Housing 2014

This time of year every national newspaper and trade magazine or journal spits out facts about housing: its recent sordid past, its numbers, and its future. They will write what they write and since every housing market is local it really doesn't mean a thing to most Americans that builders can't find land in north San Diego, or the tiny size of new apartments in New York City, or the dearth of affordable housing in San Francisco. I can assure you that someone in Des Moines doesn't give a rat's pittutty about the rent of an apartment in the City by the Bay, it only makes them smug.

The old reliables are still there, growth of the population, the shifting of population to more southerly locations, the push out of cities into the suburbs (yes, that is the truth, check out Kotkin's and Cox's work), and for some urban markets increased pressure on the housing base – witness San Francisco and the desire by the young techies who want the urban lifestyle yet work thirty miles south in Silicon Valley. As I said housing is local, kind of.

But there are trends in the overall market that should be considered. The following are some thoughts on three of the critical issues facing the general housing market, take them for what they are.

Land

They ain't make any more of it. But forty acres outside of Denver is a lot different than one acre in Santa Monica. The underlying cost of a housing unit is land, but the critical issue is the market and availability. What can the market support? For the better part forty years there has been a gradual, and often with voter approval and bonds, removal of the land from the housing marketplace for parks, wetlands, conservation areas, mitigations, and even aesthetics. Each lost acre forces up the price of another acre. As an example there are tens of thousands of acres of developable land between Oakland and Concord, California but most is now locked into parks and open space. This pushes growth into the Central Valley where farmland is lost. Ones man's scenic view is worth more than orchard or field of corn.

The Baby Boomer Generation

This is a huge opportunity for creative developers. Millions of men and women are sitting on trillions of dollars of equity in their homes waiting for the right moment to move out and "retire." But there is nothing available in their specific market. Here is what they (or I) want: 1850 to 2400 square feet, ground floor master bedroom, highly amenitized interior, good to great suburban neighborhood, garage, security, minimal yard (but good private facilities), and affordable monthly dues/HOA. It is a market that is very underserved in most regions.

Affordable Housing

If there is one glaring debacle that has contributed to the housing crises in the urban marketplace it is the creative use of the fiction called affordable housing (AF). Pass a law to fix a market problem created by the politicians themselves. Everyone feels good, except for the people trying to find a home. It is now so deeply ingrained in the business model of housing that it can probably never be extracted. The most affordable home is an existing home in most urban markets. And to put an existing home on the market requires another home to be built in the same market – usually at a higher price. All well and good, except when a highly subsidized AF comes on the market that directly competes with the existing housing stock. Often that AF is subsidized with fees placed on other non-AF units (adding to their cost), it is given priority in the approval process (time and money), and is targeted at particular markets or economic sectors (approved discrimination). In the long run the housing stock of a region suffers, prices increase, housing becomes unavailable, but I'm happy to say everyone feels so much better. One lasting impact is that the development community walks away from the production of inexpensive and affordable housing. There was a time when this was a good market to build in, now its avoided and left to the quasi-public non-profits, the cities and their whims and agencies, and the cradle to grave attitude of many city and sate governments.

Stay Tuned . . . . . . the next year will be very interesting!

Noodling Housing, Detroit, and Where America is Moving

Return to “Normal” in Housing

Are we there yet? This seems to be the tag line for almost every optimistic article about the current national trends in new home sales (old homes sales, too). This article is a good snap-shot (remember those from the pre-pixel age).

Housing Market Recovery Accelerating, Now 47% Back to Normal

And What is Normal?

In this article the authors point to a doubling of new home sales from their current level, “in the next several years.” And interesting prophecy, I throw a challenge here because there is a significant lack of planning going on to support the availability of new housing in the near future (three years or less, especially in California). It takes at least three years to plan and receive final approval for any project over one acre in size, especially if near any existing residential developments. I suggest the authors are dreaming and as a result prices will steadily climb.

New Home Sales and Distressing Gap

The 10 Most Expensive Cities to Buy a Home

My guess this is not one of the most expensive cities.

This article, and I really love these, lists the 10 cities with the highest home prices, the author notes that only two cities are not in (close to bankrupt) California. Go figure. Now as a man who believes in the marketplace and the all things supply and demand, I’m not surprised. Yet, it is a head-scratcher and you wonder either how sustainable it is in the long term, or how depressive to business it is in the short term (housing costs vs. wages).

GO HERE  and  HERE

Detroit

With everyone trying to tell Detroit what to do (and creating rancor and fear as a result), the residents are trying their best to confront the do-gooders and intellectuals using Detroit as an urban blank canvas. “Clear homes, make way for the future!” would scare any property owner hanging on by a thread. This brilliant article lays out many of the issues and planning teams involved with Detroit’s future, yet one thing is very apparent, change and rebirth will come from the bottom up, not like 20th Century planning, that forced change, hard and brutal change, from the top down.

Mapping Motown

Where Are We Going and Where Are We From?

Newgeography.com is one of my favorite urban blogs. With the talent of Joel Kotkin, Wendell Cox, and other guests it has become a touchstone on the current state of cities across the world. In this article by Kotkin, he challenges all the warm and fuzzy notions of the northeastern cities and lays out, in almost painful ways, the real changes to America that are underway. It is well worth the read and please continue to follow newgeography.com.

Where Americans Are Moving

 

Stay Tuned . . . . .

Home is Where the Heart Is

A Typical California Land Abuser

In last week’s newgeography (HERE) Wendell Cox pointed out that a survey taken by TD Bank (HERE) found that 84% of 18 to 34 year olds want to own their own home, and since that dream is impossible in most urban markets, that also means they want to move to and/or live in the suburbs. That crying you hear are the true-believers who honestly believe that the world will come to an end if we continue in our profligate suburban adventures. These crybabies currently run the California senate and assembly and have brought us all the fun laws such as SB 375 et all. This law is an attempt to push housing (i.e. Californians) into denser and denser neighborhoods, thus justifying fears about sprawl, inefficient mass transit, and air pollution. How any of these can be deflected by passing a law without forcing the costs of growth to rise is a head-scratcher.

Housing should not be an experiment. California cities and counties for almost a hundred years have been doing a reasonable job of managing growth and development. With very few exceptions they have dealt with the changes and the demands that success has forced on them by a growing population, delightful climate, energetic citizens and innovative companies. Now the state wants to have its say. And it’s scary.

While the current housing market is troubled, it is only temporary. The housing overhang is reducing and there is an obvious shift in choices by the residents, but you cannot allow the graph curve to drive long term policy. While apartments are currently in demand – that won’t be forever. Just like single family housing that was overbuilt for any number of real or imagined reasons, the curve will change. Markets are funny that way. But to pass laws based on a spot on a graph curve is just plain wrong. That means at some point later, on the same curve, another law will need to be passed to correct the earlier mistake. But then again that’s what politics is all about, I guess.

I have seen reports that the younger citizens want apartments and then they don’t, they want to live in the cities and then they don’t, they are staying single and they’re not. Mortgages scare them and they don’t. The Baby Boomers are moving out and no one can afford their homes, huge crises. Boomers are staying put and putting a strain on housing availability. Apartment prices are climbing and so are rents, then again fifty miles away they are not. The younger generation, in small towns, is leaving but then again when was that a new concept? To think you can lay a blanket of law over all this is not just foolish, but expensively foolish.

Growth is critical to small towns even when they fight it. A community cannot age in place like its residents; it must continue to reinvigorate itself. We all share in the benefits that our communities develop, theaters, libraries, farmers markets, street fairs, organized sports for kids and adults, senior facilities and the like. But the community must continue to evolve and accept changes in the marketplace. When the all-knowing state government comes in to make you change to their idea of Utopia, then we all have problems. Who does the community need to please – the state or the local resident? It also means that these state planners have too much time, staff, and money on their hands. A small step toward a more balanced budget?

Stay Tuned . . . .