FALSE “positive” thinking bites the dust: REALITY RULES!

I have to laugh as I debate some of the backward thinking “positive thinkers” who claim we need a boondoggle, 33 MILLION DOLLAR, giant middle school, right as the economy and housing markets crash around us. It is now proven that suburban sprawl towns like Molalla take the biggest hits in this economic nightmare.

The Portland Tribune ran a front page story that outlines the FACT that “Foreclosure rate soars in suburbs” (http://www.portlandtribune.com/news/story.php?story_id=128216600543594000).  This eye-opening article notes that places like Lake Oswego (foreclosures up 19%) and Oregon City (up 17% with one in every FORTY FIVE houses in FORECLOSURE) are piling up the misery by the day. If you bought ANY property worth $500,000 or more in high-end Lake Oswego in 2007 “you’re underwater” notes realtor Fred Stewart.

So guess how it is going in far-flung Molalla – which doesn’t even make the chart as A SUBURB? Our Molalla 97038 zip code is approaching 300 active foreclosures. And every foreclosure drags down the property values of surrounding homes – that’s a FACT.

So guess what all this means for the future of tax revenues in Clackamas County? It means REALLY BAD NEWS. Clackamas County, per Realty Trac, has the THIRD HIGHEST foreclosure rate in the State.

So guess what all this means for the future of property tax adjustment claims at the County? It means a REALLY BIG FLOOD (it already started last fall) of citizens and commercial property owners asking for and getting REDUCTIONS in their property taxes. It will be easy to tell property owners how they can challenge their tax bills to keep their money in their pockets and out of the mitts of Molalla which throws it away paying $70,000+ a year for an incompetent to pretend to be a planner!

So guess what all of those reductions mean for the future tax bases of schools and fire districts and cities like Molalla? It means REALLY REDUCED REVENUES for a LONG, LONG, LONG TIME TO COME.

So guess what all of that means for the needed “fixes” to crumbling city of Molalla infrastructure (like road and sewers and sidewalks and parks) and for the needed “fixes” to crumbling infrastructure of the MRSD school district? It means there won’t be enough property tax revenues to even keep afloat the sad infrastructure we already have. And we won’t have the funds to keep the educational programs at current levels, either.

And guess what all of this means for the  the “need” for a 700 student school in crumbling, low quality of life  Molalla –  when the absolute trend is for people to migrate to the core, to METRO, and not to the suburbs (as proven by the Tribune coverage)? It means that we would be fools to go out on a limb funding a giant boondoggle when we can’t even depend upon a tax base to fund basic educational needs!

So I will trade REALITY for any “build it and they will come” nonsense coming out of the mouths of a few pushy, naive parents and a head in the sand District (with Board members too chicken to even front the middle school proposal – how pathetic to use parents as the fall guys!).

Grow up and accept it Molalla – we are dead in the water on any growth and will be lucky to maintain the current population levels. We are certainly NOT a Mecca for families with school age kids. Any responsible parent here would be running to enroll in or form a new, affordable, innovative Charter school. Charter schools, virtual schools, home schools and consolidation into K-8 or K-12 are the only affordable, realistic solutions to fading fast commuter based towns like Molalla in this Great Recession era of peak oil and lost property values.

We can’t afford unrealistic “positive” thinking – positive thinking about real estate values increasing forever is what got us into the hole we are currently in. I just read a comment from a parent trying to put a positive spin on the FACT that Molalla has only passed 6 school bonds for revenue for education in 46 tries in 20 years (the last “yes” vote was WAY BACK IN 1986!) – now that’s a reach to claim anything “positive” about that record!

It’s time for us all to get used to making do with less, instead of constantly whining and looking for champagne “fixes” on a cheap beer budget. Look around you, eyes wide open for a change.  Here’s a quote about REALITY from the below New York Times article to get you started on the path to REALISTIC THINKING ABOUT OUR COLLECTIVE FUTURE: (quote from “Housing fades as a Means to Build Wealth, Analysts Say”):

“Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch-up.” (End quote)

Read the rest of this grim article below. Wake up and smell the end of an era of false positive thinking writing on the wall: we aren’t growing and we won’t be getting more houses for a bigger tax base and high-end isn’t coming to Molalla and JOBS (a key need for families to stay in town) aren’t coming and we don’t need and can’t afford a warehouse-style,, free babysitting service, 700 (in their their dreams!) student monument to a failed educational model that we WON’T BE ABLE TO FILL with bodies.

The District files held the truth about the future of schools in Oregon and Washington. A brochure notes the “perfect storm” of aging population, growing alternatives – like virtual, charter, and home schooling – quickly displacing mainstream education and lowering birthrates pushing public school enrollment downward. The biggest trend was the FACT that families will move to where the JOBS are. That’s NOT MOLALLA! That won’t be MOLALLA!

We are all BROKE folks, and Molalla is more broke than most places, since it lacks an economic base to attract families. Commuting is a HUGE negative in today’s housing market. When will the greedy “positive thinkers” GET THAT?

August 22, 2010

Housing Fades as a Means to Build Wealth, Analysts Say


Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.

The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.

Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.

“People shouldn’t look at a home as a way to make money because it won’t,” Mr. Baker said.

If the long term is grim, the short term is grimmer. Housing experts are bracing themselves for Tuesday, when the sales figures for July will be released. The data is expected to show a drop of as much as 20 percent from last year.

The supply of homes sitting on the market might rise to as much as 12 months, about twice the level of a healthy market. That would push down prices as all those sellers compete to secure a buyer, adding to a slide that has already chopped off as much as 30 percent in home values.

Set against this dismal present and a bleak future, buying a home is a willful act of optimism. That explains why Adam and Allison Lyons are waiting to close on a $417,500 house in Deerfield, Ill.

“We’re trying not to think too far ahead,” said Ms. Lyons, 35, an information technology manager.

The couple’s first venture into real estate came in 2003 when they bought a condo in a 17-unit building under construction in Chicago. By the time they moved in two years later, it was already worth $50,000 more than they had paid. “We were thinking, great!” said Mr. Lyons, 34.

That quick appreciation started them on the same track as their parents, who watched the value of their houses ascend for decades. The real estate crash interrupted that pleasant dream. The couple cannot sell their condo. Unwillingly, they are becoming landlords.

“I don’t think we’re ever going to see the prosperity our parents did, but I don’t think it’s all doom and gloom either,” said Mr. Lyons, a manager at I.B.M. “At some point, you just have to say what the heck and go for it.”

Other buyers have grand and even grander expectations.

In an annual survey conducted by the economists Robert J. Shiller and Karl E. Case, hundreds of new owners in four communities — Alameda County near San Francisco, Boston, Orange County south of Los Angeles, and Milwaukee — once again said they believed prices would rise about 10 percent a year for the next decade.

With minor swings in sentiment, the latest results reflect what new buyers always seem to feel. At the boom’s peak in 2005, they said prices would go up. When the market was sliding in 2008, they still said prices would go up.

“People think it’s a law of nature,” said Mr. Shiller, who teaches at Yale.

For the first half of the 20th century, he said, expectations followed the opposite path. Houses were seen the way cars are now: as a consumer durable that the buyer eventually used up.

The notion of housing as an investment first began to blossom after World War II, when the nesting urges of returning soldiers created a construction boom. Demand was stoked as their bumper crop of children grew up and bought places of their own. The inflation of the 1970s, which increased the value of hard assets, and liberal tax policies both helped make housing a good bet. So did the long decline in mortgage rates from the early 1980s.

Despite all these tailwinds, prices rose modestly for much of the period. Real home prices increased 1.1 percent a year after inflation, according to Mr. Shiller’s research.

By the late 1990s, however, the rate was 4 percent a year. Happy homeowners were taking about $100 billion a year out of their houses, which paid for a lot of good times.

“The experience we had from the late 1970s to the late 1990s was an aberration,” said Barry Ritholtz of the equity research firm Fusion IQ. “People shouldn’t be holding their breath waiting for it to happen again.”

Not everyone views the notion of real appreciation in real estate as a lost cause.

Bob Walters, chief economist of the online mortgage firm Quicken, acknowledges that the recent collapse will create a “mind scar” just as the Great Depression did. But he argues that housing remains unique.

“You have to live somewhere,” he said. “In three or four years, people will resume a normal course, and home values will continue to increase.”

All homes are different, and some neighborhoods and regions will rebound more quickly. On the other hand, areas where there was intense overbuilding, like Arizona, will be extremely slow to show any sign of renewal.

“It’s entirely likely that markets like Arizona will not recover even in the 15- to 20-year time frame,” said Mr. Humphries of Zillow. “The demand doesn’t exist.”

Owners in those foreclosure-plagued areas consider themselves lucky if they are still solvent. But that does not prevent the occasional regret that a life-changing sum of money was so briefly within their grasp.

Robert Austin, a Phoenix lawyer, paid $200,000 for his home in 2000. Five years later, his neighbors listed a similar home for $500,000.

Freedom beckoned. “I thought, when my daughter gets out of school, I can sell the house and buy a boat and sail around the world,” said Mr. Austin, 56.

His home is now worth about what he paid for it. As for that cruise, “it may be a while,” Mr. Austin said. Showing the hopefulness that is apparently innate to homeowners, he added: “But I won’t rule it out forever.”

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