Monday, June 17, 2002
Rise in homeowner costs outpaced income
'90s saw big loss in number of houses for $100K or less
By Ken Alltucker and John Byczkowski
The Cincinnati Enquirer
The housing boom of the 1990s, which helped create more homeowners than ever before, came at a cost. Cincinnatians now are devoting a larger chunk of their income to pay housing costs.
The Tristate's price tag for the American dream reached lofty heights during the 1990s, and residents of more affluent suburban communities benefited from rapid increases in home values, recently released U.S. Census figures show.
In 1990, close to three of every four Greater Cincinnati homes were valued at $100,000 or less. Slightly more than one-third of homes could be found in that price range in 2000.
The run-up in home prices outpaced the growth of income, meaning more people now pay a higher percentage of their paycheck to cover swelling mortgage payments.
The opposite is true for renters. Despite assertions of an affordable-housing crunch, renters sent less of their money to landlords in 2000 than the decade before, the figures show.
Housing experts say a number of factors have contributed to growing homeowner costs.
Low interest rates enabled people to buy more expensive, and in some cases, palatial homes with nine or more rooms.
With borrowing costs reaching new lows, “Certainly, you are getting a lot of bang for your buck,” said David Lockard, an apartment expert for CB Richard Ellis.
More renters took advantage of minimal down payment options to make the leap to home ownership. The continued flow of renters out of apartments and into homes during the late 1990s pressured landlords to keep rents lower, making rental costs more affordable, Mr. Lockard said.
Also, aggressive lending tactics enticed people to take out home-equity loans or second mortgages to pay off credit cards and other debt.
An Enquirer analysis of more than 310 Greater Cincinnati communities shows wide variations in home values, mortgage costs and new construction trends.
The typical house in Greater Cincinnati cost $116,500 as of April 2000, a 64.5 percent increase from $70,800 in 1990.
But suburbs with acres of new construction saw much greater leaps in home prices.
Experts warn that it's difficult to directly compare home values of communities with lots of new construction to older municipalities with fewer new homes. The census figures give only the median home value per community; that figure doesn't distinguish between new and existing homes.
Nevertheless, the figures show areas with escalating home values tend to have a lot of new construction.
For instance, home prices more than doubled in Crescent Springs and Wilder, two Kentucky communities that attracted throngs of builders during the '90s.
Russ Beymer purchased a home in Crescent Springs when he moved from Washington, D.C., six years ago. A Northern Kentucky marketing executive, Mr. Beymer wanted to live near downtown Cincinnati, where his wife works.
“As a transplant to the area, I looked at what was convenient,” Mr. Beymer said.
Their home is just minutes from downtown.
“This neighborhood has pushed the home values up. It comes down to that age-old real estate axiom of location, location, location,” he said.
Crescent Springs Mayor Claire Moriconi said her city's home-building rush in the early to mid-'90s has largely passed because there's little available land left.
“We're about maxed out now right now for building,” said Ms. Moriconi, adding that a few trickier sites could be converted to new homes.
The growth hasn't always been easy. The city studied a possible merger but ultimately opted not to join neighboring Villa Hills, a move that was designed to save costs on municipal service.
Crescent Springs still depends on its volunteer fire department to provide emergency medical and fire protection, Ms. Moriconi said. The department has drawn criticism recently for keeping a beer vending machine at the firehouse.
From time to time, “talk has come up” about converting to a paid fire staff, Ms. Moriconi said.
Across the Ohio River in older communities near Cincinnati, home prices typically didn't rise as fast. Built-out communities such as Greenhills and Golf Manor ranked near the bottom of the list in home appreciation.
Hamilton County's home values increased 55.8 percent, a smaller increase than that of the suburban counties. Warren County homes had the biggest jump in value, 84 percent, as well as the most expensive median value, $142,000.
Hamilton County commissioners hope to encourage more people to fix up their homes by offering low interest rates on home-improvement loans. The program started this month.
Terrace Park, a mostly wealthy enclave in eastern Hamilton County, was an exception in the county. Even with little construction, Terrace Park saw its median home values soar 96.3 percent to $298,600.
Good schools and a safe community drew Mary Malotke to Terrace Park more than two decades ago. She has no intention of leaving.
“Kids can ride their bikes and you don't have to lock your car,” Ms. Malotke said. “I like the sense of safety.”
The Village of Indian Hill had the Tristate's most expensive homes, with a median value of $738,800. With more than six of every 10 homes boasting nine or more rooms, they were also the largest houses.
West Chester's gated golf courseand country club community, Wetherington, had the second-most expensive homes, with a median cost of $432,800.
Addyston had the least expensive homes, $58,300, followed by Lincoln Heights and Elmwood Place.
The typical Cincinnati home cost $93,000, up 53 percent from 1990. More detailed numbers on city neighborhoods won't be available until later this summer.
Perhaps the most telling numbers from the census data is the increasing cost of owning a home, the so-called housing burden.
In Greater Cincinnati, 17.9 percent of households spent at least 35 percent of total income on mortgage and other household costs such as maintenance and utilities. That's a 2.1 percentage point increase from 1990 in the number of families at the upper end of the mortgage burden.
That doesn't surprise many real estate experts, who see families borrowing more than they can afford.
In many cases, those consumers found themselves in trouble.
Home foreclosures more than doubled in Hamilton County from 1995 to 2000, even while the economic boom was in full stride.
“People have overextended themselves,” said Karla Irvine of Housing Opportunities Made Equal. “During the '90s, people bought more house than they should have.”
Ms. Irvine's group helps people who get caught in a dangerous game of refinancing mortgages, often through subprime lenders who charge high interest rates and costly fees. The loans become more expensive with each refinancing, eating away precious home equity and burning family income.
Indeed, the census figures show poorer communities often have the highest rate of people stretched to the limit with mortgage payments. More than one in five Lincoln Heights homeowners spends at least 35 percent of income on mortgage. That rate is in the upper teens in Silverton, Lockland and Columbia Township.
Even some areas that added a lot of new construction in the 1990s had stressed families. In Newtown Village, one of five families spent at least 35 percent of income on mortgage and household costs, an 11.2 percentage point increase from 1990.
But of 170 Greater Cincinnati communities with at least 100 apartments, residents of 101 communities spent less of their income on rent than in 1990.
Mr. Lockard said apartments lost “quality renters” to homeownership in droves during the 1990s.
In fact, many cities, led by Cincinnati, had a large decline in the number of rental units.
Cincinnati lost more than 4,600 rental households in the 1990s, and older communities such as Lockland, Norwood, Wyoming and Newport lost rental households, too.
Donald Troendle, executive director of the Cincinnati Metropolitan Housing Authority, said those figures show the city needs to shore up its efforts to build affordable rental units, as well as new homes.
“That's a number that haunts us in a lot of ways,” Mr. Troendle said. “When you look at Cincinnati's population loss, two-thirds were renters.”
E-mail kalltucker@enquirer.com and jbyczkowski@enquirer.com
Museum pioneer hopes for learning, healing
Quilt stitches together ideas of 'freedom'
Rise in homeowner costs outpaced income
Showdown this week on 'The Pill'
BRONSON: Deters detour
You Asked For It
Cocaine law scrutinized again
Moeller grads draw money offers
Portune protests secrecy policy
Fairfield schools eye levy for fall
Flag captures Clermont
Garden Party welcomes 'Gatsbys'
Luken proposes race talks
St. Margaret is looking to grow
Budget crisis worries few in Ind.
Families flock to park
More patients being admitted to hospitals
Tarbell pays $10.5K; owed back taxes
Tristate A.M. Report
Ky. still behind on education
Unions want nonmembers to pay fees
Kentucky A.M. Report
