NOODLING AROUND

It Comes as No Surprise:

The Wall Street Journal posted a delightful article (for me), about Los Angeleans and their belief in the world as their own entitlement oyster. It seems that Los Angeles International Airport (LAX) has literally begun to pull the plug on free parking for electric cars. Up until very recently you could park your Leafy-tesla-volter in one of their charging stations for FREE for 30 days. The whole article is simply about very rich people (you have to be to afford one of these cars) who feel entitled to all the joys of free parking, free access to HOV lanes, and subsidies from the government. What the problem is now is that there is not enough free parking, well welcome to the real world. CLICK HERE

  

Ada Louise Huxtable (March 21, 1921 – January 7, 2013)

When I was at Michigan State University so many decades ago, we were introduced to Ms. Huxtable’s critical writings on the great architects of the time, Mies van der Rohe, Frank Lloyd Wright, Minoru Yamasaki, and many others. She, along with other critics of the time, helped to form our opinions and beliefs about architecture and urban environments. Her columns in the New York Times left little in the new architecture unchallenged. For some architects she was like their mother looking over their shoulder, always demanding the best and pointing out the insufficient. She and her pen will be missed. CLICK HERE  

Can Housing Get Us Out of Our Mess?

Housing has never been this affordable. Prices have dropped significantly over the past four years (for those not paying attention), mortgage rates are at historic lows, and there is increasing pressure from rising rents. The result is that ownership of single family housing is again on the rise. Contrary to all the doom-and-gloomers who predicted the end of ownership housing as we knew it, it’s making its way back. Good article here in the Washington Post from earlier this week. CLICK HERE

The Premature Declaration of Death

Way back in the early 1990s I was told that master planned communities (MPCs) were dead, too expensive, environmental burdens were too much, infrastructure costs pushed profitability over the edge of reason – especially in California. Then they arose from the grave, then in 2007 fell back into the hole and dirt was being thrown on the body, especially in California. In this post by RCLCO Advisory, they list the top-selling master planned communities across the United States. While the total numbers are less than 2% of the total for new homes built last year, it still shows a trend. This trend is that there are bright spots across the country for MPCs. Of the top 20 communities, 9 are in Texas (Why is it always Texas?), 5 in Florida (the #1 is the huge The Villages senior community), 3 in Nevada (yes, the worst housing market in the U.S.) and the remaining are in Washington D.C., Colorado, and one in California, the huge Irvine Ranch now in its 53rd year (so hardly a new MPC). So nothing in California, totally understandable and predictable – and will be for a long time. CLICK HERE  

Stay Tuned . . . . . .

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 . . . . .