Friday, April 27, 2012

Noodling for April

Today is April 27, 2012, can you believe the year is one third done, finished, caputski? I, for one, felt that was enough for a whole year, not just 120 days (more or less). So, without elaborating anymore, and after giving an Italian salute, let’s jump into the miscellaneous stuff that has recently crossed my desk.

Apple “Live Long and Prosper”:

Apple has decided that they not only need to build a spaceship in California, they are no longer good enough to eat with the hoi polloi. They now have to have their own restaurant, off campus, so that employees can talk shop without being overheard – all Spy vs. Spy stuff if you ask me. While I am a fanatic Apple fan and geek, I am beginning to think that they are getting stranger and stranger as their stock climbs. (Click Here)  

Smart Growth is Getting Dumber
One of the great blog sites is, while it doesn’t seem to carry a political agenda, it does, and quite often, present stories that scream, “The emperor isn't wearing cothes!” In an early April article, Ed Braddy wrote an interesting piece on Maryland’s attempts to thwart the free market by developing Priorty Funding Areas (PFAs) as a way to control “rampant” growth and those pesky Maryland citizens who are essential richer than someone else. The intent of this still draft planning concept is to make it so expensive to own a home in a low density community that they will be impossible to develop. And at the same time they have created a “new” planning term that changes “high density,” a notorious “man the battlements phrase,” to “compact development,” whatever that is. (GO HERE)  

Trust Me: This Home Will Save You Money
The Feds in their extreme willingness to help us save ourselves are now offering loans to insulate, duct tape cracks, put in solar, replace heating and cooling systems and replace windows, all in an effort to reduce energy consumption and save the world. The agencies involved are FHA and Fannie Mae (don’t they have enough on their plate destroying the American Dream). Yes they are dangling cheap money in front of the home owner to improve the house and by doing so add value to the product. But the seas are troubled when it comes to understanding the home buyer. These buyers expect these energy efficiencies in the house, and are not willing to pay extra as many home builders are finding out. And the lenders and appraisers are also saying this as well, "we are not going to add value to a property just because it has solar and better windows". They expect it to be standard. Like air bags in cars, they are no longer an option. (GO HERE)

Home Sales Up
This from Builder Magazine, and I quote:
"Contract signings on existing-home sales were up in March, rising 4.1% on a monthly basis, according to data released today from the National Association of Realtors (NAR). The change brought NAR’s Pending Home Sales Index up four points to a reading of 101.4, 12.8% above its year-ago level." (GO HERE)  

And from this morning’s Wall Street Journal (and as always they are weeks behind this blog):
Bidding wars are starting for existing homes. And it’s in those states that had historic overbuilding, ah markets, ain;t they fun. This is the formula: No new homes divided by demand equals more money (NNH/D=$$$$). (GO HERE)

And lastly:
Cram Them In ‘till They Can’t Complain
One of my favorite demographers (everyone should have one), is Wendell Cox. He and Joel Kotkin have the uncanny ability to look at census numbers and “noodle” out tidbits and data that tend to glaze over most of us. Others use this data to justify their positions, Wendell just tells it like it is. In his second installment on California’s War on Suburbia,  and for a wealth of graphs and reality read his essay. (GOHERE)

Thursday, April 19, 2012

Location, Location, Location and the Bus

One hundred years ago the Van Sweringen brothers built Shaker Heights on the east side of Cleveland. This property, once owned by a Shaker religious colony, was developed into a new community with imaginative street layouts, parklands, and rigid design controls over the architecture and construction. It has been a very, very successful community since its inception, the address ranks with Scarsdale, Pacific Heights, and Beverly Hills as the place to live in their respective cities.

What was different about Shaker Heights was that the Van Sweringen’s built a railroad from their new community to downtown Cleveland to help market the properties to the downtown executive and it worked. When completed, as a part of the acquisition of a much larger railroad network, the community exploded through the 1920s until the slowdown of 1929.

This acquisition of the railroad, well beyond the track needed to reach downtown Cleveland, led to their development of the Terminal Tower. The Depression eventually bankrupted and destroyed the brothers. They died in their 50s broken and almost penniless.

Now back to the story.
“They built a railroad to serve their community,” I don’t know a single developer who would even consider the thought. Can you imagine the impact to areas like Gilroy and Tracy, California if the private side were to step up and extend BART to their communities? Well I can at least dream. But there has been a work-around that has interesting ramifications, for want of a better term, I’ll call it the Silicon Connection.

There has been a serious increase in home and residential values and rents in San Francisco near makeshift bus stops where private charter buses that serve Google, Apple and Facebook pick up San Francisco residents. KTVU, a Bay Area TV station, focused on the story (the 3:30 minutestory is HERE).
The techies get the best of both worlds, a cool job in Silicon Valley and the opportunity to live in San Francisco (your author lived there 20 fantastic years). Some may not even own a car.

It has also had a serious impact on home values near these stops, they have risen sharply against other SF properties far from these makeshift stops. For sale flyers even note how far the house is from a Google Stop. The buses follow the employees, when there is a critical mass – a bus may magically appear. Here is an older story about the buses (HERE).

But as with all things, there are those that don’t appreciate these buses. When there are hundreds of the Google buses roaming the freeways no one cares, when they come down your residential street, now that is a bus of a different color. All the green friendly excuses: fewer cars, mass transit, reduced congestion, and efficiency go out the window when the neighborhood has to deal with these machines. Go (HERE) for the other side, you might also check out the comments – there are a lot of techies that have anger issues and social disconnections out there.

The buses are pretty cool and very high tech themselves (GO HERE). 
And while regional transit systems continue to rely on Fed dollars and regional taxes, these buses are privately owned, respond to the customer’s needs, and do not use tax money. Whether the employer pays for the service or the user pays a percent of the cost is irrelevant. It is done outside of the realm of the public sector – but be careful, I can see cities and counties trying to get their noses under the tent.

Stay Tuned . . . .

Friday, April 13, 2012

It Bears Repeating – Housing Inflation Cometh

I have said it before and will say it again (count on it); we are in the preparatory stages of another price escalation in housing – a bubble cometh. While experts wring their collective hands over the number of foreclosures and empty homes (overhang) keep in mind that many of these are in marginal areas and often outside the last effective commuter ring – Indian Country I like to say (with no slight to the Indian Nations). Yes, there are examples everywhere, but when I hear from a fellow who owns a company buying up foreclosures and then renting them and he tells me he is mining the outer suburban edges then I understand Willie Sutton’s, “…because that’s where the money is!”

To reiterate a basic and fundamental economic maxims: Decreasing supplies result in increasing prices. Increasing supplies usually result in decreasing prices. If you cut through the sturm and drang of the last five years it is quite apparent, sure there are anomalies, but the underlying truth of the foreclosure issue is a lack of buyers – for many, many reasons. The least of them is the inability to get a loan.

The last five years has also brought about a biblical collapse of the housing industry. I know personally (they were clients) of at least five companies in Northern California that are gone, the owners either bankrupt or have retired. Others are barely surviving and none can get short term capital to restart and pull together the crews necessary to start over, at least right now.

“At least right now,” is the operative phrase. In time things will balance, they always do. But in the short term, which always has the most immediate effect on our quarterly driven economy we are looking at an interesting problem: The lack of an effective building industry to support the growing population of middle aged employees, who have jobs, good jobs, and are looking for a home. They are tired of apartments, condos, and even mom’s basement.

Again another old sop: All markets are local. So true, most areas of the Midwest never had a housing crises; they stayed fairly even and only escalated marginally, it was the Coasts where speculation and cheap money (real and political) drove the markets and produced the collapse we see (I know this is simplistic – What about home prices in Europe, Ireland, or the Balkens? – Yes, I agree, the human species is an interesting organism). But in reality the housing market is a local issue and from what I have been reading and hearing (anecdotal and digital), areas of southern California are seeing asking prices getting premiums – sometimes with 20 to 30 backup offers, all over the asking price. In the tonier areas around Silicon Valley it is expected that a good house will get 20% and even 30% bumps over the asking price. There is almost no new detached single family housing under construction in Santa Clara County and San Mateo County – only dense attached apartments and townhomes. And even the townhomes and condos are getting premiums.

I will continue to rail against cities that resist housing and push it elsewhere by preventing housing from being built in their own towns – that was one reason for the push of single family housing builders into the Central Valley and Inland Empires of California. Builders will go where life is easier and potentially more profitable. I know of one small parcel of land in Mill Valley, California, with a maximum of maybe twenty units that is in its sixth year of approvals. Well, the consolation may be that it missed one good market, one great market, one disastrous market, and is primed for the next good market. Ah, the life of a builder!

We will see escalating home prices in both the existing and new home markets, especially in urban areas such as the first and second suburban rings outside of San Diego, Los Angeles, San Jose and San Francisco. And a lot sooner than the “experts” say. We will begin to see the first real price increases in the spring of next year, and since we have NO significant amounts of single family homes under any type planning or design or approval (which can take three to five years to accomplish) look for this problem to escalate even faster. We could be faced with another bubble in housing, this time supply and demand driven, by early 2014, especially if it becomes a political issue.

Stay tuned . . . . .

Friday, April 6, 2012

The Top Ten Porta-Potties

What is it with this love of listing the top ten anythings in America? I just don’t get it. I ran across an article this week (HERE) that listed the best cities for raising kids, because like a good transient American, once you have a few of the rug rabbits you will move just to make the little munchkins and your life better. I really doubt it.

Grand Rapids was listed as the best, now I’ve been to Grand Rapids and yes it is pleasant (I have relatives who lived there, once), but please. Is it the best place in the whole country for families? It sits in the middle of the one of the most depressed economic regions in the country with some of the highest taxes, highest unemployment (which I heard was improving), and winters that are well just - winter. The article justifies their rankings but I just wonder. The next two are Boise, Idaho and Provo, Utah (well out of most normal air and interstate highway connections), and both are urban islands in the middle of huge tracks of desert and are far removed from denser coastal areas.

Following Provo are Youngstown, Ohio and Raleigh, North Carolina. The article states if you want excitement go to New York or Chicago. If you want glitz and glamour go to Miami. But if you to get home early enough to see the kids (I think most commutes in these cities are three minutes), and the value of your home never collapsed due to the bubble – then again it didn’t go up with the bubble either, and if you like the quiet life when you retire because your kids have escaped to the big city, these towns are for you. And please comment below, can’t wait to hear your justifications.

CNN just posted today their 10 Fastest Growing US Cities:
  • Charlotte, N.C. (Nice town)
  • Raleigh, N.C.
  • Cape Coral, Fla.
  • Provo, Utah (again!)
  • Austin, Texas
  • Las Vegas (no, really?)
  • McAllen, Texas (you have got to be kidding)
  • Knoxville, Tenn. (my niece just moved there)
  • Greenville, S.C.
  • San Antonio, Texas (just don’t get it!)
With the exception of Austin and maybe Charlotte why would anyone uproot themselves to move to any of these places? And Las Vegas, it just beggars the mind.

But back to listing the five or ten Bests of Somethings (BOS). I have compiled my own list of city and urban top five’s, I tried to do ten but I was usually stumped after five, so here they are:

BOS towns for bagels:
  • Manhattan
  • Brooklyn
  • The Bronx
  • Staten Island
  • Miami
(do you see the common thread?)
BOS cities known for their reduction in front-yard lawns:
  • Phoenix
  • Scottsdale
  • Albuquerque
  • Manhattan
  • Yuma

BOS  Five communities for peace and quiet (GO HERE)
  • Sun City, Arizona
  • The Villages, Florida
  • Mesquite, Nevada
  • Any Del Webb – Pulte community
  • Grand Rapids, Michigan (see above)
BOS Cities with the best sidewalks:
  • New York City – most anywhere
  • Chicago’s Michigan Ave. and near Northside
  • Boston’s Faneuil Hall Marketplace Area
  • Scottsdale, Az. and Kierland Commons and Scottsdale Quarter (except for the crossing at N. Scottsdale Road
  • San Jose’s Santana Row
  • South Beach, Miami
  • Santa Barbara, Ca.
  • Savanna, Georgia
  • Seattle, Wash – some areas are just great
  • Washington D.C. Pennsylvania Ave. 
 (and why do most start with S?)

Not included:
  • Rodeo Drive – Please, should be renamed Rodeo Dive
  • Market Street, San Francisco – ongoing disaster after spending millions
  • Las Vegas – cluttered and almost dysfunctional – that’s why it’s fun
Every week we are bombarded with these lists. Top ten: Billionaires, Cars, Cruise lines, restaurants, colleges, and many, many others. But there are Top Ten lists that can’t be compiled: Politicians, Porta-potties, Lotteries, and Cold Callers. You might think about your own top ten’s, worth a conversation over a glass of wine. BTW, what’s your favorite top ten wines?

Stay Tuned . . . .