The Latest and Confusing Housing Reports

Trying to track the ups and downs of the housing market is like handicapping the various races for president. Whose up, whose down, and why—place your bets, chumps. It’s all a jumble of meddling politicians, social correctiveness (the new politically correct), flat interest rates, job migration, oil prices, NIMBYism, millennials, boomers, college debt, and Fannie-Mae and Freddie-Mac (who do control the loan market – look HERE).

The following articles are some of the more interesting articles of the last few weeks that deal with this whole “roof over my head” issue. Remember that the days of “market rate” housing are gone; in some areas more than a third of a home’s cost (and more) can be attributed directly and indirectly to local entitlement and underlying land costs. To believe that the housing market responds to the supply and  demand theories of the last century are well, so last century.

Apartments:

Who’s really renting? Good discussion HERE on the renters that are populating the new apartment complexes.

Labor:

The Wall Street Journal noted that one of the biggest problems in the housing construction is labor – seems that when those Mexicans went home they took their abilities with them – they have not come back (HERE for a different look). 

Also HERE,  for a take on the impact of this shortage of construction workers.

Housing Starts UP and DOWN – Whatever

It seems that every week we get hit with the latest in housing stats from somewhere – and even during the same week they have different conclusions. Take your pick:

Here’s the New York Times’ take: U.S. Housing Starts Increasein September:  

And the Wall Street Journal: Home Construction Rebounds AmidSurge in Multifamily Units:

Next month they will both print some form of a retraction.

And HERE'S what the impact is on housing stocks.

And Home Prices Keep Rising – One Reason:

If you have to provide one subsidized unit (affordable) for every ten approved units, isn’t it fair to believe that every one of those free-market units is now more expensive? I assure you the builder is not going to eat the difference no matter how big his heart. Affordable housing hurts everyone, but it wrong to believe that – GO HERE on Portland, Maine’s latest move (Portland, Oregon did something like this years ago). 

And in San Francisco they are still leading from the rear, HERE:

And it’s not YOUR fault:

When it comes to buying the consumer has no clue, they can’t make correct and appropriate decisions, obviously we need the government to step in, or so says Noble Prize winning economist, Robert Shiller HERE . 

But then again there are few other economists that would argue his point – i.e. Ludwig von Mises for one.

And it’s not your fault either – Part 2, 

Apartment builders should have thought about the THIS change:

And now we have to think about the new paradigm: On-Line Shopping. Where do apartments store and then deliver packages to their tenants? Should new homes have more secure exterior package drop-offs - HERE?

Stay Tuned . . . . . .

NIMBYS AND BANANAS

It seems that at some point in an urban blogger's career they must list the essential acronyms that plague the development process. Most have become overused and as such have lost their required impact of derision and ridicule. And yet others have been sown onto flags and banners and waved at public hearings.

Now I enjoy a good acronym as much as the next person. With texting, we get all sorts with OMG, LOL, BYW, WTF and so many others it would take a SNERT to know them all (see below).

So here are most of the current faves, though some are a bit old. If you have others, please comment.

Anti-Development:

BANANA - Build Absolutely Nothing Anywhere Near Anyone/Anything, this is the omnibus phrase that takes everything in.

CAVE People - Citizens Against Virtually Everything, this of course has a double meaning as in against and where many live.

LULU - Locally Unwanted Land Use, things like massage parlors, marijuana dispensaries, cigarette stores, porn shops, fast food drive throughs (In-and-Out Burger comes to mind).

The Anti-Development Nots:

NIMBY - Not In My Back Yard, this is the oldest acronym and has become the primary phrase used to depict those against any project.

NIMFYE - Not In My Front Yard Either, obvious expansion of NIMBY, though a stretch I think.

NIABY - Not In Anyone's Backyard, this is the all inclusion form of the above.

NIMEY - Not In My Election Year, the current fall back within communities with tough choices, tells all about the political process.

NACTAE - Not A Chance Till After Elections, see above.

NITL - Not In This Lifetime, I have worked on projects like these.

NOPE - Not On Planet Earth, as we move off planet I am sure this will morph into NOTM (Not On The Moon/Mars).

NOTE - Not Over There Either, cute but why not over there, or there, or even there!

PIGINIMBY – Phew I'm Glad It's Not In My Backyard, whatever.

IKWIWWISI - I'll Know What I Want When I See It, this is the normal planning and approval process as done in California – this process continues until either the developer pulls the proposal, goes bankrupt, or dies. (I have had clients fall into all these categories).

Pro-Development:

BANY's - Builders Against NIMBYs, also includes chambers of commerce and other pro-growth groups, often these have little real standing in the process and the club meetings are secret.

CEQA - Consultants Employment Quantity Act (was California Environmental Quality Act), this is a new one to me and has been a significant profit center over the years – doing work that does absolutely nothing to move the project forward except to give political cover.

DUDE - Developer Under Delusions of Entitlement, every client I know has fallen into this category at some point in the process. They learn quickly or die.

SIMBY - Start In My Backyard, this is a group that is usually formed at the developer's request. This includes unions (jobs), schools (jobs), and often politicians who want a pet project in their district.

YIMBY - Yes in My Backyard, variant of SIMBY.

WIIFM - What's In It For Me? The logical extension of the last two.

WYGIWYD - What You Get Is What You Deserve, this often is the result of the planning process when every part of the project that gives it life and soul is extinguished. Color this beige.

IAMS - It's About Me Stupid, this can apply to all participants in the process.

Citizens Involved In The Process:

DINKY – Duel Income, No kids, Yet. The apartment demographic follows these people closely.

MUPPIE - Middle-aged Urban Professional. They were previously a Yuppie – yes, we all are getting older.

GLAM - Greying, Leisured, Affluent, Married – is the GLAMMIE the obvious evolution of the MUPPIE?

NINJA – No Income, No Job, or Assets. Often found living in parent's basements – never seen at planning meetings.

RUB - Rich Urban Biker, often seen in spandex and silly helmets at planning meetings for streets and developments, scary bunch, want everything to be paid for by others.

SINBAD - Single Income No Boyfriend and Desperate, major leader of many movements within the community, cats hair often present on the sweater.

SNERT - Snot-nosed Egotistical Rude Teenager, only shows when there is a skateboard park being planned (or marijuana dispensary as well).

SITCOM - Single Income Two Children Oppressive Mortgage, the result of our government and banks attempts at making housing more available and affordable, these were DINKs three years earlier.

WOOF - Well Off Older Folk (or other similar sounding term), the sweet spot for travel agencies, nice restaurants and luxury car dealers.

WOOP - Well Off Older Person, variant of the above.

Check this SITE out for more. http://www.businessballs.com/acronyms.htm

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

Development Trends - 2014

Where do we go from here? The development world (in the US especially) is groping about trying to find traction in a world that seems confused and distracted. Is it housing, commercial, office, higher density, affordable housing, urban, or suburban? I'm tempted to say all of the above but, there is always a but, the truth lies in the edges of all of these.

Housing is the dominant driver in almost all real estate transactions. Where people are - much will follow. And, regardless of the experts who love urban, the growth will still be in the suburbs. The dream of most is a home on a lot. My mantra has been for years: The biggest house on the biggest lot that the buyer can afford. Simple, yes. Complicated, yes. Yet opportunities will be significant, especially within the 30-mile radius of the major urban areas. I was once lectured by an experienced planner back in the early 1990s that the master planned community model was deceased. Well it rose from the dead like Frankenstein and then proceeded to be put back in the ground by 2008. Hundreds of master planned communities died on the planning tables with the collapse of Lehman Brothers and other financial institutions. They will again arise due to demand and economies of scale.

Commercial/retail is always a romantic model, cool retail villages, neat neighborhood centers, urban ground floor retail. Yet we are so commercially overbuilt in retail that most markets will see a constant rebooting of existing projects until a mix works. It will be tough but even the retailers themselves are changing and morphing to find niche markets. Look for strong entrepreneurial retailers to try new and exciting things over the next few years to take advantage of competitive rents and locations. Reconstruction and expansion of existing structures will lead the way. There are no easy answers here.

Office markets, like commercial/retail, are also overbuilt. This overhang in square footage will take time to be reabsorbed, buildings will be remodeled, updated and even repurposed (with housing in many markets). Cities will look at horizontal mixed-use as strong alternatives to their problems. Again aggressive developers will see great opportunities, but it is not a market for the timid.

Higher densities are always in vogue, yet have been very difficult to achieve outside the dense urban centers. And apartment density is always relative. 40 units to the acre in one location is appropriate for some markets, 18 units per acre (the old model from the seventies) is probably more appropriate for many ex-urban markets. There has been a dearth of apartment construction during the past ten years (or more) primarily because the foreclosure market has absorbed the demands of the rental market. But now with the strengthening of single-family home sales, renters are being literally pushed out. They will need places to live and not just in urban markets. Look for strong improvements in this sector as we move forward over the next few years. And this will be in middle to small markets as well.

Affordable housing is a political football, "build it everywhere except in my backyard." Social NIMBYism. This only works where there is some form of political cover and subsidy (like electric cars). I see many of these business models morphing into more realistic projects that are a mix of both for sale market driven projects with subsidized components. Will they work? This remains to be seen, due in part to the significant social issues that are brought to bear. As I've said before build more market driven housing, this will free up the lower cost existing housing stock. Look for serious battles in this segment over the next few years.

The numbers continue to show that the growth is still going to the suburbs. You can believe what you want but the census numbers show this across most of the country. This growth will continue in outlying suburban towns that are safe and well managed politically and financially. Diversity is thriving in these towns and villages and will continue, and all the fancy demagoguery about the sterile suburb (a self-serving fallacy at that) won't change this fact. Developers will find a good home in these markets.

Stay Tuned . . . . . .