington, the Prince William supervisor who represents the area, says he understands how disorienting the changes have been for longtime residents. He grew up on a farm just off Linton Hall Road. ‘We would lose dogs if they ran off the farm here’ – they would just disappear in the vast woods, he said.

“Now only two large undeveloped tracts remain, one an old missile-building site and another that was supposed to become a quarry. They aren’t likely to stay undeveloped long.

“The old Atlas Ironworks is now a shopping center, Covington said. Plans are underway for new and wider roads, a new rail line, a freeway interchange and more commercial development.

” ‘We’re working on getting more high-end retail out here, similar to Tysons Corner,’ he said. ‘And white-tablecloth restaurants.’

“At the Benedictine monastery, Sister Cecilia accepts what has happened to Linton Hall. In fact, it was the Benedictine Sisters who triggered the development frenzy when they began selling off pieces of their 1,800-acre parcel to raise money to care for some of the elderly nuns. Back then, the land was worth $3,000 an acre. Now the order owns only 130 acres. And a recent offer came in at more than $200,000 an acre for what’s left.

“The sisters no longer raise corn or beef cattle, as they once did, or run the biggest piggery in Northern Virginia. The best thing they can do for the rapidly growing and fast-paced community, Sister Cecilia said, is preserve the last bits of open space.

“With that in mind, they’ve created a ‘Place of Peace’ with a labyrinth and walking trails for prayer and contemplation. Their once sparsely attended Sunday service is often crowded.

” ‘I kind of like the new neighbors,’ Sister Cecilia said. ‘It used to be so deserted here, I really don’t mind the changes. But I’m one of the few extroverts in the community.’ “

“National trends could drag down D.C. area housing market’s gains”

by Dina ElBoghdady, The Washington Post

30 Dec 2010

“Although Washington area housing has  outperformed the national market, which has been devastated by the twin ills of unemployment and foreclosure, the question going into a new year is whether the rest of the country can follow the D.C. area into recovery – or whether the local market will be dragged down by national trends.

“Economic forecasters are singling out the housing sector as a weak spot even as the rest of the economy appears to be gaining steam. About 57 percent of the economists and real estate experts surveyed by Macro Markets in December said they don’t see home prices recovering until some time in 2012. About 35 percent said they don’t see that happening until 2013.

“The recent run-up in mortgage interest rates from record lows and some lenders’ decision to temporarily halt evictions while they sort through foreclosure paperwork errors only add to general unease about the housing market’s direction.

“The Washington region has suffered less than many other parts of the country, but it, too, continues to have problem areas. From January through November, median prices dropped in Maryland’s Prince George’s, Calvert and Frederick counties, compared with a year earlier, according to George Mason University’s Center for Regional Analysis. Prince George’s showed the steepest decline: 15.6 percent.

“So what are the biggest obstacles standing in the way of a robust recovery?  The nation’s high unemployment rate – 9.8 percent – and the swelling volume of foreclosures.

“As long as people are unemployed or working for reduced pay, they are unlikely to buy a home and saddle themselves with a mortgage. Meanwhile, homeowners who have been out of work for long stretches are falling behind on their mortgages, adding to the foreclosure glut.

“Mark Zandi, chief economist at Moody’s Analytics, estimates that 4 million homes were in foreclosure or on the brink of it heading into this year. That’s in addition to the 6.2 million homes that were foreclosed upon between 2007 and 2010. Together, those 10.2 million foreclosures are equivalent to the populations of North Carolina and Vermont combined.

“Clearing these homes off the market is key to a recovery, because foreclosures tend to drag down prices nearby. As 2010 drew to a close, foreclosures and other distressed properties made up about one-third of existing home sales, according to the National Association of Realtors. Home prices were 26 percent off their 2006 peak.

“With prices down from their heights, about one in four borrowers in this country is underwater, meaning that any equity they may have had has vanished and they now owe more on their mortgages than their homes are worth, according to financial research company CoreLogic. That threatens to exacerbate the foreclosure crisis, because it leaves these borrowers unable to refinance or sell their homes if they face a job loss or other setback.

“U.S. Treasury Secretary Timothy F. Geithner cited all these factors as challenges in the year ahead when he testified before the Congressional Oversight Panel in December.

” ‘The most important thing that’s going to affect the trajectory of house prices, the overall number of foreclosures, the ability of people to stay in their home, is what the government is able to do to get the unemployment rate down much more quickly,’ Geithner told the panel.

Fewer foreclosures
“The Washington housing market has held up better than many parts of the country in part because of its relatively low unemployment rate and robust supply of high-paying jobs that helped fuel demand for homes.

“The region’s foreclosure rate and its delinquency rate for borrowers at least three months behind on their mortgages have trailed the national averages since the housing crisis began, according to CoreLogic. As of September, the area’s foreclosure rate was 2.1 percent, vs. 3.3 percent nationally, and its seriously delinquent rate was 6.9 percent, vs. 7.8 percent nationally.

“In the third quarter, the area’s average home price climbed 3.1 percent from the previous quarter and 6.2 percent from a year earlier to $410,839, according to the most recent report from real estate research firm Delta Associates.

“Prices remained highest in the District, Alexandria and Arlington County, rising 8 percent in the quarter from a year earlier to $514,073, the report says.

“The biggest yearly price gains were in the outer suburbs of Prince William, Loudoun and Frederick counties, where average prices jumped 9.4 percent year-over-year to $327,108.

“In the region’s inner ring – Fairfax, Montgomery and Prince George’s counties as well as the cities of Falls Church and Fairfax – prices increased 4.7 percent to $414,176.

“But the weakest links were in the Maryland suburbs. Third-quarter prices fell 11.4 percent in Prince George’s and 8.5 percent in Frederick County from a year ago.

“The report concludes that the Northern Virginia suburbs are recovering earlier than their Maryland neighbors because job growth there has been stronger and faster, boosting demand for housing. Northern Virginia’s housing market also eroded earlier in the downturn and is therefore experiencing the “first-in, first-out” effect, the report says.

The price difference
“John McClain, deputy director of George Mason University’s Center for Regional Analysis, said Maryland’s troubles may soon be overcome given that home prices there never fell as sharply as they did in Northern Virginia.

“The average price dropped about 32 percent in Northern Virginia from September 2007 through September 2008, compared with about 10 percent in Maryland, McClain said.

“Against that backdrop, McClain expects Prince George’s to follow the same path as Prince William. Both counties were clobbered by foreclosures after the housing bust, albeit at different times, and their home values plummeted. When prices dropped low enough in Prince William, bargain-hunters started snapping up the deals, sales bounced back and prices eventually followed.

“There may be more than timing to explain the different experiences, however.

“The housing market in both counties took off during the boom years for slightly different reasons, said economist Anirban Basu of Sage Policy Group.

“Prince William’s proximity to job centers in the District and the Dulles Corridor, plus Northern Virginia’s free-market approach to development, helped lure potential buyers who were priced out of closer-in suburbs when the housing market sizzled, Basu said. To meet demand, construction took off, aided by the county’s ample supply of land.

“In Prince George’s, a desire among public policymakers to upgrade the county’s housing stock and cater to upwardly mobile professionals helped fuel development, although Maryland policies generally had a more anti-growth leaning, he said.

“Both counties attracted a huge concentration of buyers who took out subprime loans, many of them with adjustable interest rates. When those loans reset, borrowers’ monthly payments shot up to unaffordable levels, and many lost their homes. As prices eroded, they could not sell or refinance their way out of trouble.

“But clearing out the foreclosures took far longer in Maryland, which, unlike Virginia, requires some court intervention in approving the foreclosure paperwork. Maryland also passed laws slowing the foreclosure process.

” ‘Because there has been relatively less government involvement in the commonwealth, the market’s adjustment has probably been more rapid than in Maryland,’ Basu said. ‘The adjustment in Prince William, though more jarring, has been more rapid.’

“As evidence of that rapid adjustment, the inventory of foreclosed properties made up about 84 percent of total sales in Prince William in January 2009, according to a county official. They were down to 40 percent by the end of that year.

” ‘Prince George’s may have been better off if it had worked through the foreclosures earlier,’ said McClain, of GMU’s Center for Regional Analysis. ‘Prince William got hit with the foreclosures immediately and bang, the bottom fell out and then prices started climbing.’

“But sales are starting to pick up in Prince George’s, McClain said. They were up nearly 22 percent from January through November compared with the same period a year earlier.  ‘That’s the first sign that things are slowly getting back on track. . . . Some parts of the region are in a different stage of recovery than others.’

“In fact, if Prince William and Prince George’s were out of the mix, the Washington region would be looking far more stable than it is, McClain said.

“But there are risks ahead for the local housing market.

“Sellers could become overconfident and stall sales. The most recent price statistics about the Washington area are exactly what sellers have been waiting for – a reason to resist reducing their asking prices, said Marc McGee, former general manager of Pardoe Real Estate.

” ‘Sellers, of course, have been long-suffering, and they by-and-large feel, with some justification, that they were unfairly treated by the market,’ said McGee, now the business development director at the real estate search engine ‘But the reality remains that it’s worth what someone is willing to pay for it.’

Federal pay factor
“A recently enacted two-year pay freeze for federal workers could cast a pall over area sales going forward, though the effects are not likely to be disastrous, said Stephen Fuller, director of George Mason University’s Center for Regional Analysis.

“But if the federal government cuts back on private defense contractors, as Defense Secretary Robert M. Gates proposed in August, that’s a ‘much bigger deal,’ because defense contracting jobs are more than double the size of the federal payroll, Fuller said.

“Another possible stumbling block for the housing market – nationally and locally – may be mortgage interest rates.

“Rates for a 30-year fixed-rate mortgage averaged 4.17 percent in mid-November, the lowest level since Freddie Mac started tracking the figures in 1971. But they’ve been higher since then, creating some angst about how that will affect home purchases and refinancings.

“Freddie Mac economists predict that rates will stay below 5 percent in 2011. But the Mortgage Bankers Association expects rates to rise to 5.5 percent by year’s end. The MBA predicts that total mortgage originations will drop to $967 billion in 2011, the lowest level since 1997, mainly because of a sharp drop in refinancings.

“While refinancing made up 69 percent of all mortgage originations last year, that share should dwindle to 36 percent this year and 24 percent in 2012 as the economy strengthens and rates climb above the 6 percent mark, the group estimated.

“Employment trends will most likely outweigh interest rates, anyway.

” ‘I don’t anticipate home values to go anywhere broadly speaking, but with job creation, we will begin to see that home sales will get nice support from the recovering economy,’ said Lawrence Yun, chief economist of the National Association of Realtors. ‘Things are shaping up a little better for 2011.’ “

2007-10 County Citizen Surveys (biennial after 2010)

PWC_SurveySumary2010 | PWC_SurveyComparison09_10 | full text pdf

PWC_SurveySummary2009 | 2009-10 Comparison | full text PDF


2007 County Citizens Survey (full text)

2007 Citizen Survey: PW citizens “generally dissatisfied with the coordination of development and roads, growth in the county, and planning and land use”
(“Supervisors Get Survey Results” by Keith Walker, Potomac News, 9 Aug 2007)

The top seven:
Citizen satisfaction with:
The bottom seven:
Citizen satisfaction with:
— Service from Library Staff  (98.9%)
— Emergency Medical Rescue (98.5%)
— Fire Fighting in Respondent’s Area (988.4%)
— Security in Courthouse (97.3%)
— Landfill (96.0%)
— Convenience of Registering to Vote ( 994.9%)
— Assistance from 911 Operator (94.6%) <
— Coordination of Development with Road Systems (35.5%)
— Rate of PWC Growth (44.0%)
— Ease of Travel in PWC (46.9%)
— Land Use Planning and Development (47.5%)
— Appearance of Illegal Signs along Major Roads (49.2%)
— County Efforts to Preserve Open Space (51.5%)
— Public Transportation in PWC (57.0%)
According to the executive summary of the 2007 County Citizens Survey (full text):   1. “In general, people are least satisfied with development and transportation issues, suggesting that these areas are in need of improvement despite the significant progress with the ease of travel of getting around within Prince William County.”  2. In the “Long-Term Trends” section,  “satisfaction with the job the County is doing in planning how land will be used and developed is down approximately 6 percentage points from 1993.”  3. Again from the “Long-Term Trends” section, “satisfaction with the County’s value for tax dollars is up more than 15 points since 1993.”

Why fight local political battles and corruption?

by Ralph Stephenson, PWCBG

3 February 2010

Regarding your question tonight about whether it makes any difference (for us to send e-mails and speak at the BOCs and Planning Commision meetings, etc), that’s a very fair question to ask.  And I really didn’t give it an answer at the time, at least not a very good one.  [Name withheld],  thank you very much for coming tonight and for all you’ve done and are continuing to do to spread the word.  It’s good to see people of virtue and principle involved in the local community; the community desperately needs their (your) influence.

Upon reflection, I would answer it in several ways, any one of which is enough for me.  Of course, I don’t necessarily expect any one of these reasons alone to be enough for others who may make better use of their time than politics.  (I’m only half-joking when I say that because I really do not like politics.  I engage in it because I feel compelled to do so — probably largely because of the “second” item below.)

First, one can give what amounts to an almost-ascetic, martyr-like response to your question:  It doesn’t matter whether we win or lose, as long as we stand for what is right, particularly in things that matter such as quality of life for us and our children (schools, roads/traffic, natural beauty), economic issues (taxes for individuals, individual property values, the county’s financial and economic health), and trying to clean up Dodge so we don’t have to live in a place that is overrun with political corruption and be bullied by political machines that benefit a few and swindle everyone else.  (Sometimes this one works for me when I feel like I’m fighting necessary but lonely battles.)

Second, one can, like Lincoln, argue that we, too, are dirtied and sullied when we don’t protest against public evils that are close at hand and accessible to us — and that we thus might be able to stop, slow, or mitigate if we only tried.

Third, and this one, like the second one just above, is very compelling to me:  You often do win (see paragraphs below for explanation of why), and I very much like to win victories in what I think are worthy and important causes.  : )  (A hard-fought victory against difficult odds, as in Brentswood, is one of the best feelings you can have.)  See the last sentence of the second paragraph that I’ve forwarded below from Michelle Trenum.  Her count is 10 victories, 1 loss.  Since Brentswood in early 2006, I count all victories and no defeats, except for one half-win, half-loss (let’s call it a draw) on an attempt by the Board of Supervisors to make incursions into the Rural Crescent in Dec 2007.   My experience has been that before the loose citizens alliance to fight this sort of nonsense formed in early 2006 during Brentswood, it was one loss after another in western PW county — mostly losses, with only a few (and sometimes very temporary) victories, typically when a critical mass of people got very angry just before an election.

Most politicians love the backroom deal where there’s no transparency, no public input, no awareness, just the opportunity for them to further their ambition and vanity and sometimes line their pockets.  And most politics in most places is practiced that way.  Politicians get away with it because of people’s apathy or fear of getting involved.  But when you smoke politicians out into the open, where their actions are visible and they can be held accountable, they are much more likely to behave in a responsible way.  At least, that’s my experience — and in many places, not just here, including in several political campaigns and in a couple overseas American communities where my wife and I were involved in political battles.

“In darkness and obscurity, the interests of the powerful and affluent prevail;
while only in the bright light of public scrutiny can the common good be secured.”

And, one of my all-time favorite political quotes: “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.” ~ Margaret Mead

“Housing Red Flags Ignored”

by Elizabeth MacDonald, Fox Business

2 Feb 2010

“One of the nation’s biggest mortgage industry players repeatedly warned the Federal Reserve, the Federal Deposit Insurance Corp. and other bank regulators during the housing bubble that the U.S. faced an imminent housing crash.

“The trade group also mapped out the 15 states which faced ‘sudden increases in foreclosures’ and ‘a downward spiral,’ including California, Florida and Nevada.

“But bank regulators not only ignored the group’s warnings, top Fed officials also went on the airwaves to say the economy was ‘building on a sturdy foundation’ and a housing crash was ‘unlikely.’

“The letters, obtained by Fox Business, were sent in 2005 and 2006 before the housing bubble burst.

“As it pleaded with bank regulators to stop subprime lending abuses, the Mortgage Insurance Companies of America [MICA] pointed out the red flags in analysis from the bank regulators’ own staffers as well as the likes of Bear Stearns and Lehman Brothers.

“But the fact that these lengthy warnings did not compel bank regulators to act raises serious policy questions for Congress and the White House, as they move to make the Federal Reserve the systemic risk regulator, when the Fed didn’t act to stop the biggest systemic risk of all.

“The new revelations also may make it harder for Federal Reserve chairman Ben Bernanke to battle Congressional curbs on the Fed’s authority over the banking system, and moves by members of Congress to have the Fed’s monetary policies audited.

“Disturbing Concerns Raised

“Mortgage insurance companies cover lenders’ loan losses when they go bad; borrowers pay for the insurance. MICA counts as its members AIG United Guaranty, Genworth Mortgage Insurance Corp., PMI Mortgage Insurance Co., United Guaranty, and Mortgage Guaranty Insurance.

“Mortgage insurers are ‘deeply concerned about increased mortgage market fragility, which, combined with growing bank portfolios in high-risk products, pose serious potential problems that could occur with dramatic suddenness,’ warned Suzanne Hutchinson, top executive at the Mortgage Insurance Companies of America, in 2005.

“Failure to adjust bank underwriting, reserves and capital to account for this growing risk ‘means that downturns from credit and/or interest rate events – let alone shocks – will be far more severe than’ if precautions are taken, Hutchinson noted, adding that what is ‘disturbing to us is the fact that recent trends could lead to sudden increases in foreclosures.’

“MICA based its warnings on detailed analyses that came from the regulators’ own officials at the Federal Reserve, the OCC, FDIC and OTS. ‘The OCC and FRB work reinforces, we think, the urgent need for quick action on high-risk’ subprime loans, Hutchinson wrote.

“And MICA also backed up its red flags with hefty amounts of data from the Basel Committee on Banking Supervision, the world’s top central bank body comprising central bank governors from the Group of Ten nations.

“MICA also bolstered its case with data from Bear Stearns and Lehman, three years before these two Wall Street giants collapsed under the weight of bad mortgage bets.

“It also backed up its predictions with Fannie Mae disclosures in filings with the Securities and Exchange Commission, as well as analysis from Standard & Poors, Fitch Ratings, Deloitte & Touche, the Mortgage Bankers Association and the National Association of Realtors.

“The Federal Reserve Board, the Administrator of National Banks, the FDIC and the Office of Thrift Supervision declined repeated calls for comment. MICA said the letter only jump-started informal conversations about the problems.

“Bank regulators began warning lenders in 2004 about the dangers of subprime loans, and issued guidance in 2005 advising tighter lending standards, including higher down payments and income verification.

“But MICA said this didn’t go far enough. It noted that there are ‘questions about the degree to which this guidance has in fact been reflected in industry practice,’ and the government’s ‘industry outreach statements do not address the prudential implications’ of subprime loans, which demand stiffer ‘internal controls, regulatory capital and reserves.’

Bernanke Says Crash ‘Unlikely’
“Despite mounting evidence, Bernanke went on TV in 2005 to say of a housing collapse, ‘it’s a pretty unlikely possibility,’ adding that ‘fundamentals are strong.’ Right before the crash in 2007 the Fed chairman said ‘the subprime markets seem likely to be contained.’

“Bernanke also noted in February 2008: ‘By later this year, housing will stop being such a big drag directly on GDP’ and that ‘among the largest banks, the capital ratios remain good and I don’t expect any serious problems.’

“Former Fed chairman Alan Greenspan also testified to Congress that the Fed could do nothing to stop lending abuses. ‘The loan officers of those institutions knew far more about the risks involved and the people to whom they lent money than I saw even our best regulators at the Fed capable of doing.’

“Despite the fact that a chorus of economists around the world began raising the alarms in the mid-’90s that U.S. housing leverage on both the business and borrower level would lead to economic collapse, no moves stateside were made to enact common sense measures such as tougher loan to value ratios.

“For example, Germany’s legal limit on loan to value ratios is 60%; France is 75% and Denmark pegs it at 80%. In the U.S., no-money-down loans were rampant.

“Subprime loans were historically given only to rich borrowers who could afford them. In 2000, just 1% of borrowers got subprime loans.

“But by May 2006, about a third of all borrowers had one, according to First American LoanPerformance, which tracks mortgage lending statistics.

MICA’s Warnings
“In September, 2005, MICA executive vice president Hutchinson wrote to the Federal Reserve, John Dugan, Comptroller of the Currency, Donald Powell, then chairman of the FDIC and John Reich, then director of the Office of Thrift Supervision.

“Hutchinson acknowledged that regulators were dealing with the aftermath of Hurricane Katrina. But she pleaded with regulators to crack down on risky subprime loans because another storm was brewing, a nationwide crash due to a ‘growing risk in residential mortgage’ business.

“Mounting defaults warrant ‘considerable caution as lenders have rapidly increased their portfolios of high-risk subprime loans,’ she said, adding, ‘Federal Reserve data indicate that banks say they have not yet changed their underwriting standards even as’ the subprime loans ‘have dramatically increased.’

” ‘We know that dealing with Hurricane Katrina is rightly your agencies’ first priority,’ Hutchinson warned, but ‘market developments call for quick supervisory action on mortgage risk,’ as banks were overexposed.

Banks’ Wells Running Dry
“And Hutchinson foretold that the banks’ wells were running dry, putting the FDIC deposit insurance fund in jeopardy.

” ‘Combined with the fact that bank reserves are, according to the FDIC, at a 19-year low, it would appear that lenders with large’ subprime portfolios ‘are singularly ill-prepared for the risk clearly presented by high-risk, nontraditional mortgages,’ she said.

“Hutchinson warned that toxic subprime loans ‘would, in effect, ‘pollute the residential mortgage well’– a well of profound importance to the depository institutions you regulate and to the mortgage insurance industry.’

“Hutchinson also cited a ‘recent Federal Reserve study [that] has rightly demonstrated that many vulnerable borrowers of complex adjustable rate mortgage products do not understand their terms, may pay higher rates with complex products, and thus are more exposed to payment shock.’

“Even so, lenders were selling subprime loans at ‘very high’ loan to value ratios ‘to unsophisticated borrowers’ who were ‘ill prepared’ and could default, she said.

“The OCC, too, had cautioned that it has seen the ‘first drop in overall credit underwriting standards in the 11 years of its work,’ Hutchinson noted.

“OCC found rampant problems, including ‘higher credit limits and loan-to-value ratios, lower credit scores, lower minimum payments…less documentation and verification, and lengthening amortizations — have introduced more risk to retail portfolios,’ Hutchinson told regulators.

Huffing, Puffing, and Blowing Borrowers Out of Their Houses
“Citing data from SMR Research, a market data firm, Hutchinson pointed out that borrowers were increasingly doing an end-run around the rules in order to get little- to zero-money down loans — or loans at 100% or more of a home’s value.

“Specifically, MICA’s Hutchinson pointed out a soaring increase in what are called ‘piggy back loans,’ whereby borrowers first get a loan worth 80% of a house’s value, then get another loan to finance the remaining 20%.

” ‘They may be called piggyback loans, but some analysts worry they could behave more like the big bad wolf — huffing, puffing, and blowing borrowers right out of their houses via defaults,’ Hutchinson wrote, quoting Dow Jones.

“Hutchinson predicted no money down loan abuses would help tank the market.

” ‘Without equity, borrowers may have to bring money they do not have to the closing table, worsening market problems and potentially creating a downward spiral in home prices that leads to still more mortgage defaults and then still more foreclosures,’ she wrote.

Shows the States Under Threat
“California, Arizona, Nevada, Florida, Texas and ten other states were plagued by these loan abuses, Hutchinson said, citing an SMR survey covering 2004 and the first half of 2005, which looked at 3.1 million new loans for homes in over 334 counties.

“SMR found that out of the loans in these areas, ‘60% were piggy back loans with LTVs above 95% in 2005, up from 52% in 2004,’ Hutchinson warned. Hutchinson added that ’70 counties, or a fifth of the total, had piggybacks representing more than half of all loans in 2005,’ noting that ‘piggybacks comprise over 48% of the dollar value of all new home purchase loans.’

“And Hutchinson noted government data showing that loans at 95% or more of a home’s actual value actually ‘performed 200% worse’ in terms of defaults versus loans at 80%. Loans at 100% more performed three times as poorly as loans with 20% down.

“Hutchinson spotlighted another growing abuse. ‘One lender brought out a mortgage that combines an 80% first lien and a 23% second for a 103% LTV. Minimum credit score: 620,’ at the low end of the range, she told the bank regulators.

“Hutchinson also cited a Fannie Mae disclosure in its 2003 annual report, where Fannie reported ‘the likelihood of default and gross severity of a loss in event of default are typically lower as the LTV decreases.’

Cites Lehman Bros. Warning
“According to ‘a recent Lehman Bros. report,’ Hutchinson said that ‘several large banks have significantly higher exposures, including ‘Wells Fargo [and] Bank of America.’

“Reckless subprime lending caused ‘lenders to develop large concentrations of high-risk loans which, even if backed by additional capital or reserves, could pose significant credit, liquidity, operational and interest-rate risk,’ she wrote.

Cites Bear Stearns, S&P Warning
“And Hutchinson reported a Bear Stearns analysis whereby it’s saw delinquencies more than triple in just a year on option ARMs, which dangerously let borrowers set their own payment terms, even skipping interest payments. She urged federal bank regulators to move ‘quickly’ to curtail these loans.

” ‘Bear Stearns estimates the percentage of skipped payment borrowers at 65%, but both estimates are significantly higher than the 20% comparable figure estimated by Bear in spring 2004,’ she wrote.

“She added that meanwhile, ‘S&P data indicate that only 16% of option ARM borrowers provide full documentation’ to get their loans, and ‘that about 75% of these borrowers skip mortgage principal and interest payments in any given month..S&P has also noted that possible payment shock awaiting neg-am borrowers is a main concern for the ratings agency.’

“And only ‘approximately 60% to 70%’ of ‘borrowers make the minimum payment,’ Hutchinson said, adding that ‘recent trends show alarming signs of on-going undue risk-taking that puts both lenders and consumers at risk.’

Says Fannie and Freddie At Risk
“The piggy back loan abuses were an end run around Fannie and Freddie requirements that forced borrowers to get private mortgage insurance on any loan above an 80% LTV ratio, Hutchinson said.

“Piggy back loans ‘are often structured solely to evade this requirement, intended by Congress to ensure that [Fannie and Freddie] do not take undue risk,’ Hutchinson said.

“But they did get swamped with such risk. By the end of 2008, Fannie and Freddie held or guaranteed approximately 10 million subprime and Alt-A mortgages and mortgage-backed securities (MBS)—risky loans with a total principal balance of $1.6 trillion, says Peter Wallison of the American Enterprise Institute. These are now defaulting at unprecedented rates, accounting for both their 2008 insolvency and their growing losses today, he added.

“Wallison also said: ‘New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.’

“And securitization, whereby banks pass the loans off as paper securities, wouldn’t totally inoculate lenders from harm, MICA’s Hutchinson said.

” ‘Some have suggested that banks are not at risk because nontraditional mortgages are largely securitized,’ Hutchinson said, but ‘as Fed data cited above, this is not the case for many banks.’

“She added: ‘Securitization does not ameliorate’ the ‘risk’ from subprime loans ‘because many lenders hold these’ loans in their portfolios. ‘Lenders who rely on securitization may also be subject to liquidity risk if markets dry up unexpectedly as risks become suddenly apparent,’ Hutchinson warned.

“Quoting bank analyst Richard Bove, Hutchinson wrote: ‘There is a reason why the three largest banks that make 40% of the [option ARMs] are selling 75% of the product [in securitizations] despite its high yield. They smell the risk.’

“Hutchinson added: ‘The question remains as to which lenders have not yet smelled the risk and which ones will still be carrying the exposure when it is too late.’

Behind the Scenes at Treasury
“During the bubble, Federal Reserve and Treasury staffers considered everything but a housing crash triggered by subprime loan abuses.

“In a report on what was happening behind the scenes, they considered ‘sudden crises such as terror attacks, natural disasters,’ says Phillip Swagel, former Assistant Secretary for Economic Policy in the Treasury Department, ‘or massive power events such as the failure of a major financial institution..a large sovereign government default..huge losses at hedge funds, energy price shocks; ..corporate bankruptcies..or a large and disorderly movement in the exchange value of the dollar,’ Swagel notes.

“They also considered all sorts housing data, too, he notes.

” ‘What we missed was that the regressions did not use information on the quality of the underwriting of subprime mortgages in 2005, 2006, and 2007,’ Swagel says.

FDIC Warns First
” ‘This was something pointed out by staff from the Federal Deposit Insurance Corporation (FDIC), who had already (correctly) pointed out that the situation in housing was bad and getting worse and would have important implications for the banking system and the broader economy,’ Swagel adds.

Bernanke Ignores Growing Problem
July 1, 2005: Bernanke, then President George W. Bush’s Chairman of the Council of Economic Advisers, to CNBC: ‘…unquestionably, housing prices are up quite a bit; I think it’s important to note that fundamentals are also very strong…I don’t know whether prices are exactly where they should be, but I think it’s fair to say that much of what’s happened is supported by the strength of the economy.

“CNBC: Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’
Bernanke: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.

February 15, 2006: Bernanke said: ‘Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise, but not at the pace that they had been rising. So we expect the housing market to cool, but not to change very sharply…The weakness in housing market activity and the slower appreciation of house prices do not seem to have spilled over to any significant extent to other sectors of the economy.’

January 2007: Bernanke speech before the American Economic Association in whereby he said ‘to make crises less likely over the years, the Federal Reserve has worked effectivelywith the Congress, other supervisors, and financial market participants to develop statutory regulatory and other measures.’

March 28, 2007: Chairman Bernanke said: ‘The impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.’

May 17, 2007: Chairman Bernanke said: ‘We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.’

February 27, 2008: Chairman Bernanke said: ‘By later this year, housing will stop being such a big drag directly on GDP…I am satisfied with the general approach that we’re currently taking.’

February 28, 2008: Chairman Bernanke said: ‘Among the largest banks, the capital ratios remain good and I don’t expect any serious problems … among the large, internationally active banks that make up a very substantial part of our banking system.’

July 16, 2008: Chairman Bernanke said that Fannie Mae and Freddie Mac are ‘adequately capitalized’ and ‘in no danger of failing.’  Since then, Fannie Mae and Freddie Mac have received the largest taxpayer bailout and have been taken over by the federal government.

Greenspan Too
October 2008 Congressional Testimony:

Greenspan: I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms. And it’s been my experience, having worked both as a regulator for 18 years and similar quantities in the private sector especially, 10 years at a major international bank, that the loan officers of those institutions knew far more about the risks involved and the people to whom they lent money than I saw even our best regulators at the Fed capable of doing.

Greenspan: Well, let me give you a little history, Mr. Chairman. There’s been a considerable amount of discussion about my views on subprime markets in the year 2000. And indeed, one of our most distinguished governors at the time, Governor Gramlich, who frankly, is regrettably deceased but was unquestionably one of the best governors I ever had to deal with, came to my office and said that he was having difficulties with the problem of what really turned out to be fairly major problems in predatory lending.

Bank Crackdown Gets Lost in Fed Subcommittee
Testimony continues:

Rep. Henry Waxman (D-Calif.): Well, he urged you to move with the power that you had as the chairman of the Fed, as both the Treasury Department and HUD suggested, that you put in place regulations that would curb these emerging abuses in subprime lending. But you didn’t listen to the Treasury Department or Mr. Gramlich. Do you think that was a mistake on your part?

Greenspan: Well, I question the facts that — he and I had a conversation. I said to him I have my doubts as to whether it would be successful. But to understand the process by which decisions are made at the Fed, it’s important to recognize what our lines of responsibility and lines of authority are within the structure of the system.
The Fed has incredibly professional large division that covers consumer and community affairs. It’s got probably the best banking lawyers in the business in the legal department and outside counsel of expert professionals to advise on regulatory matters. And what the system actually did was to try to corral all of this ongoing information and to eventually filter it into a subcommittee of the Federal Reserve Board.

Greenspan: If I may have an extra minute. The reason basically is this that Governor Gramlich said to me that he had problems. Indeed, I agreed. I had heard very much the same thing. I, frankly, thought that when our meeting ended that the subcommittee of the board which supervises all of the various aspects of consumer and community affairs within the board of governors and the Federal Reserve system would move forward and present to the board as a whole recommendations to be made. That was not made, and I presumed at the time that essentially the subcommittee didn’t think it rose to the higher level.”

“Housing Market: Even More Pain in Store?”

Fox News

25 January 2010

“Like a carnival free-fall ride that stops suddenly, teasing riders into a false sense of safety before plummeting the rest of the way to the ground, some economists say the housing market could once again be headed for a plunge after slowly clawing back some of its 2008 losses.  A trio of gathering government storm clouds will be responsible for the drop that some predict could mean another 10% to 15% slump in prices, they say.

” ‘Here it is three years after the peak and it’s still all about housing,’ said David Rosenberg, an economist at Gluskin Sheff & Associates in Toronto. ‘The outlook for the market is extremely clouded.’

“The first shoe to fall was last week’s Federal Housing Authority announcement that it would tighten its loan standards in light of defaults that had pushed the agency’s reserves well below its mandated level.

“In an effort to stem the tide of defaults, the agency increased the required down payment for borrowers with the weakest credit, hiked the premium for its loan insurance required of all customers and restricted the amount of closing costs that may be contributed by the seller.

“The FHA has backed more than 30% of loans in the past year as credit tightened and the market for borrowers with questionable credit dried up.

” ‘For a lot of people the FHA was their only resort,’ said economist Dean Baker, co-director of the Washington, D.C.-based Center for Economic Policy. ‘A lot of people who can’t get loans from the FHA will have nowhere else to turn.’

“Up next is the Federal Reserve’s plan to close up shop on its planned $1.25 trillion purchase of mortgage backed securities begun last year. In that time, the government has purchased roughly three quarters of all mortgages that Fannie Mae, Freddie Mac, and Ginnie Mae have turned into securities.

“The Fed’s planned March 31 pullout could send mortgage rates, which have been at historic lows in recent months helping to prop up home sales, up as much as a half to a full percentage point.

“Economists point to the virtual halt in refinancing that occurred earlier this month as rates jumped 0.10 percentage point, helping push demand for refis to a six-month low, as an indication of what could happen.

” ‘Barring a change of course frrm the Fed you will see interest rates start to rise,’ Baker said.  ‘That should lead to increases in rates of 0.5 to 1%. It’ll be a gradual increase but that’s enough to have an impact on the market.’

“The third and potentially most damaging blow poised to strike the housing market is the expiration of the federal tax credit for first time home buyers. The $8,000 credit for first time buyers – $6,500 for current homeowners in their houses longer than five years – has helped push sales up more than 15% from December 2008 but is set to expire on April 30.

“The credit was originally scheduled to expire on November 30, 2009, and the market gave a preview of the potential impact last month when existing home sales dropped 16.7% — or more than one million units — from November.

” ‘We’re likely to see a further falloff this spring because of the expiration of the credit,’ Baker said.

“Michael Lea, director of the new Corky McMillin Center for Real Estate at San Diego State University, said the actions by the government will likely mean a strong first quarter of real estate sales with the second half turning negative as rates rise and demand softens.

” ‘The net of it is transaction volume will be more concentrated in the first half and weaken in the second, and house prices are likely to have downward pressure again,’ Lea said, adding that the already-depressed markets of Nevada, Michigan and Indiana will continue to be harder hit than others where the economic recovery may be taking hold more firmly.

“There are other factors that will likely pressure the market as well, said Rosenberg. A glut of inventory – there are nearly nine million homes either on the market currently or vacant after foreclosure and being held off by the bank that owns it – means it will continue to be a buyer’s market.

” ‘The lingering problem in the housing market is still one of excess supply,’ he said. ‘The prospect we could have a 10-15% downfall in residential real estate values is significant.’

“The further drop in value would decimate consumer confidence and lead to more foreclosures as fully one half of all mortgage holders in the U.S. would owe more than the value of their homes.

” ‘That would put tremendous pressure on the government to deal with that environment,’ he said.

“High unemployment is yet another wild card that could pummel housing. As the jobless rate hovers near 10% and the rate of under-employment crests 17%, consumer confidence – and buying power – has been battered. With no clear end in sight to skyrocketing unemployment, the housing market and consumer spending in general are bound to suffer.

“But unlike most sciences, economics is one of speculation and conjecture, so much so that President Harry S. Truman, tired of his economists’ penchant for hedging their forecasts with information from ‘the other hand,’ once demanded a one handed economist.

“Nothing has changed.

“Celia Chen of Moody’s said she expects the market to rebound in 2010, and she downplays the effect the government will have on the housing market. Indeed, while existing home sales were reported to have fallen by nearly 17% in December, median prices actually rose for the first time in more than two years.

“The FHA restrictions should have little to no effect, Chen said, because few borrowers have credit scores as low as 580, the threshold at which the agency requires 10% down instead of its traditional 3.5%. It’s uncertain if the Fed will actually make good on its intent to pull out of the mortgage backed market, Chen says, and if the economy does not pick up that decision could be reversed.

“The credit expiration may also have little effect, she said, because the bulk of the buyers eligible to take advantage of it have already done it.

” ‘I think that our outlook is that the housing market will continue improving through this year and the government support that will be fading away will be fading away at the same time the economy is strengthening,’ Chen said. ‘That will help drive demand for homes. If things work out well these policy measures will be in place long enough to get housing past the worst of it.’ “

Letter to the Editor in “Your View” section: “Taxes low as long as priorities kept”

by Ralph & Kathy Stephenson, Inside NOVA.Com

17 March 2009

“We understand that the Prince William Board of County Supervisors is debating and will soon decide fiscal year 2010 property tax rates. We support efforts to keep taxes low, or even reduce them, particularly in the kind of severe recession the country is now experiencing. We understand full well that it takes political courage to keep the size of government and taxes under control, and none whatsoever to constantly expand government, heedless of the interests of those footing most of the bill — middle-class taxpayers.

“We will continue to support efforts to keep taxes low as long as the county’s highest priorities are police and fire protection, schools/libraries, and roads/transportation. And we will support reasonable efforts to attract more business and commercial development to the county.

“We also think it is important to be mindful of what got us into the current mess in the first place and to ensure that it never happens again.  As Vice Chairman Covington has noted, the plight of ‘the family who has one wage earner unemployed, the homeowner who has seen the value of his house plummet, the small business owner who tries to hold on to valued employees, the corporation that planned to expand, and the senior citizen who has witnessed his pension fund decline in value by 50%,’ and others even worse off is heartbreaking and erodes the well-being of all. These human tragedies all around us are reminders of the ultimate, root cause of the current severe recession:  a housing industry with massive overcapacity, consequent massive housing oversupply, and years of concurrent political mischief and corruption by both major political parties [at the federal, state, and local levels] (with apparently only a few Republicans dissenting) to distort healthy market forces and overturn normal, honest financial practices in order to artificially force housing demand to fit oversupply.”

Ralph and Kathy Stephenson

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