A new report from bond rating agency Standard & Poors says the finances of the nation’s largest cities should be able to withstand the housing slump. Yes, I know, S&P has been criticized for not calling all the trouble in subprime mortgages early enough. The report does have some surprising stats about the nation’s largest cities.
Did you know that 80% of the nation’s 301 million residents live in urban areas? About 10% live in the ten largest cities. That’s despite the fact that three of the largest saw their populations shrink over the past three decades—Chicago, down 5% to 2.8 million people, Philadelphia, down 14% to 1.4 million and Detroit, ouch, down 27% to 870,000.
Contrast that with Phoenix, whose population is up 91% to 1.5 million. San Antonio’s is up 65% to 1.3 million and San Jose (who knew they were even in the top ten?) up 47% to 929,000.
S&P notes that although all cities are impacted by housing price declines, each city varies in the amount of money it generates from property taxes. Dallas, for example, gets 42% of its municipal revenue from property taxes; Philadelphia, just 6%. Moreover, cities in California may not be hurt as much as one would think because increases in home appraisals have been limited under the state’s famous Proposition 13.
The report concludes that most of the big cities should weather the housing bust. Among big cities, Phoenix has probably seen the biggest drop in home prices and sales, but S&P concludes that previous conservative municipal management coupled with recent action by officials there to trim spending should allow Phoenix to maintain its triple A credit rating. That’s the highest rating among the big cities (another surprise there).
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.