Small Cities Weekly | 08.04.2023
The housing finance edition
As part of the work we are doing on the Small City Segment, we send out a brief weekly post of thoughts and links that reflect the week’s work. I’d love to hear from you if you have any thoughts, questions, disagreements, or things to add! And please forward this on to people you think might enjoy reading it.
Thoughts
As part of the research that went into our latest Problem Profile on small dollar mortgages (see below for link), I had the chance to talk to someone from the NYU Furman Center’s Local Housing Solutions group. They do a lot of work in housing policy and are one of the few groups who has a practice specifically dedicated to small and mid-size cities. From their website:
While housing needs in larger and coastal cities receive the most national attention, small and midsize cities—those with populations between 50,000 and 500,000—face their own array of complex housing challenges—from disinvestment and concentrated poverty to housing instability and affordability gaps.
Small and midsize cities are ripe for innovation. Smaller cities can be more nimble and less encumbered by bureaucracy than their large city peers, and better able to engage higher levels of leadership, gain visibility for promising strategies, and build trust and engagement with the wider community.
It’s really interesting to me how not only the mechanics and barriers of affordable housing are different in these cities, but also how different policy is. We are lucky in South Bend to have a city government that is doing a lot in this area - from releasing open-source, pre-approved home plans to decrease development costs to subsidizing utility connections to decrease new home construction costs on vacant lots. In most places, people are looking at how government and regulations have gotten in the way of building new housing. In smaller cities, governments are commonly actively supporting new construction. This creates a really interesting environment for founders because there is an environment is already in place for innovation - we just need the people to create them.
Links
Problem Profile: Mortgage Economics at the Edge, Dustin Mix
Known for their affordability, small city housing markets are usually looked at with envy by those in big cities. For the most part, this is true. But oddly enough, affordability can also be a curse. When housing gets too affordable, the mortgage system and its economic incentives break down and people with lower-middle incomes struggle to take advantage of the affordability that everyone else covets.
Not to talk our own book too much here, but this week we released our first Problem Profile, looking at how affordable housing can become inaccessible because of how the mortgage market works. Look for more profiles on housing and other topics to come!
Indiana and Midwest Take Top Slots in WSJ/Realtor.com Housing Index, Wall Street Journal
“Buyers continue to zone in on affordable areas,” said economists at Realtor.com in an analysis. “While the market has slowed, it has not come to a full stop.”
People are moving to the Lafayette metro area, which has about 225,000 residents, because of its strong job market, said Tamara House, a real-estate agent at Re/Max at the Crossing in Lafayette.…
The median home-sale price in Indiana’s Tippecanoe County, which includes Lafayette, was $292,000 in June, up 10.5% from a year earlier, according to the Indiana Association of Realtors. The national median existing-home sales price in June was $410,200.
On the topic of housing, a number of small cities showed up this week in the news for the strength of its housing market. But as you can see, even with strong demand, these markets still come in under the median national sales prices.
The Massive Shift Underway in the US Banking System, Odd Lots Podcast
“When Silicon Valley Bank imploded, there was a lot of talk about the future of regional and community banks in the United States. Can they compete with the large, too-big-to-fail institutions? What will happen to their deposits and their cost of capital? But actually the challenges facing smaller banks long precede March's banking drama. Tensions have been building for years, and will likely continue to do so, even if things have stabilized over the last few months.”
If there are banks that can make moves in things like small dollar mortgages or small business lending, they are most likely going to be regional and community banks. As the banking world continues to change, this is a great 30,000 foot view of what’s happening within their walls.
If you…
are interested in building for the small city segment…
are already building for the small city segment…
know someone who might be/should be building for the small city segment…
want to contribute expertise to problem profiles…
or want to help us expand our networks of trust in small cities…
please subscribe and reach out at dustin@invanti.co.