It was close to 60 degrees in Manhattan yesterday which reminded me I neglected to post Ed Glaeser’s fascinating commentary in the Economix Blog of the New York Times called Revenge of the Rust Belt.

It also brought to mind a Steven Wright favorite of mine:

It doesn’t matter what temperature the room is, it’s always room temperature.

But I digress

Glaeser correlates population trends with January mean temperature. As a nation, the sun belt continues to see population growth and the midwest continues to see population contractions.

Pittsburgh has its Steelers because high transport costs made it costly to move coal. Prodigious amounts of energy were needed to work the metals, like iron and steel, which were the hard core of the Industrial Revolution. Since moving vast amounts of coke or coal was expensive, Andrew Carnegie’s steel factories were close to Henry Frick’s coking furnaces, which were close to Pittsburgh’s vast coal seam.

Over the course of the 20th century, transport costs plummeted. The real cost of moving a ton of goods a mile by rail declined by more than 90 percent. Manufacturing left cities, the Rust Belt and America altogether. Every one of the old industrial cities declined greatly. The city of Pittsburgh’s population fell from 677,000 in 1950 (its peak) to 334,000 as of the last census, and apparently less than 300,000 today.

The advantage a market like Phoenix has in the long run, despite the sharp declines in housing, is the potential for more affordable housing because of the unrestricted capacity to build and expand.

There is a lot of controversy, inconvenient truths and discussion about going “Green” (no, not Favre signing with the Jets). One of the key elements of discussion is the economic impact of climate change.

The Federal Reserve Bank of San Francisco’s economic letter, discusses a paper on Regional Variation in the Potential Economic Effects of Climate Change by Butsic, Hanak, and Valletta.

Here’s an interesting chart in the Fed posting covering the increase in temperature:

The continental US has a 100 degree F range of temperatures on some days. The impact will be greater in areas already on the edge of tolerance.

One of the key bases for variation in the potential impact of climate change across geographic areas is the starting point from which climate change occurs: climate warming may have little or no impact within a range of temperatures, but the impacts may grow rapidly as temperatures rise above that range. This nonlinear or “threshold” pattern implies that climate change effects will be most pronounced for areas that are already near critical temperature boundaries. This principle is best illustrated by some examples from recent research on the potential economic effects of climate change.

Shifts in agriculture production are most pronounced, not much impact on mortality rates. The article zeroes in on winter sports and it’s impact on resort housing.

Some markets are hurt more significantly than others. My take away is that the issue can’t be looked at as a matter of degrees (no pun intended) of impact. There appears to be some sort of tipping point to which the study suggests market prices are hurt significantly in different regions depending how stressed they are by temperature ranges already.

ergo, coastal flooding

I turned on the TV this morning to catch an update on the hurricane in New Orleans, hoping it was better. Thank goodness no deja vu, the storm appeared to be less intense than originally feared. I flipped the channels and saw Geraldo Rivera holding an anemometer counting off the wind speed. It reached 70mph, and thought, this is simply perverse.

Despite all the coverage and worry, the FDIC has reported only 10 bank failures so far this year. Granted, there were only 3 in 2007, 4 in 2004, 3 in 2003, 12 in 2002, 4 in 2001 and 2 in 2000, but from all the coverage, I would have expected 50 by now. Of the failures this year, Indymac was the only biggie.

The watch list has grown from 90 to 117 (and Indymac wasn’t on the watch list).

The Federal Deposit Insurance Corporation, or FDIC, insures bank deposits of up to $100,000 at nearly 8,500 of the nation’s banks and also keeps a watch list of banks that it considers in trouble.

Thanks to a collapsing housing market and a weak economy, a growing number of banks are struggling to stay afloat, with not enough cash on hand to cover losses from bad loans.

At the beginning of the year, 90 banks were on the FDIC watch list. There are now 117, FDIC chairwoman Sheila C. Bair announced at a news conference this afternoon. That is the highest number in five years, but some analysts expect the list to grow even more in coming months.

This is supposed to be one of the biggest financial catastrophes in US history, no? In the 1980s FDIC removed nearly 2,000 institutions and S&L from the face of the earth. I remember the unbelievable stuff we saw as appraisers, performing workouts for RTC and FDIC in the early 1990s. Incredible stupidity abound.

Because it’s not all about the traditional banks…

It’s about the investment banks and the investors. Banks were able to shift the risk to third parties via securitization.

My assistant is a beekeeper so I have been especially attuned to the strange disappearance of more than 1/3 and perhaps as much as half the US bee population over the past year. For reasons unknown, the bees are flying away from their hives and not coming back.

There was a very good New York Times article by John Lelnad this weekend called Floridian Is the One to Call When Bees Move In that linked the Florida foreclosure problem and vacant housing with bee hives. As properties sit idle, bees take over, but the property owners, if one can be found, are reluctant to pay for their removal.

Foreclosed houses around the country have been colonized by squatters, collegiate revelers, methamphetamine cooks, stray dogs, rats and other uninvited guests. Mr. Councell, 35, only has eyes for bees.

I find it interesting how the bees represent a second occupant of an reo property and they are not able to remain either.

Make sure you watch the video embedded in the story.

A map of the fire-stricken areas [LA Times]

Here’s a good summary of the fire situation in Southern California:

By late Tuesday, the blazes had burned 420,424 acres — about 656 square miles — and destroyed 1,155 homes, making them nearly as large as the fires in October 2003 that are considered the biggest in California history. Although only one death has been directly attributed to the fires, five others have been linked to them.

There was an interesting economic take on the eventual aftermath of the Southern California fires. In Tom Sullivan’s article Beyond the Flames in this week’s Barrons. Here’s synopsis from Seeking Alpha California’s Economy May Get Post-Fire Boost.

“It’s an oddity of economic accounting…but the sharp initial pain could possibly turn into long-term stimulus,” says Alan Gin, an economics professor at the University of San Diego. How? Insurers will absorb the bulk of losses, and the eventual rebuilding boom, helped by a generous doses of federal aid, is sure to pump hundreds of millions into the Golden State.

It looks like the region is going to need it. According to the RPX Monthly Housing Report that I author for Radar Logic, the data and analytics firm, the San Diego market has seen one of the largest price declines over the past year.

The decline in housing impacts everyone employed within the real estate industry, including construction workers, contractors/trades, architects, landscapers, real estate agents, mortgage brokers, lenders, appraisers, lawyers and probably a slew of other professions and occupations I can’t think of at the moment. This silver-lining scenario is not a zero-sum situation, but at least the potential economic stimulus is better than nothing.

One of the dire predictions (that pesky conventional wisdom thing again) of the post-Katrina US was the soon to be lack of homeowner’s insurance or at the very least, hard to get and very expensive post-war homeowner’s insurance.

But then a funny thing happened… (Peter Coy, in Businessweek’s Hurricane Ahead, But Lower Insurance:

In most of the country, property insurance rates for homeowners and businesses are actually lower than they were before Katrina. And amazingly, insurance rates have been falling recently in many parts of Florida and the Gulf Coast that stand to suffer severe losses from hurricanes, encouraging continued construction in low-lying areas.

Why?

• No major hurricanes hit in 2006 and investment returns by the industry set a record.
  
• Private equity firms, in search of returns, have poured money into bonds, betting on whether a hurricane will hit.
  
• Florida government is keeping rate increases in check.
  
• Insurance firms have fled Florida, driving up competition in other states, thereby lowering costs.
  
• New companies have entered Florida, gambling there won’t be a major storm anytime soon, offering new and lower priced products.
  

I am always fascinated by the spectre of blame that fills the commentary of the housing market, from insane commenters on Curbed, to mainstream media sound bites. Last fall, before the outbreak of subprime fever, I had noticed the beginning of the transition from housing bubbles to mortgages.

Daniel Gross in his always interesting Moneybox column on Slate writes about the widespread blame on the housing market for our nation’s woes in The Real Estate Blame Game: the unlikeliest victims of the housing slump.

Here’s a summary of the problems caused by a weak housing market:

• Pickup truck sales
  
• Railroads
  
• Boat retailers and manufacturers
  
• All of Latin America
  

But we all know that the weather is the cause of all of housing woes so we can safely say that pickup truck sales, railroads and boat retailers, especially those who are exported to Latin America, are severely impacted when the snow on the ski trails in Utah, feel as light as champagne.

Sigh

After the nation was able to make it past the annual Sports Illustrated swimsuit edition, we were faced with an SI cover story on global warming.

One of the lessons from Hurricane Katrina and made official recently from climatologists, is that we are influencing to a certain degree, the weather. In fact, if we all go green right now, its probably too late to undo the damage. I had read somewhere that every mile of lost wetlands around New Orleans results in one foot of additional storm surge. The loss of wetlands over the past 50 years escalated the damage of Katrina…it wasn’t all about the levees.

A few degrees of warmer weather and a few inches of water can cause havoc in the housing market, especially with the surge (no pun intended) of second homes, of which a significant portion are located on coastal waterways and shoreline. There was an interesting cover story by Teri Rogers called The Real Riddle of Changing Weather: How Safe Is My Home? in last Sunday’s New York Times Real Estate section about consideration given to these changes in a high density urban market like New York City.

Click here for full sized graphic.

One of the take aways from the article for me was the potential underground damage to transportation and utilities and the rise in the use of glass in architectural design.

Incidentally, the FEMA flood zone maps for New York City haven’t been updated since 1983 and Battery Park City, which is a neighborhood created on the Hudson River from a landfill using the earth from the World Trade Center site isn’t even on the FEMA map. The maps still show the pre-existing piers. FEMA flood zone maps rate areas as zones of risk such as A5, B and C, usually in one hundred year increments. Perhaps, the time frame might need to be rethought.

In this week’s Solid Masonry weekly post on our other blog, Soapbox, Been Down So Long, It Looks Like Up To Me, John Mason explores the theory of relativity, as it relates, in a relevant way, to New Orleans real estate.

Planetizen deserves a hat tip for pointing me to the article Can Architecture Help Housing? [Businessweek/Metropolis Magazine] with the subtitle: The ideological catfights over housing threaten to marginalize all of architecture. Could the parties agree for the greater good?

Architects and urban planners have not been known to get along. With the latest housing boom, this gap, IMHO has not narrowed much. Architects have gained the attention of developers who have sought out Starchitects as developers seek to differentiate their building from the competition. New urbanists and other urban planners tend to be more macro in their orientation. Detractors call New Urbanism plop architecture or public housing for the rich.

With the devastation the has leveled a significant portion of the gulf, observers wonder if architects and urban planners can get past the nit-picking that has traditionally characterized their relationship.

The Businessweek piece wonders whether this next generation of architects and urban planners can do better than those in prior generations.

Now that architects are taking shots at one another over housing, can we do better than we did in the last century, which gave us sprawl for the middle class and Cabrini-Green for the poorest of the poor? Can we close the great divide between fetishistic formalism and social responsibility? Or are we doomed to a world in which architecture’s leading practitioners use their work merely to comment on social tumult rather than actually trying to do something about it?

This will be put to the test in the Gulf region as large swaths of it requires rebuilding. Its unrealistic to assume New Orleans can be reproduced exactly as it was before, yet at the same time, is at risk to lose its identity.