Tuesday, November 21, 2006

How do people or anyone make it in Humboldt County?

Oh goody! Things are so great in Humboldt County! Just look at this story and everything looks great and positive. Times-Standard Online - Humboldt's unemployment could be at an all-time low But go and talk to someone living this great Humboldt economy and you will see another picture. I have talked to many 30 and under type workforce laborers who try to make ends meet here. Not a pretty story. Just a few hours ago I talked to a worker in the roofing business who worked up to $8 an hour after 3 months! How can you live on that! You would be better off on welfare! And the story plays itself over and over again in Arcata. With no competition of wages, employers are taking advantage of our college/mobile young workforce and driving down wages! Here are some sobering statistics for young people entering the workplace. In the beginning of 2000 you could buy a house in Humboldt County for $93,500. Your household income would have to be $25,000 to qualify to pay $615 a month to actualize the American dream and buy a home. 60% of our workforce families could do this. As of Jan. 2006, the average house price was $308,000. Your household family income has to be $75,000 to afford the $1,864 a month payment. And now only 12% of the family workforce can afford to buy a home. And if you are single in Humboldt County and especially a woman? Forget about it! It will not happen! Less than 1%. Reality check! And people are happy to pay $1,000 plus rent! Wow, what has happened! Will the young workers of Humboldt County step up in protest? We may need a Humboldt County Living Wage ordinance! But we will debate: What is a living wage! Why should it be based on two wages? Is it discriminatory? Information Source-Humboldt Association of Realtors Search properties


Hank Sims said...

Richard -- You got it backwards, like people often do. The HAR stats don't mean that only 12 percent of the people can buy a home. That's ridiculous, when you think about it.

What the affordability index is a measure of how many people can afford the median home price. How many people can afford homes selling in the 40th percentile of home prices? Lots more. How many can afford homes selling in the 30th percentile? Lots, lots more. And etc.

That's why they're called "starter homes." Lots of people can afford them. Even in Humboldt County.

Anonymous said...

I'll agree that times are tough, but they were hard back in 1975, too. Lots of hard work for small wages. Lots of saving and scrimping and doing without necessities, let alone luxuries. Getting a down payment together was nearly impossible. Making the monthly payments kept us awake with worry many a night.

Regardless, we got the jobs, paid the bills, bought the house, made the mortgage. We ate beans not steak. We vacationed "in our own backyard," not in New York or Europe. Finally, we paid off the house. Hard work does have its rewards, even here in Humboldt County.

In '75, the newspaper carried only about 6 column inches of help-wanted ads. Half of them were military recruitment ads.

Yesterday's Times-Standard carried about 70 column inches of help-wanted ads.

That's not the whole picture, of course, but it is part of the picture and it deserves to be considered.

Anonymous said...

Why do you have to own your own home? I live and rent in san francisco, and even with a healthy salary, I don't expect to buy a home anytime soon. And I don't want to. The housing market is overpriced, as in Humboldt. This trend will eventually lower prices to satisify the market. Maybe then I will venture into the homeowners circle.

And please believe that the answer is not the quick fix that all developers will lead you to believe- build, buiild build. the last thing humboldt needs is to abandon smart growth principles and feed into the develpers greed.

Please be patient Humboldt!

Anonymous said...

Anonymous said...
Why do you have to own your own home?

Thanks for sharing your perspective. Owning your own home gives a number of satisfactions that renting cannot.

First, if you own your own home, you never have to put up with a landlord again! That, to me, was a sweet reward.

Second, when you do pay off your home, you get to live in a really nice house, almost for free! It's like getting another paycheck every month.

But make no mistake, investing in a home is a big commitment. You need to have a steady job for one thing.

If you can swing it, it helps to have a big wad of money to draw on. That, or some generous and well-heeled parents. Read my earlier comments and you will see that I had neither. Just the steady job. And sometimes more than one.

It was a "long, hard slog" to quote one of my least favorite government employees.

But for me, it was definitely worth the effort.

The only thing that would make life sweeter is winning the Lottery so I could buy a Victorian in Noe Valley or high on one of those little mountain roads within San Francisco that nobody but me knows about. Such sweet dreams!

Greg said...

In Memory:

John Fitzgerald Kennedy

May 29, 1917 - November 22, 1963

Anonymous said...

Hank: Find a starter home under $200,000 in Eureka or Arcata. Not going to happen. And you will still need to show around $60,000 a year to qualify to buy that headache. In the 70's I made over $9 an hour at the mill and fixer uppers were around $30,000. Wages have stagnated the last few years. Talk to people around the county. See how many have not had raises in years. And yet the price of houses and goods are through the roof. Lots of people can afford them? I disagree. Most 20 year olds don't have the same opportunity to be home owners as people in the 70s through the 90's.

Anonymous said...

Thank you so much 8:11!!!

I am so sick of these puffed up journalist leeches who pretend to be part of the working class, then betray their own yuppie class consciousness when they pretend everyone is getting those blood-soaked real estate ad dollars rolling in. Hank Sims is just one example of a fourth estate detached from the reality of everyday people.

Hank Sims said...

8:11 --

Here you go.

And here.

And here.

And here.

And here.

And here.


I'm not saying it's easy to buy a home -- it's not. It was a whole lot easier in the '70s, that's for sure. But homeownership rates in Humboldt County are right around the California average -- maybe a little better.

Another thing: You don't have to show $60,000 per year to buy a $200,000 home. My wife and I certainly didn't -- we qualified for a grade-A Bank of America mortgage on one and a half less-than-impressive salaries.

My key point, though, is the misuse of the HAR affordability statistics, which is endemic in Humboldt County.

Anonymous said...

Well, you can buy a starter home in Rio Dell less expensively than Eureka or Arcata. Before you laugh, consider that McKinleyville
was once considered an undesirable place to live, mentioned as "Oklahoma my the Sea" in the SF Chronicle. Now people are moving to McKinleyville in droves.

Anonymous said...

Hank - bad dog, no doughnut!

you pulled a couple of shoe boxes out - some as big as trailers.

620 sq. wow, 900, wow...

The point is how are you going to put a family in the four or five houses you were able to find. And the fact that you found them was incredible... there are just a handful that are small, and unliveable fore a family -

People are still making 9 bucks an hour but housing has quadrupled in the last 10 years....

That is the point Hank -

I have a lot of admiration for you, but on this one you seem to have gotten your boxers in a bunch.

Anonymous said...

Considering the underground drug trade its rather easy to buy a home.

Hank Sims said...

Hey, there's some bigger houses in there! No. 5 is 1100 square feet. No. 3 is a whopping 1442 square feet. Bigger than my place!

And those weren't the only homes available under $200,000, either -- just a selection. You can search the MLS yourself, if you're interested. Just follow the link Richard provided in this post.

And 9:54 is right, too -- widen your search to include Rio Dell and you've got a bunch more options.

You're right that it would be impossible to do on a minimum-wage job, or anything close to it. But that's not the fault of Humboldt County -- that's a nationwide thing. A California-wide thing, especially.

Meanwhile, if you've got a $9 per hour job and you're looking to buy a home, why not take up Richard on his challenge and apply at the pulp mill? There's some damn good jobs available out there, apparently, but no one seems to want them.

Eric V. Kirk said...

Why do you have to own your own home? I live and rent in san francisco, and even with a healthy salary, I don't expect to buy a home anytime soon. And I don't want to. The housing market is overpriced, as in Humboldt. This trend will eventually lower prices to satisify the market. Maybe then I will venture into the homeowners circle.

Sorry, but barring a major recession, I don't think San Francisco housing prices are ever going to drop significantly. Hasn't happened in 20 years.

Eric V. Kirk said...
This comment has been removed by a blog administrator.
Anonymous said...

Why thank you Erwic for your comments!

Anonymous said...

Reality is what it is.

Learn its intricacies and take your choices.

Or ignore them and resent that Reality is not more to your liking.

"Where there is a Will there is a Way" is a maxim distilled from eons of human existence.

You want to buy? You can. You can find a way.

Anonymous said...

Try Susanville

Anonymous said...

Bravo's bashing KHSU, Wes Chesbro, and Rob Ammertwerp.


Anonymous said...

When considering which house to buy, remember: It is better to buy a small house in a good neighborhood than a mansion in a high-crime neighborhood.

samoasoftball said...

Hank: How long ago did you purchase your home? Couls you afford to buy it back from yourself now? The thing is, house prices here are out of control. My wife and I bought a fixer upper a few years ago for under $100,000 and now it is probably worth near $300,000. In other words, I could not afford to buy the house I currently own.(Well I could, but I am talking the average wage earner in Humboldt County could probably not afford the house they currently own in this housing market.)

Anonymous said...

Median price means that exactly half of the houses sold in the last year, sold for more than the median price and half of them sold for less.

So, if only 12% can afford the median priced home, that is not a good thing, it is a BAD thing. Affordability in California has plummeted in the last ten years, primarily because wages have not kept up with pricing.

Why have wages not kept up with pricing: primarily due to the limitation of available housing units. In states that have easily developable lands - Texas, Idaho, Iowa, the Carolinas etc. - all have housing prices in line with wages. Runaway home prices are a supply problem. Humboldt's supply problem comes from three major issues:
1) decrepit infrastructure,
2) uncertainly and delay in the entitlement process; and
3) the growing anti-development mindset in local politicians and bureaucrats.

Hank Sims said...

You're talking like Humboldt County is a little island off on its own in the middle of the Pacific Ocean.

There's been a boom in housing prices all over the state and all over the country. It makes the cover of Newsweek every six months or so. It's not a phenomenon unique to Humboldt County. So unless most every county in the nation has suddenly and simultaneously developed infrastructure problems, suffered from permitting delays and elected no-growth leaders, I think there's some holes in your analysis.

It's not a simple matter of supply and demand. It's a matter of supply and demand, but it's not simple. There's big, big macroeconomic factors to consider. It's ridiculous to blame the Board of Supervisors for the fact that the stock market tanked in 2000 and that people then moved their money into real estate. It's ridiculous and counterproductive to hold the City Council responsible for low interest rates, which made buying more affordable.

The best argument against your position is unfloding before your eyes, and has been doing so for about a year now. Home prices have flattened out and are starting to drop. It isn't the seller's market it was last year. Places are staying on the market for weeks and weeks, and owners are coming down on their prices. Real estate agents are starting to roll out the giveaways and sweepstakes again, because they've got to drum up business in a way that they haven't for some time now.

So, why is this? Did the county just build a whole big slew of new houses? No, it hasn't. The national market has cooled off. Interest rates have risen. People aren't buying homes as investments any more, because they know that now is the stupidest possible time to buy. That's all there is to it.

This isn't to say that the county doesn't have serious infrastructure problems -- it certainly does. But that's not a factor in this equation.

Richard: We bought in 2003 -- not the stupidest possible time, but fairly close to it. The bank says that our house has gone up about $70,000 since then, but I'm sure that's going to fall some. We couldn't buy it back from ourselves now, but that's mostly because we have kids now. If my wife and I were both working full-time, I'm sure we could swing it. And that would be on the combined salaries of a journalist and a teacher -- not the worst-paying jobs, but far from the best.

samoasoftball said...

Hank: Thanks for the input. You live on the peninsula right? Lets get together some time.

Anonymous said...

"Sorry, but barring a major recession, I don't think San Francisco housing prices are ever going to drop significantly. Hasn't happened in 20 years."

There is currently four residential high rises being built, ranging from35-55 stories. 1500 + units coming into the market in those buildings alone in the next year and a half. Depending on how desperate the developers are to turn over their investment, you could see an opportunity... especially if they don't sell quickly. The developers are already freaking out since the market has leveled off in the past year.

Hank Sims said...

Richard: Eureka. But let's get together anyway. No athletics, though!

Anonymous said...

Well, my analysis was done in about two and a half minutes… so there could be holes, but…

Certainly there are macro-issues that Humboldt is swept up into – like low interest rates. But low-interest rates do not typically drive up home prices significantly year after year after year. For example, say a family has $1,500 for housing (let’s ignore taxes and insurance). At 6% that will get them a $250k loan at 8% they get $200k. While $50k (25%) is a lot of upside, it should be an essentially a one time increase – the facts suggest that housing prices have moved up a heck of a lot more than that.

Stock market re-investment? In Humboldt county? In single family residential? not likely.

Housing prices throughout the state of California have risen much higher than other states because many communities share the same three issues that Humboldt does. So while Homboldt is not unique, that does not mean I was wrong.

Prices in Humboldt County are going down some … but not due to interest rates. Notice that “reasonable” priced homes are not going down – they continue to climb. Moderate priced homes are staying stable - the expensive homes are the ones going down (and dragging averages down). If your interest rate/investment theory were true wouldn’t it affect all house prices equally?

The fact is the wage/price imbalance is catching up to Humboldt County. People just cannot afford a $600,000 home. The trade-up market is tanking.

Previously you posted a list of affordable homes for sale in the area. If you divide the list price by the size of the home you would get a price per square foot number. In Humboldt it costs between $100 and $150 per SF to build a home plus the cost of the lot. If we don’t have a supply problem, those numbers should be in harmony – are they?

Hank Sims said...

OK -- you know what you're talking about, probably a lot more than I do. Let me make just one observation, then I'm off to bed.

You say it costs $100-150 per square foot to build a home in Humboldt County. At the same time, you hold that some of the teeny-tiny homes in the list I posted above are not adequate for a family (no real argument there).

So let's say that there's a building spree in Humboldt County, and builders are cranking out 1400 square foot homes by the dozen. So by your numbers, those homes are going to cost $140,000 to $210,000 to build. I assume that that's without the developer's profit figured in.

So how is a building spree going to make housing more affordable? The new homes are going to cost as much as the old ones, or more. If they don't, the builders aren't going to build them.

Hank Sims said...

Oops -- I missed the end of your post. So our new homes are going to cost $140,000 to $210,000, plus the developer's cut (I assume) and plus the cost of the lot. That's quite a bit of cash.

Anonymous said...

Oops -- I missed the end of your post. So our new homes are going to cost $140,000 to $210,000, plus the developer's cut (I assume) and plus the cost of the lot. That's quite a bit of cash.

WAIT just a cotton-pickin' minute.
Are you talkin' about buying NEW houses???? I thought you were talking about buying AFFORDABLE houses.

Fred said...

9:55 wrote, "I'll agree that times are tough...".

Seems to me I've been hearing people say that since I was old enough to understand what they were saying.

Anonymous said...

Hank - the developer's profit is built in to the $100 - $150 per SF. The lot SHOULD be 1/5 the current costs they are now. So a reasonable new 1,400 SF house should costs around $175,000 to $250,000.

Those are not the affordable homes per se... The homes that people move out of to move into the new homes - those are the affordable homes.

Hank Sims said...

The lot SHOULD be 1/5 the current costs they are now.

If wishes were horses...

Anonymous said...

100-150 per square foot is a very low figure, just for reference.

Anonymous said...

In 2004 I built a custom designed five bedroom home for $148.15 per square foot plus lot. Granite counter tops, tile floors, stainless steel appliances.

Anonymous said...

Natiowide lot prices represent about 15% of the home price. In California its closer to 20%. In Eureka it is closer to 33%. The lot prices SHOULD be much lower.

Hank Sims said...

You're talking about the California Coast, here. Don't expect land prices to track evenly with Booger Holler, Kentucky or Great Wasteland, N.D.

Supply and demand, you know.

samoasoftball said...

OK here is the challenge. What is the dollar figure for affordable housing? What % of your wages should be the set point to qualify to buy a home or rent for that purpose?

Anonymous said...

Fred said...
9:55 wrote, "I'll agree that times are tough...".

Seems to me I've been hearing people say that since I was old enough to understand what they were saying.
7:59 AM

Fred, That's because times are always tough for SOMEBODY...

Anonymous said...

9:55, I don't know where you are getting your info, but I am in the real estate business and your comments are erroneous. Show me the stats and tell me what the source of these numbers is. And by the way Richard, I've seen your fixer and it is not worth $300,000; closer to $200,000.

samoasoftball said...

8:59-The house across the street was on the Market for over $350,000 about the same size and mine has a bigger lot, and a house a few doors down went for $250,000 cash with no kitchen. So I was just speculating. I have not had it appraised.

Anonymous said...

Hank - I AM talking about Supply and Demand.

Humboldt County is not growing particularly fast – right? So it is not a demand problem. It is a supply issue. Please note my first comment “Runaway home prices are a supply problem.” Whether we live in “Booger Holler, Kentucky” or the California Coast, price is a function of supply and demand.

We know that in Humboldt that the demand is not outlandish – it is, in fact, moderate. The Supply issue is driven primarily by three things:
1) decrepit infrastructure,
2) uncertainly and delay in the entitlement process; and
3) the growing anti-development mindset in local politicians and bureaucrats.

If you have other reasons for rapid increase we have had, I'd love to discuss. Identifing our issues is the first step in solving them.

Anonymous said...

Oh 8:59 AM, being "in the real estate business" should give you some helpful knowledge - so...
How am I wrong?
What are the right facts?
Why do you beleive that homes have gone up so much in the few years?

With your superior knowledge, what should be do to moderate prices in Humboldt county.

Hank Sims said...

Richard -- I think the banks -- and the feds, too -- say that you should be spending about a third of your income on housing. So 33% of gross income = affordable housing.

4:05 -- Aha! Are you who I think you are?

You repeat those three factors of yours, and I'm simply not buying. Because those three factors would suggest that the problem lies solely in local factors, and it plainly doesn't, because: a) there's been a housing boom all across the nation and b) the housing boom locally is slowing down or reversing, and the three factors you name have remained constant. (Hey, some economists at HSU have written a paper on this -- maybe you're aware of it?)

I'm not arguing with the laws of economics, I just think that you're defining the model too narrowly -- you're not thinking macro enough. You're not taking capital markets into account. Housing prices can boom for the same reason stock markets boom -- people don't just buy homes to live in them, and that's true of people who only own one home, too. Houses are investments.

It's like Hernando de Soto says -- for most people, their homes represent their only significant source of capital. And when interest rates fall, you can make money by refinancing, or you can trade up and keep your same monthly payment. If there's a lot of people doing this, as there was for the last five years, prices start to rise. Housing become a very profitable investment, fueled by expectations of high returns, and more and more people want on the bandwagon. Landowners and simple homeowners both. Over the last three years, the amount of money that my wife and I have made at our jobs has been just about equal to the amount our home has appreciated. We saw that coming, and that's a big reason why we wanted in. Arbitrage for the masses.

Of course, there does reach a point when the whole thing goes pear-shaped. Things flatten, or you get another Tokyo crash, like is happening in L.A. right now. I don't think the bubble's going to burst like South Sea stocks in Humboldt County, but it's definitely leveling already, and your three factors have nothing to do with that.

Anonymous said...

Hank / Richard – most banks use a two-prong analysis – Your housing payment (Principle, Interest, Taxes and Insurance) cannot exceed the SMALLER of 30% of gross income or 50% of all debts (including house payments, car payments, credit cards, student loans, etc.).

Hank – perhaps you can identify me, you ARE an investigative reporter. :) We have met a couple of times and I once explained in great detail my displeasure with your decision to run an article (I was wrong but forced into my corner by others). E-mail me.

First, I never said the nationwide housing boom was caused by local factors. My thesis was (and still is) “Affordability in California has plummeted in the last ten years, primarily because wages have not kept up with pricing.” Its not that prices are increasing – it’s that wages are not keeping up. I am not talking about house prices going up – I am talking about people not being able to buy homes. Granted, I was not very clear on this in my second post.

Second, historically single family houses are a lousy investment – with the possible exception of the mortgage interest tax deduction. Even then, it is marginal. Your (and about half of the country’s) perspective is too limited here. We have enjoyed a boom since 1991 or so but the yield-curve is inverted.

Third, Hernando de Soto? Really? I am impressed. Have you read Sowell?

Fourth, and finally, my three factors are still the best reasons I can think of locally pricing vis-à-vis wages have turned so dramatically in Humboldt County over the last five years or so. If you look, I think you find if you measure “affordability” the entire county has not dramatically changed.

Hope your Thanksgiving was happy and full of turkey and football

Hank Sims said...

I once explained in great detail my displeasure with your decision to run an article...

But you were easily placated with ice cream.

samoasoftball said...

Hey: Thanks to all who comtributed time and effort to the answers! Even the wrong ones. It all comes down to my original premise, there are many less of our youth able to afford to buy a home than when I was in my 20's. The limitations are becoming way lopsided. And wages in Humboldt County are going nowhere.

Anonymous said...

"Second, historically single family houses are a lousy investment..."

Not for me. I made $450k on my last one. $200k on the one before that. But I either pay down a lot or pay cash.

samoasoftball said...

Here is some other information on this subject on the national level. Seems to relate to us though really.

Wealth Gap Swallows up American Dream

By Noelle Knox, USA TODAY

NAPLES, Fla. - In the luxurious neighborhood of Port Royal, home to the likes of mystery writer Janet Evanovich and mutual fund magnate John Donahue, homeowners are insulated from many of life's daily cares - including the real estate slump. This year, 15 estates in the country club community have sold for $5 million to $16 million. But in the rest of Collier County, home sales have plunged a gut-wrenching

Elsewhere across the USA, the megarich are still snapping up homes in such enclaves as Vail, Colo., and Beverly Hills, and often paying cash. Sales of homes above $5 million are up 11% this year and are on track to break another record, according to an analysis by DataQuick
Information Systems for USA TODAY. As for the national average, by
contrast, sales are off about 8%. Prices fell in September for a
second-consecutive month, partly because they'd soared beyond the reach of many.

The divergent housing trends are a sign of how a widening wealth gap is reshaping U.S. neighborhoods. In Naples, as in other areas, the
consequences of the growing divide between rich and working class are
increasingly visible. Residents here face "Not in My Backyard"
resistance to affordable housing, so workers live in distant suburbs
and towns, roads are jammed, and labor shortages unsettle the

In Naples, about 130 homes over $5 million are for sale. That's more
homes than the county will let Habitat for Humanity build this year.

"There's the rich, and then there's everything else, in terms of the economy but also in terms of social class," says Edward Wolff, a New York University professor and expert on the wealth gap. He likens it to the social divisions of the 1890s, adding: "If you don't counteract the extreme inequality trends, I see some social upheaval coming. That's my worst fear." The disparity in wealth could draw the scrutiny of the new Congress,
now led by Democrats. Rep. Barney Frank, D-Mass., who will head the
House Financial Services Committee, has said that addressing affordable housing is a top priority. Residents in Naples will tell you there's little friction between the haves and have-nots. But if you want to draw 500 people to a public meeting, just put affordable housing on the agenda, says Cormac Giblin,
manager of the county's housing and grants office.

Bill Earls, a real estate broker who lives in Port Royal, knows the
area needs affordable housing but says, "In the real high-end part of Naples, we don't want to see those 10,000 rooftops going in. We don't want to see our streets clogged. ... I don't want to see the Chevy Spectrums and Ford Focuses on our highways. I know we need them, but there's got to be a balance."

That attitude is not lost on Ezequiel Quiroz, a 27-year-old tow truck driver. Quiroz works six days a week to keep up with his mortgage in the working-class neighborhood of Golden Gate, 35 miles from the chic section of Naples.

'They make you feel like you're nothing' Asked if he's frustrated by the growing gap between rich and poor, he says: "No, but sometimes it bothers me that a lot of rich people look at you like you're nothing because you're not driving a BMW or expensive car. They make you feel like you're nothing."

He's not the only one who feels shunned.

"Unfortunately, (rich residents) don't want people like me, a
working-class person, living in their backyard," says Brian Settle, who works for NCH health care System, which runs the two hospitals in Naples. "They don't want firefighters, teachers. I don't understand that, because we are the infrastructure."

Settle says more than two dozen people have turned down jobs at the hospitals in the past year because they couldn't afford to live in the area, and 140 employees have moved out of the area.

The company rents 200 apartments for the nurses who work between
October and May, when the population of Naples swells by nearly 50% with the addition of "snowbirds," who live up North in summer.

"Naples is a beautiful place," Settle says, "but we have to provide reasonable-priced workforce housing, or the infrastructure of our community will crash."

The state of Florida estimates that Collier County, which includes Naples, has a shortage of at least 35,000 affordable homes. That's the estimated number of residents who spend 30% or more of their income on housing. It doesn't include the thousands who commute from the surrounding counties because they can't afford to live in Naples.

The lack of affordable housing in Naples has been magnified by growth - population has doubled in the past 15 years, to about 300,000 - and the real estate boom. Investors and vacation-home buyers helped drive up the median home price to $446,900, second-highest in Florida after the Keys. Though prices are falling a little, they're still too high for most people in the area. More than 80% of the workforce is employed in the four lowest-paying industries: construction, retail,
agriculture and services (pool cleaners, for instance, and golf
instructors). Median income for a family of four: $66,100. That would qualify you for only about a $350,000 house, nearly $100,000 below the median.

House rich, cash poor

Homeownership is the No. 1 source of wealth-building for middle and
lower classes, and the housing boom made millions of homeowners "house rich." But over the past five years, once you account for inflation, incomes for these groups are actually down. Many low- and moderate-income families are spending home equity just to maintain their lifestyles.
Nationwide, nearly 90% of homeowners who refinanced homes from July through September took cash out of their property - the highest level in 16 years, according to Freddie Mac.

And while rising home prices mean rising wealth, they also mean larger mortgages. For the middle class, the ratio of debt to net worth has nearly doubled since 2001 and is now in dangerous territory.

"The figures are astonishing," says Wolff, the NYU professor.

The number of homeowners who spend 30% or more of their income on
housing has jumped to 35%, up from 27% in 2000, leaving little or
nothing left to save. By contrast, incomes for the rich are rising,
protecting them from the downsides of real estate cycles.

"We've seen the prestige market go up when the rest of the market is
going down, and we've seen that market decline when the rest of the market was cooking," says John Karevoll, analyst with DataQuick. "These people are trying to figure out the best place to park their assets.
They are evaluating tax considerations, capital gains considerations and return on investment. They are not exposed to the normal real estate cycle like the rest of us."

There are three homes for sale in the USA for $100 million or more:
Donald Trump's estate ($125 million) in Palm Beach, Fla.; one near Aspen, Colo., owned by Saudi Arabian diplomat Prince Bandar bin Sultan ($135 million); and a third in Lake Tahoe, Calif. ($100 million), owned by Joel Horowitz, co-founder of Tommy Hilfiger.

And in 24 states and the District of Columbia, the top 20 properties on the market are all priced at $5 million or higher, according to the recently published magazine Unique Homes: State by State.

"We've had probably one of the strongest high-end runs we've ever had," says Stephen Shapiro of the Westside Estate Agency in Beverly Hills. He laments that there aren't enough homes over $7.5 million for sale. "There's a dramatic lack of inventory being chased by a lot of people
with money."

'Not in my backyard' politics

Each year, Habitat for Humanity in Collier County is inundated by about 1,500 applications from low-income families seeking the American dream. The non-profit has built about 100 homes a year in the area for the past five years, more than in any other county in the USA.

"The biggest impediment is the local politics," says Sam Durso, CEO of the local chapter of Habitat for Humanity. "The 'not in my backyard' attitude is what keeps people from building more affordable housing. We could build two to three times what we do, but we can't get enough land rezoned."

Dee Proehl, her longtime partner and their two children will move in January into a Habitat home, six miles from Port Royal, where she cleans several mansions. Her partner, George Cervantes, 41, is a forklift driver and dock master at Cedar Bay Yacht Club. Together, they make under $42,000 a year, and she has no health insurance.

"There's people who own businesses and own homes, and there's the
people who work for them - there's no in between," says Proehl, 42.
"It's frustrating. They want us here. They want us to do the work, but they don't want us to live here."

Yet some wealthier residents are starting to feel that the lack of
affordable housing is eroding their quality of life. Roads at rush hour look like parking lots. Restaurant service is slower. Checkout lines are longer because businesses can't find enough people willing to work
here. And companies that raise wages to lure job candidates usually pass the cost on to customers.

"For years it's been, 'Yeah, there's a problem, but it doesn't affect me personally,' " says Giblin, of the county's housing and grants office. "What we're finding now is, it's starting to affect the normal routines of the people who live in Naples and Collier County in terms of getting quality services."

Efforts to encourage the building of affordable housing have had
limited success. The county lets developers build more homes per acre if they include affordable housing as part of the project. Over five years, Collier County has added 5,000 affordably priced homes, including about 500 homes built by Habitat for Humanity.

County planners are considering changing the zoning to force developers to include some portion of workforce housing. That's likely to meet with fierce opposition from builders and residents.

Homeowners in Collier County pay the lowest property taxes in Florida. They want new residents to cover the cost burden that new homes impose on existing schools, roads and other facilities. So the county hits builders with a one-time charge of $30,000 in "impact fees" per house - the highest in the state. Those extra costs make it all but impossible for a traditional developer to build a home at a price a working-class family could afford.

"When you go to Kmart, and you've got 20 cash registers but only two
are open, it's not because Kmart wants to have the line 15-people
deep," Giblin says. "It's because they can't find people to work. It's starting to hit people in the face."

Contributing: Barbara Hansen

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