Indiana lawmakers blogging

The purpose of the IREN Blog is to bring you commentary from IAR on news, issues, and public policies impacting Indiana’s real estate industry. We thought you might find it interesting that three of our 150 state legislators are also using blogs:

Senator David Ford (R-Hartford City)

Representative Ryan Dvorak (D-South Bend)

Representative Steve Heim (R-Culver)

While this means that only 2% of the General Assembly currently has a presence in the blogosphere, IAR predicts that many more legislators will be blogging by the end of 2006. And on that note…

…Happy New Year

from the

Indiana Association of REALTORS®!

FORTUNE telling: Indiana home prices to rise in the new year?

WISH-TV of Indianapolis has picked up on a report in the December 26^th issue of FORTUNE magazine (read article here) which contains forecasts of home price changes over the next two years:

Fortune predicts prices in New York City will drop 3.5 percent two years from now. It projects at 2.9 percent drop for San Francisco.

"They've had to deal with the air going out of the bubble in a lot of those areas so people will invest in properties at a certain price and then the value go down,” said Beckie Agan, president of the Metropolitan Indianapolis Board of Realtors.

Indianapolis has not had that problem. The housing market here has seen consistent two to three percent gains for the past several years. If Fortune Magazine is right about the next two years, property values will go up more than they have in years.

The FORTUNE report looked at the largest 100 metro areas in the country (full rankings here). The housing markets of most interest to Indiana REALTORS® are listed below with the projected appreciations rates for 2006 and 2007.

Metro Area (2006 Rate; 2007 Rate)
Cincinnati-Middletown (6.0%; 6.6%)
Indianapolis (5.6%; 5.4%)
Louisville (5.0%; 4.6%)
Gary (4.4%; 3.4%)

The numbers for the Gary area may not be astronomical, but the research used by FORTUNE by Moody’s Economy.com indicates that home prices in nearby Chicago-Naperville-Joliet will rise only 1.1% in 2006 and just 0.2% in 2007.

IREN Blog is back

Apologies for the lack of activity here on the Indiana Real Estate News (IREN) Blog, however, we will now be returning to a regular posting schedule.

The first priority is an update on the status of HB 1001, which contains legislation to shift funding for child welfare programs away from property taxes. The following comes from Abdul Hakim-Shabazz, host of the Indianapolis-based “Abdul in the Morning” radio program and a new contributor to the excellent Indiana Barrister blog (read orginal post here):

Indiana House Republicans may have to scale back some of their plans to provide Hoosiers with property tax relief. Speaker Brian Bosma told me this morning on News Talk 1430, WXNT that because of the state's recent budget shortfall, their plan to assume the child welfare portion of your property tax bill will have to be adjusted.

The above-mentioned “shortfall” refers to recently revised projections of the tax revenue expected to fill state coffers through June 30^th, 2007 (read details of the new forecast here). Speaker Bosma’s comments would indeed seem to confirm what was reported by Lesley Stedman Weidenbener in the Louisville Courier-Journal back on December 15^th:

As a result, House Ways and Means Committee Chairman Jeff Espich, R-Uniondale, said the change in the forecast will force him to reassess his plan to shift the cost of some services for abused and neglected children to the state budget. Money for those services currently comes from local property-tax revenues.

Espich's proposal would cost the state $53 million next year, $173.5 million in 2007 and more than $207 million in 2008, according to a fiscal analysis by the Legislative Services Agency.

"We'll have to re-evaluate whether we can afford to do it permanently, on an ongoing basis and do it within a balanced budget," Espich said.

The state takeover may have to happen more slowly, he said, or it might be just a one- or two-year program while lawmakers seek another solution to increasing property taxes.

"We will not unbalance the budget," Espich said.

IAR may have had some concern over the lack of a long-term funding plan for removing child welfare levies, but we hope that this proposal does not disappear. State responsibility for these services remains a laudable goal and this issue should stay on the front burner in 2006 even if a more complete solution is not attainable until the 2007 budget-writing session.

An unwelcome holiday surprise in Brown Co.

What’s worse than a lump of coal in one’s stocking? How about a property tax bill 20% greater than the prior year’s bill:

Property taxes due week before Christmas
(from the 12/7/2005 Brown County Democrat)

Brown County homeowners received an early Christmas present from the treasurer’s office last week — a property tax bill that is 20 percent higher than the previous year.

Statements for 2003 pay 2004 taxes were mailed on Wednesday, November 30, and are due Friday, December 16 — one week before Christmas. The good news is that any overpayments previously made should show up as credits on this statement.

And no, that isn’t a typographical error where it states that these are the 2003-PAY-2004 tax bills. Brown County has really fallen that far behind the normal billing cycle due to its disasterous reassessment process.

Leveraging Indiana's housing market to grow the economy

A number of formerly red-hot housing markets in coastal communities may finally be starting to cool. We heard from NAR yesterday that this October’s Pending Home Sales Index was about 3% below October 2004:

“David Lereah, NAR’s chief economist, says a decline was expected. “The drop in pending home sales is an affirmation that we are experiencing a modest slowing in the housing sector,” he says. “The index is pointing to a soft landing for home sales, which will help to correct the inventory shortages that have dominated housing over the last five years. This should restore balance to the market.””

Despite the possible slowdown, prices in many metro areas are likely to remain at relatively high levels with respect to median family incomes. As a result, homebuyers in high-priced areas have fled in search of more affordable housing options. We noted a New York Times article on this topic last month, and today we found this CNNMoney.com piece:

‘Take this house and shove it’: More and more Americans are moving to get away from overheated housing markets

“California suffers a net loss of about 100,000 residents a year to other states, according to Economy.com. In recent years, many have cashed out their rapidly appreciated homes and moved to Arizona, Washington, and Oregon.

But now that prices have climbed in those states as well, the latest trend is that Californians are turning to the Midwest, where spacious houses are available for half of the cost of similar space in Los Angeles.

"It makes increasing sense if you can buy more house and still live in a good area," says Conrad Egan, president and CEO of the Center for Housing Policy, a non-profit group that seeks to make sense of the nation's housing policy.”

Such market shifts create an opportunity for Indiana to turn a weakness (slow home price appreciation) into a strength. IAR feels strongly that our housing affordability can be a positive selling point in economic development; however, we cannot focus only on price. Any marketing effort built around housing must help to dispel myths and educate those outside of Indiana about the diverse options that many do not know of and the quality of life.

Ask a non-Hoosier to imagine a house in Indiana, and they are unlikely to picture a condo in a vibrant urban downtown, a beautiful lake cottage in northeastern Indiana, a cabin in the rolling hills of southern Indiana, or an affordable suburban home for Chicago-based commuters.

We are pleased with the efforts of one Indiana mayor to seize this opportunity. Mayor Matt McKillip has created a new program to recruit college-educated workers to his city of Kokomo. His plan touts both low home prices and the area’s quality of life. Here is a sample of the official announcement on November 10^th (click here for the full press release):

“Mayor Matt McKillip announced a unique economic development incentive program on Thursday evening designed to attract more college-educated workers to live in Kokomo. The program, coined "Project Grow Kokomo," offers college-educated persons who work in Howard County but reside outside of the Greater Kokomo Region a financial incentive to move to Kokomo. Through the program, qualified persons can apply for a forgivable loan in an amount up to $10,000, or ten percent of the purchase price of a home within Kokomo's city limits, whichever is less. If the homebuyer stays in Kokomo for five years, the loan will be forgiven.”

"Our residents enjoy one of the most affordable quality housing markets in the country," said Kathy Harbaugh, Executive Vice-President of the Realtors Association of Central Indiana. "People should really give Kokomo a serious look and consider all that the area has to offer."

Kudos to the folks in Kokomo. More information on the mayor’s plan can be found here.

Different fates for two southern Indiana condo projects

One condo development is moving forward…

Condominium idea catching on in downtown Evansville

Evansville Courier & Press, 12/6/2005

“When Ben Kunkel and Chuck Harper became friends in the early 1990s while attending North High School, they never dreamed they would team up together 12 years later on a major renovation project Downtown.

Their careers took completely different directions, but their friendship endured.

Now the two 1993 North graduates are the backbone behind the proposed $2.2 million overhaul of the old JC Penney building at 508 Main St., which Mayor Jonathan Weinzapfel announced Monday.”

…while another faces a more uncertain fate.

Jeffersonville mayor to veto city council condominium development decision

(Jeffersonville) Evening News, 12/6/2005

“A rezoning of property along Utica Pike approved by the Jeffersonville City Council on Monday will be vetoed by Mayor Rob Waiz today.

“I’m going to go ahead and veto the zoning ordinance on the Kempf property,” Waiz said in a telephone interview this morning.

“Well, God bless America,” said David Lewis, an attorney representing some of the opponents of the rezoning. “I didn’t see this coming.”

On Monday, the council voted 4-2 to rezone one of four acres Thomas and Nancy Kempf own at 2413 Utica Pike from single-family to limited-multifamily zoning. The couples plans to raze their 6,000-square-foot home and replace it with Casa Del Rio Condominiums. The couple plans to live part-time in one of the condos and market the other three for $900,000 to $1.1 million each.

The vote to approve the rezoning came despite a 6-3 vote by the city’s Plan Commission a week ago, and impassioned opposition from several neighbors of the proposed development.”

Another blogger on impact fees

Tracy Warner is the editorial page editor for the Fort Wayne Journal Gazette. He publishes an interesting blog which featured this post on impact fees yesterday:

Park tax on new homes

“As Indiana cities and towns struggle with their budgets, they will increasingly seek new ways to raise money -- in other words, new taxes by other names.

Take Valparaiso, which is beginning an "impact fee" of $931 for every new house that is built, with the money going to the city's parks district. As The Times of Northwest Indiana reports:

Under state law, communities can impose a fee on developers to recover the anticipated costs of new development on roads, parks, storm drainage, sanitary sewers and the water system. The money is collected at the time a building permit for a home is obtained, and the money has to be spent in the area of the development.

Although approved by the council, the city can't collect the fees until six months after passage. The fee increases to $1,131 on Jan. 1, 2008, and to $1,331 on Jan. 1, 2009. The mayor has to appoint a three-member impact fee review board. The board members serve five-year terms, and the board must include a real estate broker, a licensed engineer and a certified public accountant.

(Parks Director Steve) Doniger said the money, which is expected to grow from the $100,000 to $150,000 in the first year, won't be used to create any new main venues. It will be used mostly for playgrounds, basketball courts, tennis courts, ballfields and shelters. The one exception might be a sprayground, an interactive water play area for kids, and an addition to the skate park.

How long will it take for other cities to jump on this idea?”

Note that state law requires a real estate broker to serve on the mandatory board that reviews appeals of impact fee assessments. You can read the entire state statute (which was first established in the early 1990's) on impact fees here.

Indiana housing market report roundup

The Indiana Economic Digest tipped us off to reports on market statistics from three major areas of the state. Unfortunately, none of the news from the Northwest Indiana Times, the Evansville Courier & Press, and the Greenfield Daily Reporter was terribly positive.

• Northwestern Indiana (Lake and Porter Counties)

Home sales chill in October

Porter County sees decline of 18.6% from 2004

November 29^th, 2005

“The numbers in Northwest Indiana appear to reflect what's happening nationally, but it's too early to predict a trend locally, said Nancy Smith, executive vice president of the Greater Northwest Indiana Association of Realtors.

September sales were high in Northwest Indiana, Smith said, climbing 15.5 percent from September 2004, to 764.

"Until we have another month to compare (October) to, it's hard to come to any conclusions," Smith said.”

• Southwestern Indiana (Evansville area)

Area's housing market 'very stable'

Home prices increase 7.9 percent in three counties

December 2^nd, 2005

“Schulz [Mike Schulz, President of the Evansville Area Association of Realtors] theorized the area is shielded from bubbles as it doesn’t have huge appreciation numbers of from 25 percent to 40 percent like some other parts of the nation.

The percentage of appreciation in Vanderburgh, Warrick and Posey has averaged from 2 percent to 6 percent the past 10 to 12 years, Schulz noted, predicting another good year in 2006.”

• Central Indiana (Hancock County)

Hancock County home sales lag for third month in a row

December 3^rd, 2005

“"Sales normally take a dip as we get closer to the holidays," said Karen Beeson a local realtor who works in Hancock, Marion and Hamilton counites.

According to the figures, most counties in Indiana posted a decline in the number of homes sold in October as compared to the October 2004 figures.

Home sales handled by the Metropolitan Indianapolis Board of Realtors in Hancock County fell from 95 last October to 84 last month. It represented a 12 percent drop in sales and was the third month in a row in which sales dropped.”

County officials talking about reorganization and assessing

The Fort Wayne Journal Gazette covered the annual convention of the Indiana Association of County Commissioners in Saturday’s paper (link to the article here). There continues to be much chatter about local government restructuring around the State House, and we at IAR hope that some of the ideas mentioned in Benjamin Lanka’s article become policy proposals:

“Allen County Commissioner Marla Irving said the suggestions varied from cutting the number of commissioners per county from three to one, expanding the number of commissioners to five and eliminating county councils.

She said a lot of discussion time was spent on consolidating township assessors and the county assessor.

Irving said one idea that was intriguing to her was to eliminate the positions of county auditor and treasurer as elected positions and put them on a board of finance to serve under the commissioners.

“Maybe some of the other offices could be under the commissioners instead of elected,” she said. “That maybe should be where we start.””

Whenever the topic of local government reorganization comes up, it is always mentioned that some county-level offices are required by Indiana’s Constitution. There is often confusion over which offices are expressly mentioned, so we looked it up:

Article 6; Section 2

There shall be elected, in each county by the voters thereof, at the time of holding general elections, a Clerk of the Circuit Court, Auditor, Recorder, Treasurer, Sheriff, Coroner, and Surveyor, who shall, severally, hold their offices for four years; and no person shall be eligible to the office of Clerk, Auditor, Recorder, Treasurer, Sheriff, or Coroner more than eight years in any period of twelve years.

The idea of a board of finance appointed by and accountable to a county executive instead of separately elected auditors and treasurers has a lot of merit. However, it appears that there would be constitutional issues to address before creating such a structure legislatively. However, note that assessor is not one of the “constitutional offices”.

More news on home prices (OFHEO 3Q 2005 results)

The new OFHEO numbers on house price appreciation came out yesterday (read the PDF of the news release here), and Indiana's statewide percent change for the third quarter of 2005 was 1.51% (up from from 1.13% in 2Q 2005). This is not terribly high, but it was greater than the quarterly gains in eight other states, including Massachusetts.

Over the past year, only Nebraska, Ohio, and Michigan have seen slower appreciation at the state level according to the OFHEO data.

Indianapolis ranked most affordable metro area

The Indianapolis Star reports today on a new ranking by the National Association of Home Builders (NAHB) that rates Indianapolis as the most affordable metro area in the US. Here is an excerpt from the article:

“Historically, the city has been one of the most affordable major metropolitan areas in the country, said Jim Litten, president of the residential real estate service division of F.C. Tucker.

The lack of geographic boundaries is a big reason for that, he said.

There are no mountains or oceans to limit growth, he said. The possibility for building homes in Indiana is endless, unlike Colorado or California.

"The shock is if you come to Indianapolis from San Francisco, you can't imagine the kind of buying power you'd have," Litten said. "Conversely, if you go from Indianapolis to San Francisco, you're in for a shock."”

More details and the full rankings can be found on the NAHB’s website. For example, here is the complete list of the 10 most affordable metro areas:

1. Indianapolis, IN

2. Youngstown-Warren-Boardman, OH-PA

3. Detroit-Livonia-Dearborn, MI

4. Buffalo-Niagara Falls, NY

5. Oklahoma City, OK

6. Dayton, OH

7. Rochester, NY

8. Grand Rapids-Wyoming, MI

9. Toledo, OH

10. St. Louis, MO-IL