Tuesday, September 30th, 2008 at 9:00am

Lake County Needs Housing Bailout

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Affordability! Affordability! Affordability!  That is the reason why all of the Herculean efforts by the United States government will  have little affect on the housing market in Lake County.  In fact, if this County had wise and perceptive County Commissioners, they would have already sounded the economic alarms and gathered the County’s top minds to come up with a bailout program for Lake County in an effort to stop the massive job losses and the evaporation of sales tax revenue.  Pride and political positions have become more important than the welfare of working families.

From 2003 through today, Citizens for Better Government, L.L.C. has vigorously fought impact fee increases and excessive government mandates on housing on one premise – affordability.  Our group has said time and time again that housing prices were well out of reach for most people in Lake County.  Based on the current prices, only about one in five households in Lake County can afford a home.  Lake County will soon become a county of renters, which will stretch government services with few contributions to the tax base.

In August of 2000, Lake County’s average home price was $109,243.  Adjusted for inflation, the average home price today should be $138,706.  Eight years ago, there was a 3.26 month supply of homes on the market.  Today, the average sale price is $179,523 and there are 5,225 homes on the market, or a whopping 20.3 month supply.  Right now, based on the average home price adjusted for inflation, a house in Lake County costs $40,817 too much.  Unfortunately, these numbers do not include the 300-400 homes being foreclosed on each month.  As those homes enter the market, homeowners should expect more price destruction.

Since 2000, housing in Lake County has been hit with three major state code changes, innumerous state and local building mandates, dramatically higher developmental costs, and about $14,000 more in impact fees and building fees.  The new housing situation in Lake County is grim because builders literally cannot build a house for the price that existing homes are being sold for, and this has created an inverted curve where existing houses are determining the market price instead of new ones.

Added to the over-inflated price to build a home is a reverting back to legitimate lending standards, which require down payments of 20%, accurate appraisals, and good credit.  Based on the average home selling price, a prospective homebuyer in Lake County will need a down payment of $35,905 and a good appraisal, which will be almost impossible to obtain in a distressed market, which is about to be flooded with foreclosures.  The mess on Wall Street, which has resulted in a complete freeze in the credit market, is exacerbating an already bad situation.  How many people do you know have almost $36,000 saved up for a down payment?

Unless Lake County and the State of Florida do something about affordability, what is going to be the future?  You need only look at the long depressed markets in the Midwest to see the outcome.  Many homeowners will become renters, and more families will live in the same house.  Seniors will retire in areas where they can find homes for $75,000-$90,000, and many current Lake County homeowners will remain with negative equity in their homes.  Those who are forced to leave the area for jobs or lifestyle changes will see their family’s wealth completely wiped out.

If current homeowners have any hope of getting values steadied, the new home market must emerge out of its depression.  This can only be accomplished by making new housing affordable again.  Government must roll back impact fees, building fees, and government mandates so that the housing market can begin moving.

The fallacy of Lake County’s entire housing and no-growth policy is that government fees and mandates had little impact on people moving to Lake County.  Many felt new residents would pay any price and just wrap the cost into their mortgages.  This looking only at monthly payments instead of housing costs created the need for exotic sub-prime mortgages.  The collapse of that type of financing has now reversed housing fortunes, and those who opposed growth are now sitting on devalued properties, which many will be stuck with unless they want to take huge losses.  The loss of affordable new homes in Lake County is completely choking down the economy and destroying the wealth of families and retirees.

Take a ride down Highway 441 between Leesburg and Mount Dora.  All you see are “for sale”, “for lease”, and “for rent” signs, but it appears the Lake County Commissioners are blind to them.  The federal government’s bailout will have little impact on Lake County’s housing market, and this County desperately needs to convene an emergency summit to address how these issues can be resolved.  UCLA has documented that every major slowdown in America since Word War II has been led by housing.  If Lake County has any chance of cranking its economic engines and preserving the value of homes for senior citizens and working families, then the politicians must take action.  Doing nothing is not an option.  Unless action is taken, Lake County will become a renter’s county with limited wealth and prosperity.

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