The Reality of Pent Up Demand

What if you threw a party and everyone shows up. On Saturday (July 18^th) I was shocked. To be honest it was more than a shock, it was a total smack upside the head. For those who have doubted the reality of the marketplace and the demands that high prices and low production have on housing, only had to be with me at the Trilogy Vineyards community in Brentwood, California. What happened Saturday was more than just an open house, it was a full-fledged storming of the castle and taking siege.

Background

Trilogy at the Vineyards (GO HERE) is a resort type active adult master planned development about forty miles east of San Francisco. It sits near the Sacramento River (five miles north), within the eastern hills below Mt. Diablo, and is about an hour and a half from Sacramento, and an hour from Stockton. My land planning and landscape architecture firm has been working with Shea Homes (parent of the Trilogy brand) for more than ten years on the project. The community’s market is about fifteen million people that stretches from Santa Clara County to Sacramento County (and in reality, much farther). The community has a first class clubhouse and recreation facility, great tracts of vineyards that roll right up to the back doors of the homes as well as extensive olive groves – one could believe they are in Tuscany.

The Opening

For the last three months Trilogy Vineyards (Go HERE) has been marketing their new models (at least five new plans designed around the active adult market)—single story with a master down, high-end fixtures and appliances, well decorated, and considering the Bay Area market – very reasonable ($650,000 to $900,000). Extensive on-air radio time was purchased and even Masterpiece Theater on Sunday evenings was not missed.

I don’t have the final numbers but by the time I arrived at 12:15 Saturday more than 1500 people had arrived (or more) and my guess is that more than 4,000 prospective buyers or interested parties walked through the complex that afternoon. It was also an event that showed off Brentwood, the medical clinics and emergency services, restaurants, local cultural, to dispel the rumors about living out in the far reaches of the Bay Area. A first class job all around.

The active adult (over 55 but really over 65) is a rich market both literally and figuratively. We/they are all in the same boat: How do I get the equity out of my home and still remain in the region and not be required to live in some dumpy little 1,200 s.f. apartment with a bunch of whiney thirty-somethings living next door. We/they deserve better and this is the type of project that may appeal to us/them. The turnout seemed to prove this. While the conversion rate may be low, the exposure is unbelievable.

The active adult residential market that is in dire need of expansion and growth. The impact of the these types of projects roll through the residential marketplace, these projects usually free up housing stock that is closer to jobs and urban centers. This market—the baby boomer—has longs legs and will be growing for the next ten to fifteen years. It’s time that more builders get on board.

Stay Tuned . . . . . . . . . . .

The Rise of the Parklet

A new and innovative urban design solution looking for a problem is underway in many cities from San Francisco to Philadelphia—the parklet. They have also found a place in Brazil and elsewhere. They are nothing more than taking back the street from the car, one parking stall at a time.

This all started (or so claimed) in 2005 when a San Francisco design company took over a parking stall (by feeding the meters all day) and installing a pop-up park with maybe 176 square feet of sod, benches, and boxed trees. From this radical event it grew nationally until 2010 when San Francisco completed its first permanent parklet (and accompanying manuals, guidelines, and nascent bureaucracy). A revolution began and cities nationwide began exploring opportunities in their downtowns and high traffic areas.

This was not without some concern by local businesses afraid to lose that one stall right in front of their door. But cities used an interesting tactic; if the business (usually a coffee shop or deli) was willing to “own” the parklet, they could use it to expand their customer seats and directly affect their bottom line. Some businesses have even offered to pay for the upgrades and improvements. Costs can run all over the place, from remedial projects that cost $15,000 to sophisticated parklets that can run two or three times that amount. Actually there is no limited to cost, only the imagination.

The visual impact on the street depends on the design, the more vertical the better. The most critical design control is the street itself. To be a legitimate parklet, the street paving and drainage remains intact. To start removing asphalt and realigning curbs changes the result to a sidewalk improvement not a parklet. The goal is to be cost effective while also dramatically changing the streets look and add to the pedestrian’s experience. Amenities have included planter boxes, pots filled with annual color, tables and chairs, benches, trellises, shade screens—the list is almost endless.

Some are sleek and modern, others funky and very, very temporary looking, some have used salvage bins with a bench crafted into the side, others have used shipping containers (cut-in windows and doors). One was offered as a mini-golf course. Their primary reason is to increase and expand the pedestrian use of the street.

During the last hundred years the automobile has increasingly demand more and more of the right of way. Wider lanes, bike lanes, on street delivery zones, higher and higher parking rates, it has been a constant war between motorists, bicyclists, and pedestrians. And the car is winning—for now.

The climate on the West Coast and the South favors the permanent installations of parklets. In snowy regions greater concern is warranted and may require more temporary parklet solutions that get setup each spring and removed in the fall. One distracted snowplow operator can do a lot of damage.

The urban street a tough place. So much going on, so much to offer, so much to lose. The more we can enliven and “activate” the sidewalk and storefronts, the better the downtown.

Stay Tuned . . . . . . .

Little Boxes Stacked Neatly in Piles

Mission Rock, San Francisco

If there is one thing the world is not short of these days is shipping containers. I even wrote a thriller about them a few years back. They are the most ubiquitous “thing” of the late twentieth and twenty-first centuries. Originally it was an idea of Malcom McLean to use standardized boxes to carry goods from one port to another (first ship was his Ideal X) 

The idea wasn’t exactly new but it was McLean and his personal drive that made it change the world. Everything that has to deal with international cargo changed that day—April 26, 1956—when the Ideal X sailed from New York to Houston, everything. Ship designs grew to incredible sizes and demands. Whole railroad systems were redesigned to handle the containers (they would be stacked higher if existing railroad tunnels were taller). Los Angeles built a below grade railroad “river” from Long Beach out of the LA basin. Freeways are now being widened to handle the influx at ports and at gateways around port cities (Altamont Pass in eastern SF/Oakland Bay Area). Shipping channels are dug deeper every ten years to accommodate these massive ships. Even the Panama Canal is being widened to allow for better east-west trade by the bigger ships (with very significant changes to international trade as a result). There are 5-6 millions of these boxes moving around the world at any one time (probably more). As many as 10,000 fall in to the oceans every year (yes, the rumors of running shoes on the beaches of Oregon are true).

So, what about architecture? These boxes are designed to be stacked up to 12 high on board a container ship (with appropriate rail supports), on land they are usually maxed out a 7 boxes high. These boxes normally come in three basic sizes, but the variations seem to be endless. The basic unit is 8-foot wide by 8’-6” high and 20 feet long. They can also be 40 feet long and 56 feet long (and a world of other sizes as well). They are steel frames with corrugated panel sides. They are dry, refrigerated, some air tight and sealed, others barely hold themselves together after few years of use. Guesses are there are maybe 17 million plus around the world on ships, rails, stacked in piles, and in backyards. Who would have thought of all this in 1956?

Now back to architecture. Wikipedia lists at least 40 things you can do with these structures, everything from housing foundations to Starbucks stores.   Their use is only limited by imagination—even cost of rehab is not an issue. Remember, we are saving the planet. Back in the 1960s Moshe Safdie designed his famous Habitat 67 in Montreal; while that was all precast bocks of concrete, one can easily see the transition to shipping containers. 

Habitat 67 - Montreal

The latest idea is what the San Francisco Giants are doing in the Mission Rock area of the city – a pop-up shipping container village with restaurants, bars, and shops in one of the city’s most exciting revitalized neighborhoods. And it is also directly across McCovy Cove from AT&T Ballpark (the home to our World Series champs). It is also an opportunity to tune up the city for the Giants long-term development project on this same piece of land.

Last week I wrote about shopping malls, here is an example of a temporary mall built after the tragic Christchurch, New Zealand earthquake in 2011.

Christchurch, New Zealand

Temporary Mall, Christchurch, New Zealand

This is not the first nor will it be the last container town. I imagine in some third world cities there are whole villages of these boxes. Even refugee camps (this one in Turkey for Syrians). 

Konteynir Refugee Camp, Turkey

They are trying to survive; we are just trying to be chic.

Stay tuned . . . . . . . .

A RARE SIGHTING

IN SAN FRANCISCO THESE RENTS ARE  TRIPLED 

I saw something last week that has been rarer than a republican in California, a model home sales center. And not just one, but eight of these nearly extinct complexes and all in the same master planned development. And to top it off, the project, Mountain House, was once the poster child of poor planning, speculative buying, and rapacious development. East of Oakland, California and next to Tracy and in the same county as Stockton, Mountain House is the first master planned community a home hunter finds when they climb the Altamont summit on I-580 and enter the Central Valley. Four years ago it was a community of foreclosures, dead lawns, and single-family rentals – now it’s building hundreds of new homes, and adding schools and parks.

Such is the story of the past decade – bust, boom, bust, and now rebirth. The Bay Area has suffered through these cycles, but with less affect than the communities in the Central Valley. The growth of industries in Silicon Valley, the usual transient migrations in and out of San Francisco, and the slow growth attitude of most Bay Area cities actually contributed to reducing these impacts of the last five years. Yes, there were foreclosures and a total shut done of the homebuilding industry, but values held better than most other regions (New York and Washington D.C. excepted).

But values for new and old homes have now gone through the proverbial roof.

Case in point:

We owned a home in San Francisco for more than ten years. It was a delightful 900 square foot cottage on the city’s southwest side. Built in 1926, it had wonderful floors, lath and plaster, solid foundation, just great for a first home. And it was unlike most of the homes in San Francisco, it was on a detached lot. We paid about $80,000 in 1979 – by national standards three times the price in Chicago or Iowa. After all it’s California. Ten years later we sold it for four times the price. I chanced googling the house a few months back – it was on the market for $1,050,000. True, and to make it even more hysterical, nothing had changed in the house, the kitchen was exactly the same as when we sold it in 1990. And so was the small single bathroom, the small bedrooms (2), the one car garage, and the one extra room I added in the basement. It had not even been painted. That’s how bad things have now gotten in San Francisco. A thousand units are built each year (hopefully), when 5,000 are needed. The housing stock is aging with little to no replacement and at the insane price for a 900 sf house, no one will buy, tear down, and replace.

So the pressure on the existing housing stock continues to build and prices rise beyond reason. Now Bay Area rents have gotten to a point where the monthly would allow you to buy a new home – in Mountain House. I have seen this movie before and it did not end well.

Stay tuned . . . . . . . . . .

To Buy or Rent—Now That Is a Question

I remember when I was in my late twenties the one thing I wanted most was to own a home. My wife had always rented so she, while understanding, was somewhat ambivalent. I persisted and just after we turned thirty we bought our first home in… San Francisco. Yes, the small town on the west coast where home price are now totally and completely nuts. In fact the home we purchased in 1979 was recently sold for 11.66 times the price we paid—yes, totally insanity. (In fact, no improvements have been made to the house since we sold it in 1990, now that’s sad  on many levels.)

But we, like millions of other across the United States, have weathered the ups and downs and the vagaries of the housing marketplace and survived, and most have prospered. Much of our collective net worth is in that humble assembly of stick and stucco. Our hopeful retirement fund is not in some stack of bonds and stocks, but covered by a new composite roof. Such is the state of the financial world in the United States. Much of the rest of the world is confused by this American institution—considering that to pay rent is the norm—not home ownership.

So why aren’t home sales bursting through the roof? There are more potential buyers out there than at any time since the years following World War II. They are wealthier (or have access to family capital), they find that interest rates are incredible low (more than half what we paid in 1979), and depending on the region, reasonably priced.

Some say it’s the amount of debt that the under thirty crowd carries over from college. This may be true. Some say it’s the fear of what they and their families have just gone through during the Great Recession; this may also be true. And some say the culture has changed, ownership means being tied down, beholding to a bank and to sticks and bricks. This may also be true. My guess is it’s all of these and more.

There are changes in automobile ownership; reports are that some in the younger generation are opting out of buying a car. They rent one when they need one—other than that they take the bus or the train. For some this is a smart move—we all certainly know the costs of car ownership. In fact there is a growing trend of renting everything among the youth—thus reducing the baggage that we older types carry around with us. They may be into something here, but this also leads to not saving. And not saving leads to having little left at the end of the month and the end of the year, and most especially the start of retirement.

It is very hard to put your finger on the problem, as this Wall Street Journal article on renters pointed out yesterday. There it is stated that the real reason for not purchasing is lack of money (down payment), income, and debt. I’m shocked; in more than thirty years the reasons for not buying a home are exactly the same reasons we were faced with. Much of what happened in the Naughty Aughties when the government, banks, and builders foolishly messed with market forces and over built, over lended, and then over extended themselves and came very close to collapsing the economy, is now being averted. Steady pacing of construction, more prudent lending, more stringent controls for loan qualifications, and renting will do more to quite economic fears than any government program.

Stay tuned . . . . . . . . .