Flat report on housing may signal a slowdown

July 19, 2005, 11:53PM

Associated Press
WASHINGTON - Construction of new homes and apartments showed no change in June after a decline the month before, with weakness in every part of the country except the South.

Analysts said June's weaker-than-expected performance could be a sign that the red-hot housing market is finally starting to cool a bit. But they said any slowdown was likely to be gradual as long as mortgage rates do not rise too rapidly.

The Commerce Department reported Tuesday that builders broke ground on 2 million new homes and apartments in June at a seasonally adjusted annual rate, exactly the same pace as in May.

Private economists had been expecting a small rise in construction activity in June.

A cooling of the housing market would be welcome news for those who had begun to worry that the country was developing a dangerous housing bubble similar to the speculative bubble that developed in the stock market in the late 1990s.

But economists said they did not expect any precipitous drop in housing activity, given that mortgage rates, which have started to rise, still remain at extremely attractive levels.

Despite the flat housing report, Wall Street got a lift when Merrill Lynch & Co. and other businesses beat earnings expectations.

The Nasdaq composite index hit a high for the year as the market anticipated after-the-close earnings reports from Yahoo and Juniper Networks.

But it was the earnings reports from IBM and Merrill that reassured investors Tuesday after disappointing earnings from Citigroup on Monday halted three weeks of stock market gains.

The tech-dominated Nasdaq rose 28.31, or 1.32 percent, to 2,173.18, while the Dow Jones industrial average rose 71.57, or 0.68 percent, to 10,646.56.

The Standard & Poor's 500 index rose 8.22, or 0.67 percent, to 1,229.35.

Bonds rose, and the dollar was up against other major currencies in European trading. Gold prices were unchanged.

There goes the neighborhood

July 10, 2005, 4:03PM

What's the difference between a historic house and an empty lot?
In Houston, it's 90 days.
By LISA GRAY
Copyright 2005 Houston Chronicle

Yes, the house's new owner, Barry Norman, told the city commission, he knew he was buying property in a historic neighborhood, the Old Sixth Ward. But he had no intention of keeping the little Queen Anne cottage that stood at 1814 Lubbock since 1885. In fact, he was applying for permission to tear it down.

On the lot, Norman and his wife, Maria Isabel, proposed to build an aggressively modern house out of concrete block, metal and Hardiplank siding. Isabel, an architectural designer, had drawn up the plans herself.

With its tallest point (a meditation tower) at 49 feet 9 inches, the new house would loom over its one-story neighbors, blocking their views of nearby downtown. Though the neighbors' porches hug the sidewalk -- the old-fashioned setback is only 10 feet -- the new house would hang back 17 feet and more, creating an unsettling gap. And to the pretty street, the house would present a blank face: a wooden fence and the door to a garage big enough to accommodate five cars and the couple's RV.

Isabel and Norman's dream house would be, to say the least, very different from the dilapidated 1885 cottage currently on the lot. That cottage was built by Urbain Valentine, a son of Peter Valentine, the Houston valet of university founder William Marsh Rice (and no, not the one who famously murdered Rice in New York). When Rice retired to New York, he left his elderly Houston valet a large sum in appreciation for years of service. Peter Valentine died soon after, and his widow divided the money among their six children. Urbain Valentine used his share to set up housekeeping in what was then a middle-class neighborhood.

Neighbors admit that the Valentine house is tiny and greatly in need of work -- much like the previous incarnations of houses that some of them have turned into showplaces. Last year, neighborhood resident Charles Stava's house won the national restoration contest sponsored by Victorian Homes magazine; this fall, his house will be featured on HGTV's If These Walls Could Talk. Two houses in the 1800 block of Lubbock proudly display plaques declaring them to be in the National Register of Historic Places; with restoration work, the Valentine house could also qualify
Norman's plan spooked the neighbors, who described it with phrases such as "monstrosity," "McMansion on steroids" and "defeating the principles of good architecture." They worried about their own property values. Most of all, they worried about their neighborhood, a laid-back, friendly place, proud of its distinctiveness.

The Old Sixth Ward is only six blocks at its longest point -- smaller than a Wal-Mart parking lot, neighborhood association president Larissa Lindsay notes -- so a blow to one of its best-preserved streets would hurt deeply.

In 1997, more than two-thirds of the Old Sixth Ward's property owners signed a petition to have it designated a City of Houston Historic District. That designation gave the neighborhood the toughest preservation defenses in all of Houston, tougher even than the neighborhood's listing on the National Register of Historic Districts. Which is to say: not much at all.

The neighborhood's last line of defense against the Norman house was the Houston Archaeological and Historical Commission, which rules on the appropriateness of permit-requiring alterations to officially recognized historic properties. At its June 3 meeting, Thomas McWhorter of the Greater Houston Preservation Alliance noted that though Norman's proposed house might be appropriate in many Houston neighborhoods, it would wreak havoc on the Sixth Ward. McWhorter pointed out that the city recognizes only seven historic districts, some as small as a single cul-de-sac. Taken together, they make up far less than 1 percent of the city's land. Norman's dream house would fit much better almost anywhere in that other 99 percent, he noted. Why not go there?

Lynn Edmundson of Historic Houston also railed against Norman's plan. Randy Pace, the city's preservation officer, judged that Norman's request to demolish the Valentine house was inappropriate in every category the commission considers. All seven members voted to deny the request.

The board deployed what its legal counsel advised was the strongest weapon in its arsenal: a 90-day delay for Norman's demolition permit. "If somebody is determined to be an obnoxious neighbor," explained chair Texas Anderson, "there is precious little we can do."

On Sept. 2, Norman and Isabel will be free to raze the house. "I want to get the neighborhood cleaned up," says Isabel, who likes the Old Sixth Ward for its proximity to downtown, Memorial Park and Buffalo Bayou. "Right now that lot is full of bums. People come and put trash there. Cleaning it up -- that's my thing. The historical movement, it's not my bag."

Isabel says instead of demolishing the Valentine house, she'd prefer to have someone move it. So far, though, no one has been willing to accept the hefty expenses: replacing the house's floor joists, cutting the entire house in half, removing its roof and maneuvering the pieces around the large palm tree in the front yard. Norman and Isabel plan to preserve the palm tree.

Houston preservationists have grown used to losing battles like this one. The city's ordinances make other outcomes unlikely.

Houston's preservation laws are among the weakest in the country. Other relatively young cities, such as Seattle and Los Angeles, have far more stringent laws -- as do other cities in regulation-hating Texas.

"When we'd tell people in other cities about our ordinance, they would laugh," remembers Edmondson.

"It used to be that Houston and Dallas were always at the bottom of every list," says Bart Truxillo, a member of the Houston Archaeological and Historical Commission. "But Dallas got smart 10 years ago." In Dallas, the board that reviews proposed changes to historic neighborhoods has the power to kill a proposal like Norman's. And in Dallas, an owner willing to rehab in a historic district near downtown could receive up to a 100 percent abatement of city taxes for 10 years.

Why is Houston so careless with its history? The city prides itself on being a place where individual freedom trumps everything else, says architectural historian Stephen Fox, a fellow of the Anchorage Foundation of Texas. "It's our economic niche," he says. "We're a place where people make their own rules, where no one can tell them what to do. That idea has become Houston's identity."

That attitude, says Anderson, a Realtor, dates back to the Allen brothers, the real-estate speculators who founded Houston: "Move ahead. Do what's new. To heck with the past."

Lindsay, the neighborhood association president, points out that boom times pose special dangers for historic neighborhoods. As property values soar, Harris County's tax assessor tries to keep the valuations of existing properties relatively constant so that homeowners aren't forced out of their houses.

That part is great, Lindsay says. The catch comes in the way the tax assessor keeps the valuation stable. The assessor raises the value of the land -- and lowers the value of the house sitting on top of that land by an equal amount. On paper, the houses plummet in value precisely as fast as the land beneath them grows more valuable.

What bank, asks Lindsay, would give a home-improvement loan to someone with a $20,000 house sitting on a $275,000 piece of land? Strapped, existing owners are often forced to sell their land rather than remodel their bathrooms. Potential buyers then confront expensive land with houses in desperate need of maintenance.

Bureaucratic kinks like that determine the future of houses, and the future of houses adds up to the future of a neighborhood -- and, some argue, to the future of an entire region.

In his much-discussed book The Rise of the Creative Class, Richard Florida asserts that in the global economy, cities that thrive are those that attract knowledge workers, the highly educated, highly mobile people high-wage companies compete to hire. Those talented people, he says, gravitate toward distinctive places -- quite often historic neighborhoods. Encourage the right habitat for those people, argues Florida, and your city's economy will thrive.

Preserving the Valentine house would also make sense for the neighborhood as a whole. Norman and Isabel's future neighbors worry that as their views are blocked and Lubbock Street loses its charm, property values along the whole street will sink.

Rehabbing the beat-up little Valentine house might even make dollars-and-cents sense for Norman and Isabel. Stava points out that well-restored houses in the neighborhood have sold for $150 per square foot -- among the highest prices in Houston. Currently, he says, three Old Sixth Ward houses are on the market for prices hovering around $500,000.

Anderson doubts that Norman and Isabel's new house will turn out to be a good investment: "We've seen developers try that, building big, new-looking things in old neighborhoods. People don't want to buy those. They look wrong."

Lindsay is one of about a half-dozen Old Sixth Ward residents who devote a large chunk of their lives to protecting its character. "None of us have kids," she explains, "so we have time to scream and yell. We scream and yell a lot. That's why the neighborhood is still standing."

Every Monday morning, she goes online to check for building and demolition permits. She signs starchy letters to Realtors who market historic houses as teardowns. To more sympathetic Realtors, she offers to chat with potential clients, to help sell them on the joys of owning an old house in the Sixth Ward.

"This place has a history," Lindsay explains. "It's a place that's alive. I want people to understand that -- what it's like to live in a place that's not cookie-cutter. And to know that when it's gone, it's gone. It doesn't come back."

A few weeks ago, after hearing that the Valentine house was doomed, Lindsay ran into another of the neighborhood's activists. "How are we going to save the neighborhood?" Lindsay asked.

"Do you think we can save the neighborhood?" her friend replied.

"We have to," said Lindsay. "We just have to."