As more of the Sub Prime debacle is revealed, one has to wonder if Yelm is going to be left “holding the bag” with a glut of unsold homes, as these stories make our approved developments look like very risky ventures!

The Washington Post explains in this story on WHY BUYING A HOME WITH 0 DOWN IS OVER!
“Home buyers again need their own money to close a deal.
Lenders faced with growing piles of bad loans, even to borrowers once considered good credit risks, have clamped down on the no-money-down mortgage. The abrupt shift threatens to dash the hopes of millions of potential buyers, especially those shopping for their first homes.
Four out of 10 first-time buyers used no-down-payment mortgages in 2005 and 2006, according to surveys by the National Association of Realtors. But some lenders are now scrapping such loans completely. Others are pickier about who gets them. All figure that the more cash borrowers put down, the less likely they are to default.

Truthout investigates declining productivity as a gauge of a downturn in the economy:
“Economy Goes From Bad to Worse
For most of this decade, progressive economists have said the economy was growing fine, but typical workers were not benefiting because income was being redistributed upward. We can no longer say this.

The Commerce Department revised its growth data last month. It now shows the economy grew much slower over the last three years than we had previously thought. In particular, the new data implies productivity has been growing at just a 1.5 percent annual rate over the last three years. This is the same rate the economy experienced during the long productivity slowdown from 1973 to 1995. It is a full percentage point below the 2.5 percent growth rate from 1995 to 2004.

While productivity may be an alien concept to most people, it is the most important determinant of our standard of living. Productivity measures the value of the goods and services an average worker produces in an hour of work. The standard of living for different segments of the population (e.g., school teachers and hedge fund managers) will depend on how output is distributed, but if the economy is not very productive, then we don’t have very much to distribute….

The fact productivity growth has now slowed is a very bad sign. It means the economy is not doing well by any measure. The argument for conservative economic policy was always that by giving people more incentive to work and invest, productivity would grow more rapidly, and that this would benefit everyone in the long run. It turns out, even with the massive upward redistribution of income over the last quarter century, productivity is now growing at its slowest pace in the post-war period. In short, we are not seeing much growth and the growth we are seeing is going to those at the top.”

Business Week says,
Builders Helped Fuel Mortgage Mess
“Elizabeth and Armando Motto are living a real estate nightmare with a new breed of monster: the big homebuilder as lender. In November, 2005, the couple, who have four children, agreed to pay $540,000 for a newly built three-bedroom house in suburban Clarksburg, Md., near Washington, D.C. Rather than send them to a bank, the builder, Beazer Homes USA Inc., offered to provide a mortgage itself in an arrangement of the sort that helped fuel the long housing boom across the country.”

USA Today reports that consumer spending is down,
“Consumer spending growth slumped in June, while the construction sector was pulled down by the dreary housing market. Inflation, however, was muted and wage growth was steady, according to a slew of data released Tuesday [July 31]…
The Commerce Department said consumer spending rose just 0.1% in June, the most anemic pace in nine months. That followed a 0.6% rise in May and a strong performance earlier in the year.”

Let’s add all of this up:
1. As reported here previously, Yelm is out of water and is not a sure thing for some developers.
2. Zero down mortgages are gone, meaning buyers must put cash down.
3. Builders fueled the mortgage mess with their unwise credit issuance.
4. Tahoma Terra to build 1,200 homes, with Thurston Highlands proposed 5,000 homes.
5. Consumer spending is way off.
6. As reported here on July 26th, Yelm Community Development Director Beck told the City Council that the Hearing Examiner instructed the city their traffic figures for the Tahoma Terra phases needed to be combined, and in doing so, Tahoma Terra’s Longmire artery in now a failed road, which feeds onto another LOS F road, Yelm Ave. West.

YIKES!

If I were a developer in Yelm right now, I would be just a little bit nervous!
The City of Yelm would be wise to play very conservative what they perceive as their potential tax revenue from new homes, as they enter into their 2008 budget planning next month.

And, since the City has no contract with its largest developer in using taxpayer money to fund a private developer’s water study, what assurances do the taxpayers of Yelm have that this developer will repay the city, especially if they withdraw from the project?
See this blog on December 18, 2006 & June 26, 2006 for more details on this.

The brakes slowing this unbridled growth here may be at hand, and no thanks owed to city leaders for that!