Thursday, February 23, 2012

Noodling Housing

A lot of news has passed over my desk regarding housing, on both national and local (California) levels. Some good, some questionable, and some just head-scratchers. The engine that will drive this economy out of its depression is housing and construction. I posted numerous blogs about this subject during the past year and it’s this collapse that has been the basis for much our ruin. And as I’ve also stated: “All aspects of the industry from development, consumers, and financials, bear responsibly.” I’m reminded of the story on the news recently where we are listening, teary eyed, to the tragic foreclosure of a single mother’s house.  But it does lose some heart-tugging when she does admit she took out hundreds of thousands of dollars in “equity,” for what, I’m not sure. But it certainly wasn’t a predatory lender that made her do it. But I digress, and here we go.

Home Prices Drop and When will They Stop
To be honest, it will stop when there is some balance in the market and foreclosures have reverted to norm. We are continuing to experience a market where 35% of sales are either foreclosures or short sales. We will see ongoing foreclosures for the next year – at least that’s my take. With no pressure on the upside, prices will drop until they can’t (a wise economist said that). Go HERE for a good look at the overall market nationally.

This is also a good update on the foreclosure activity from a usual good source.

It Takes a Tree to Build a House
I came across the following diagram that shows in a diagrammatic tree the current state of the housing market – while more than enough questions arise from terms such as “others” and the source itself, Goldman Sachs, it’s still a beginning point (HERE)

Housing Break Down by Goldman Sachs
Sympathy for the Suburbs
Diana Lind wrote an interesting essay on the suburbs for Next American City (HERE). She goes after the current exhibit at the Museum of Modern Art (MoMA) in NYC entitled Foreclosed. The idea of an exhibit on the suburbs by a bunch of New Yorkers is actually quite silly, but that didn’t stop them from putting it on. But then again the fearsome social experiment of the suburbs scares most urban dwellers. It’s those evil single family dwellers who brought down the economy, not the arrogant Wall Streeter’s. In the article Diana, quite rightly, points out the naivety and ignorance of the teams with regards to the suburbs. I suggest that you click on the various highlights in the Next American City article to get a fuller understanding. It is one of the best essays to attack those that know the least about the subject, good job Diana Lind. This is one of their answers to the troubles in suburbia, kind of humorous in a scary way.

 Use the Right-of-Way, Why not?

A Head Scratcher – Affordable Housing  - Its Time Has Passed
With the cost housing dropping and becoming more than affordable why is it that city’s still insist on an affordable housing component in a project – this is especially true in Northern California (where it is 82 degrees today). It has gotten to the point where a builder has to provide affordable units that are MORE expensive than a comparable unit in the same neighborhood. In Donna Kimura’s article (HERE)  all of this readjusting in the marketplace isn’t happening. Affordability is getting worse and worse and is in dire straits (liked the band though). Sheila Crowley, president of the National Low Income Housing Coalition (NLIHC) is in full, protect my job mode, when she states that the millions whose incomes are so low and whose housing costs are so high that all it would take is a few days out of work with a sick child to push them into homelessness. It isn’t an issue of cheap/affordable housing, the issue is who is providing the housing. It is also an issue of income. With housing more than 35% lower in some areas and even lower in others, affordability isn’t the issue.

Enough for now, I could go on and on. But I'm seeing some bright things beginning to show in the denser urban markets of the Bay Area, and in some of the senior housing markets as well. This last market is faced with a growing and needful market of Baby Boomers. 

This is a shot of the latest “suburban project” that we are doing with KB Home in Pleasanton, Ca. Other than the stairs (three stories over garage) they are quite nice.

KB Home In Pleasanton, California

Stay tuned . . . .

Friday, February 17, 2012

How Big is Big Enough?

If there is one on-going issue of debate it is how large should a housing unit be? The pejorative term “McMansion” certainly says one thing and efficiency studio says another. But what is the right size? To be very honest, I’m not sure anyone knows.

The Home is the Man's/Woman's Castle
I was watching Dr. Zhivago last night and the issue of space became a political moment. As Zhivago returns with stolen wood for the fire, he is faced with the political reality of their home being seized by the Party to house the homeless. At that time, five people to one room was the standard residential model, if you didn’t like it, you could be shot. Nice, I can see the marketing brochure. Spacious one room studio, toilet near, heating optional, minimum four persons per unit.

We have come a long way since those days of the glorious revolution. I’m reminded of their excellent city planning concepts and the endless rows of concrete monoliths. I think at that point the density had been reduced to 3 people per room - progress.

Now it seems everyone is concerned about their neighbor’s house and how big it is. When my father bought his first home in 1955, it was about 850 square feet (for 4 people – Soviet statistics wanting) In the 1970s the average new home size was about 1500 square feet. By 2009 it was about 2600 square feet. It has lowered a bit, according to the National Association of Home Builders. Or has it? Almost one third of new homes have at least three baths, most had three car garages, half are now two stories (more I think to smaller lots than the need for height), and it goes without saying more bedrooms. All this while the average size of the family has gone down.

The prices are also down substantially from 2006 (well, duh), from about $305,000 to $274,400. More house, less money – it’s the market stupid. The trend says that bigger homes are in demand, and of course with the current historically low interest rates, why not. My planning mantra has been for years; “The home buyer wants the biggest house on the biggest lot they can afford.” Fairly simple.

Now as we burn through the housing overhang (insider speech for too many homes - not enough buyers), the trends we see in new homes will set the standards for the next ten years. In an article I read, this was attributable:“more to do with who was buying than with overall consumer tastes.” HERE  And how does the writer know that? These days I don’t believe the home buyers is that naïve and in fact I would say the opposite – and most are opportunists. Buy now (low), sell later (higher) – again, duh! But it is a leap of faith.

That home in Park Forest, Illinois that my father purchased (and added the first garage and fireplace on the street), is still there. It sells today for about $65,000 ($76.47 per square foot). The average home price today is $242,300 for about 2600 square feet ($93.20 per square foot). The “McMansion” with its 4000 square feet is selling in many markets for about $350,000 ($87.50 per square foot). It’s all in the square footage. A good website to get the overall thrust of home pricing since 1963 is HERE.

Or is this their castles?
Much of all this hub-bub about size is about envy and wealth (I won’t go into the other reasons where size is concerned and the same goes a Porsche). It’s also up there with the attack on success and wealth. When the buyer has options, and today he has more than in many past years, they will exercise those options and purchase more wisely that they have in the past. It’s a phase, I know we will return to the norm sometime in the future (for good or bad), but as always the home building industry is critical to the future growth of the US economy. It is one thing that can’t be outsourced (no matter how hard they’ve tried).

Stay tuned . . . .

Friday, February 10, 2012

New Urbanist Melange

It’s time for my annual “Bait the New Urbanists” blog (see header above). For those new to the urban scene, the New Urbanist is an urban planner (and those of like mind), who believes in the scripture proposed and adopted at the 1991 conference at the Ahwahnee Hotel in Yosemite Valley (HERE). These principles became the constitution for the soon to be formed Congress for New Urbanism (HERE). Its urban standard bearer is the elite and very exclusive community Seaside, Florida. Another community is Mountain House near Tracy, California. Mountain House has the distinction of being a community with one of the highest foreclosure and failure rates in the United States. I guess the concept of New Urbanism includes all forms of housing and development.

During this crisis in housing there is much blame and fault to go around. Greed has a lot of admirers: banks, home owners, cities, state governments, and speculators just to name a few. The New Urbanist believes that through an innovative and far reaching program of community and regional planning, all the ills of community growth will go away. The Congress for New Urbanism’s call to the battlement is this:
We advocate the restructuring of public policy and development practices to support the following principles: neighborhoods should be diverse in use and population; communities should be designed for the pedestrian and transit as well as the car; cities and towns should be shaped by physically defined and universally accessible public spaces and community institutions; urban places should be framed by architecture and landscape design that celebrate local history, climate, ecology, and building practice.
All warm and fuzzy isn’t it, and naïve. Reminds me of the phrase “I’m from the government and I’m here to help.”

From this initial statement and along with the principles, significant mischief has crept into innumerable governmental zoning and general plan changes. They are heavily involved with California High Speed Rail. The Vision California report issued on state wide land use planning and the rail’s impact on the state (HERE) was written by members of this group. They have pushed through draconian Design Guidelines in cities across the country that now control every aspect of a city’s zoning, street design, and even the size of a home’s porch. And during the past twenty years thousands of young pliable city planners, architects, and urban designers have read the works of Andres Duhany, Peter Calthorpe, Daniel Solomon, and Peter Katz (The New Urbanism, Toward an Architecture of Community). There was a time where not one issue of Architectural Record or Urban Land would arrive without some glowing article about the newest and greatest Urbanist neighborhood. They even cowed and coopted the Urban Land Institute.

But where are they now? In a market where builders and developers needed planners, they lived well, now not so much. In a time when governments were flush, they cajoled and inveigled their way about. Now they live for grants and hopeful federal monies. They like all us in the design professions have been decimated. Past glories and awards are trumpeted, yet the dream for a master planned America has fallen short. And I, as a Decentrist planner, am saddened but sheepish. Americans are more rough and tumble sorts of fellows; leave me to my own devices, my own ideals, my own way. Cute communities with high fees and managers looking over my rear yard fence are not for me; roundabouts are foreign conspiracies, front porches are very nice, but give me a bigger back yard. My garage isn’t just for my truck, it’s my shop and public storage unit. Life is hard enough without rules on where to live, not just how.

While many of the principles are wise and for the most part common sense, it is the overall theme of control that bothers me. The belief in regional planning on such a scale that the power of small towns is swallowed up and lost. The belief that a small group of public employees can properly drive the future of regions and cities is foolish and scary (i.e. The Great Society, Pruitt Igoe, Mountain House). I like the confused and messy aspects of the planning process. It riles up the neighbors, gets them out the house once and while, and gets them to peek into the stew that their officials are cooking up. The one great fear about this New Urbanist ethic is that “we will take care of you, no need to look in the pot, trust us –we are here to help.”

Stay Tuned . . . .

Thursday, February 2, 2012

Noodling Housing, Redevelopment and Gehery

It’s The Market Stupid
I always wonder about politicians, then again don’t we all. We listen to their speeches, announcements, and pronouncements and shake our collective heads. Either I’m just not getting it or they are as dumb as a box-of-rocks. In an effort to wave a federal wand and change the course of housing, banks, financing and apple pie; President Obama is escalating the fight over how to revive the housing market. But one critic Paul J. Miller, a bank analyst at FBR Capital Markets in Arlington, Virginia, said that while it doesn’t “have a prayer in hell of passing,” the proposal may help Obama score political points. A bank tax is “bad public policy, but it’s populism at its highest,” he said. So there you have it, Damn the torpedoes, full steam ahead. GO HERE   for the story. My hero Ludwig von Mises must be chortling in his grave. I repeat again, “The market is supreme.” You can’t legislate, cajole, bribe, or intimidate the market; it will ignore you and do what is in ITS own best interest. Ask the Soviet Union, China, solar power makers, electric car builders, and Apple acolytes.

The Law of Unintended Consequences
California Governor Jerry Brown must be all puffed with pride over his flaying and gutting the redevelopment districts of California. With the Democratic Assembly and Senate with Supreme Court acquiescence he was able to eliminate these bothersome agencies. But they may still rue the day. They were shut down, I think for a number of reasons: 1) No politician understood them, 2) For the most part they were successful in helping cities move forward, 3) They had huge bags of money hidden under the floorboards. For a couple of perspectives GO HERE for an article in the Wall Street and HERE for a southern California viewpoint.

Builders Survive – But is it Slow Suicide?
Builder Magazine states the obvious regarding the current condition of home builders at the start of 2012. Their survey which poles 345 readers, who represent a hard-core (or hard-headed) set of survivors, “all united by a resolve to carry on.” GO HERE to get up-to-date on the latest. A builder is quoted: “I do all the work: sales, bills, marketing, management, and field work. Sixteen-hour to 18-hour days just to pay the bills. NO PROFIT.” Wrote another, “Nobody gets a salary any more.” And, I ask, why wouldn’t you just go to Hawaii and wait it out?

A Voice of Sanity – I Think
In a January ruling the Alameda County Superior Court ruled that the Bay Area Air Quality Management District’s guidance regarding the mitigation of air quality issues for new development was clearly in violation of California’s environmental quality act. These guidelines were challenged by a group led by the Center for Creative Land Recycling (a group I have never  heard of). The new guidelines would have made it even more difficult (as hard as that is to believe) to get a project approved in the Bay Area. GO HERE and HERE 

Frank Lloyd Wright’s Doghouse
To show that he wasn’t just one of America’s greatest architects, FLW took a commission to design a doghouse for a client’s son. It’s now in a movie and a book. In 1956, Jim Berger ask the architect for a favor, please design a doghouse for his black lab, “Which would be easy to build (unheard of in FLW’s vocabulary) and would go with our house.” GO HERE   for the complete story. I wonder if it too, leaked? BTW, I wonder what Frank Gehery’s dog house would look like?
"Dog House" Architect Frank Gehery
Stay tuned . . . .