Posted by Jonathan J. Miller -Tuesday, October 5, 2010, 5:30 AM
Barry Ritholtz went aerial photo gonzo over on Big Picture today and his post was picked up freakin’ everywhere so I had to share. Barry presented the amazing images from Boston.com’s Big Picture (no relation).
We have all read ad nauseum the aftermath of the Florida real estate collapse first hand, but what about a 30,000 foot view?
Florida Housing Empty Hopes And Dreams
More after the jump…
Posted by Jonathan Miller -Wednesday, April 28, 2010, 10:21 AM
I’m a big fan of the work of Harvard Economics Professor Edward Glaeser’s work, especially that related to Manhattan. This week we are hit broadside with two compelling pieces to read.
[click image to open article]
The first is yesterday’s Cities Do It Better article in the NYT Economix section where he asks the question:
What makes dense megacities like New York so successful?
Economic geography was one of my favorite courses in college because it was so applicable to understanding the logic of how a city evolved and operated. Access to natural resources, transportion, labor, etc. He references Jed Kolko’s essay in “Agglomeration Economics” that he edited.
A key point as far as I’m concerned:
In a multi-industry city, like New York, workers could readily find some other employer. The young Chester Carlson was laid off from Bell Labs during the Great Depression, then moved to a law office as a patent clerk and then joined the electronics company that would make Duracell batteries and then invented the Xerox copier.
It’s sort of like my assumption that it is much more likely you will run into someone you know from another state or went to high school with in Manhattan than you would if you lived a mid-sized city. High density brings opportunity.
But there is more risk in cities like Detroit whose economy has always been one-dimensional. Pittsburgh and Houston are examples of smaller cities that learned to diversify after hovering near insolvency in prior decades.
[click image to open article]
His second article was released in City Journal called Preservation Follies which warns against excessive landmarking which serves to make Manhattan less affordable. He’s not anti-preservation, but he makes a case for excessive landmarking which has including buildings that don’t deserve it. His approach was novel to me, in the way that he tracks acres as the metric of landmarking:
He also looks at the addition of housing units within landmark districts:
During the 1980s, the mostly historic tracts added an average of 48 housing units apiece—noticeably fewer than the 280 units added in the partly historic tracts and the 258 units added in the nonhistoric tracts. In the 1990s, the mostly historic tracts lost an average of 94 housing units (thanks to unit consolidation or conversion to other uses), while the partly historic tracts lost an average of 46 units and the nonhistoric tracts added an average of 89 units.
…and its impact on housing prices…
From 1980 through 1991, the average price of a midsize condominium (between 800 and 1,200 square feet) sold in a historic district was $494,043 in today’s dollars. From 1991 through 2002, that price was $582,671—an 18 percent increase. The average price of a midsize condo outside a historic district, meanwhile, barely rose in real dollars, from $581,865 in the first decade to just $583,352 in the second.
Posted by Jonathan J. Miller -Tuesday, August 25, 2009, 12:21 PM
Westwood Capital, LLC, an investment bank, led by founder and managing partner Dan Alpert, projected that housing prices would decline by 28.2% from peak based on the Case-Shiller Index as a benchmark. Arguably pessimistic at the time, the 43% decline that actually occurred was a lot more bleak.
Westwood just released a compelling research piece called Reconstructing American Home Values which suggests we are 75% of the way through the decline.
Here’s a few of the salient points presented:
To firmly return to the upper limits of historically justifiable levels of stabile prices relative to rents in
particular, we believe the Case-Shiller 20 markets must decline, on average (with considerable
differences among markets), by an additional +/-16.9% from May 2009 levels.
In the final years of the housing mania of the 2000s, home buyers not only assumed the price they paid
would rise to the moon; they paid more than 50% of their homesâ€™ purchase price toward what was effectively
a wildly overpriced option on that presumed growth, relative to the portion that could be reasonably
attributed to the cost of shelter. They not only massively overpaid that option; they were also leveraging
themselves to the teeth to do so. For the entire period from 1997 through the bubbleâ€™s peak in 2006, housing
prices in the Case-Shiller 20 metropolitan statistical areas rose by a total of 163.8% before inflation, and
107.6% after inflation is taken into consideration!
In other words, in addition to the cost of shelter, the housing bubble was caused by an irrational jump in the cost of an option to purchase a property’s future price appreciation. The report concludes that that the future appreciation portion of the value equation was over valued by at least 50%.
Another point that was brought up related to the fact that the value of land is attributable to what it can be used for. When housing markets rise, it is really the value of the land that rises rather than the value of the improvements.
I also like the discussion on rent v. sales price disconnect that began in 1997.
A big concern going forward is rent deflation, which is already occuring as many “For Sale” properties are becoming rentals due to the lack of demand.
Here are a few of the charts that interest me from the report:
Posted by Jonathan J. Miller -Monday, November 13, 2006, 12:01 AM
Les Christie’s article Kelo’s revenge: Voters restrict eminent domain: Eight (actually, 10) states vote to prohibit or restrict the use of eminent domain to take property from one private individual and give it to another [CNN/Money] summarizes the election aftermath relating to eminent domain.
We discussed the historic Kelo v. the City of New London court decision last year in Eminent = Imminent where a homeowner could lose their private home to a private developer.
After the outrage relating to this court decision, more than 30 states enacted laws and/or constitutional amendments to prevent this from happening. It has energized watchdog groups such as Castle Watch, to prevent more of this type of emminent domain taking.
Here’s a pre-election tally and its substantial. California did not vote for the proposition because the law was too broad and pressure from conservation groups concerned that it would weaken government authority too much.
Posted by Jonathan J. Miller -Thursday, August 10, 2006, 12:58 PM
Brian S. Hickey, President of Xchange Properties wrote to us, refuting the premise of a previous post of mine about his company Teardowns.com called Let’s Be Honest, Teardown Your Home where I conclude:
Teardowns.com seems to be yet another niche service created by the housing boom that might now be torn down.
Mr. Hickey provides support for his argument that there is long-term demand for his services:
The teardown phenomenon is not new. Houses have been demolished and replaced for as long as they have been built – just take a look at historic pictures of your community, chances are you will see the current “teardown” is a replacement for something even older.
We agree that new business models pop up to take advantage of current trends, but we will argue that offering a service to help facilitate the rebuilding of outdated and in some cases obsolete housing stock within established communities is shallow or temporary.
Please take a look at the attached article from The Lincoln Institute (July 2006) by Daniel P. McMillen. The Lincoln Institute is a non profit educational institution established in 1974 to study and teach land policy and taxation; you just may change your opinion on the longevity of this teardown “phenomenon”.
The paper makes some great points and I am not anti-teardown in most cases (except historic properties). I appreciate Mr. Hickey’s feedback and respect his eagerness to defend his business.
However, the point of my post was simply that there have been a seemingly endless array of niche brokerage services that arrived on the scene during the housing boom. With the market softened by rising inventory, it seems unlikely that teardowns will continue at the torrid pace of the past few years leaving even less room for a specialty business. Yet I do wish Teardowns.com success.
Teardowns: Costs, Benefits, and Public Policy [Lincoln Institute]
Lets Be Honest, Tear Down Your Home [Matrix]
Posted by Jonathan J. Miller -Tuesday, June 27, 2006, 6:43 AM
Susan Kelo: New London, CT
The fallout from the seminal Supreme Court eminent domain ruling KELO et al. v. CITY OF NEW LONDON et al. has been widespread as state legislatures have sought strengthen state’s rights in order to prevent the takings of private property for public development.
Its been a year since the eminent domain ruling and the City of New London, Connecticut has negotiated with the two remaining homeowners to vacate their private homes in order to make way for private development.
The ruling touched a nerve for the simple reason that its one of the basic principles of US citizenship.
Government ability to seize private property for public good has been relegated to things like roads, schools and government buildings. Economic reasons have now reached the forefront of the concept. This is not a new concept.
For them to come in and tell me how much my property’s worth and for me to get out because they’re bringing in somebody else when I own the land is unfounded to me.
Kelo brought clarity to the concept however and touched a nerve. This could be of particular concern on the east coast where land is much more scarce and big box retailers, who try to stay below the public relations radar, may seek to take advantage.
The federal government has now taken action to prevent its own agencies from seizing private property [WSJ] except for public projects reflecting conservatives concerns over the erosion of the Constitution’s Fifth Amendment. They have argued such takings are an unjustified governmental abuse of individual rights. Liberals see the new power as a powerful tool in urban renewal to revitalize cities. The executive order is an attempt to offset some of the momentum of the Supreme Court ruling.
The battle over the issue will be waged for years to come. The New York Times posted an editorial for the responsble use of Eminent Domain and the good that it can do. The Real Estate blog quipped that the New York Times is calling for responsible use of eminent domain while it was imposed on the development of their upcoming new headquarters on 41st Street.
In 1998, pharmaceutical giant Pfizer built a plant next to Fort Trumbull and the City determined that someone else could make better use of the land than the Fort Trumbull residents. The City handed over its power of eminent domainâ€”the ability to take private property for public useâ€”to the New London Development Corporation (NLDC), a private body, to take the entire neighborhood for private development. As the Fort Trumbull neighbors found out, when private entities wield governmentâ€™s awesome power of eminent domain and can justify taking property with the nebulous claim of â€œeconomic development,â€ all homeowners are in trouble.
I am all for urban revitalization, new urbanism, etc., but this ruling goes beyond where I am comfortable. Everyone can call it as they see it from a distance, thats easy. Imagine living in your home for 40 years in an area where there is no urban blight, where houses are kept up, and the community is cohesive? What is the just compensation in this case? That is exactly what happened in New London, CT.
I suspect that the issue of just compensation, is probably more than market value can support.
Posted by Jonathan J. Miller -Monday, June 12, 2006, 12:01 AM
Since we are in the zenith of American flag season between Memorial Day and 4th of July and there have been so many new homeowners of late (Fannie Mae says that 69% of all Americans own their home) that I was intrgued by the fact that there are many of us who are unable to fly the flag.
In Jay Romano’s article Why Some Americans Can’t Fly the Flag [NYT], most rental tenants, co-op and condo owners are restricted. This also applies to many planned urban developments, and properties located in private associations.
the federal Constitution does not prevent a co-op or condominium from enforcing rules pertaining to the appearance of the building. Just as a board can stop you from painting your window frames purple, it can stop you from hanging a flag from them.”
However, state laws are inconsistent. In the article, he cites Connecticut and New York as not having laws pertaining to flag displays while New Jersey does.
Tenants need to refer to their leases and co-op and condo owners need to refer to their homeowner association rules for guidance. Where there are such restrictions for external display, many are able to display them inside their windows.
There are organizations that actively seek to overturn the any such restrictions. In many cases, these rules have been in existence prior to when the unit was purchased so it should come as no surprise. If not, then the unit owner should have the option of going through the political process within the organization to try to get the rule overturned or modified.
For people who both want to, and are able to, display the flag can refer to Title 4 of the United States Code for guidance.
I am all for patriotism but I can only imagine the public safety nightmare if residential occupants of highrise buildings were allowed to attach flagpoles outside of their units. Then again, imagine the safety issues of all those window air conditioning units that are hanging outside all those windows high above the pedestrians below.
Posted by Jonathan J. Miller -Thursday, June 8, 2006, 12:01 AM
In Amir Efrati’s The Suburbs Under Siege [WSJ] or here homeowners love their cul-de-sacs while city planners find them to be a nightmare for traffic.
I lived on a classic cul-de-sac when I was a kid in the 1960’s when they were all the rage in new suburban tract housing. Our neighborhood was full of them. All the houses faced the street and there were no windows on the side of the house (that I remember), providing a sense of privacy (or isolation, depending on your perspective). Of course I remember losing control of my bike on the downhill leading into the cul-de-sac and splitting the bottom of a split rail fence (as well as my knee).
The term cul-de-sac is French for bottom of the bag. Their objective was to limit traffic through residential neighborhoods thereby promoting quiet and enhancing safety for children. Today developers charge a premium for properties located on them for this reason and they remain popular. Their existence in a subdivision allows more houses to be squeezed into the land parcel.
But the New Urbanism movement says they promote driving by separating streets, making it impractical to walk, isolating neighbors from each other and encouraging crime because of limited pass-through visibility.
Here’s an interesting NPR segment released yesterday called Cul-de-Sacs: Suburban Dream or Dead End? [NPR]
Their safety has been a big source of comfort for many buyers.
“The actual research about injuries and deaths to small children under five is that the main cause of death is being backed over, not being driven over forward,” he says. “And it would be expected that the main people doing the backing over would in fact be family members, usually the parents.”
Armed with such arguments, critics of the cul-de-sac have won some victories in recent years. In cities such as Charlotte, N.C., Portland, Ore., and Austin, Texas, construction of cul-de-sac-based suburbs has basically been banned. In other places, cul-de-sac communities have been retrofitted with cross streets.
They still remain popular with homebuyers and I suspect they are so engrained into our suburban culture that they will remain a staple of design for generations to come.
Posted by Jonathan J. Miller -Monday, June 5, 2006, 12:05 AM
I have never done this, but I made the review of a book the topic of a post. The book is American Green and the review was called America’s Obsession With That Green Patch In The Yard [CS Monitor] via Planetizen, whiched hooked me and I wanted to share it.
An environmental historian ponders the cultural significance of the lawn in suburban America.
With the explosive growth of suburbs and sprawl and Americans obsession with housing and its fever pitch of the recent housing boom, I have always wondered why a green lawn was so important to many (self-included). Its not about the evils of fertilizers and chemicals, but more about the social dynamic. The review is quite thorough and a good read.
…When read through this cultural lens, lawns become an instrument of planned homogeneity. As Americans sought to fit in with one another during the cold war, writes Steinberg, “…what better way to conform than to make your front yard look precisely like Mr. Smith’s next door?”
…In his story of the lawn, the social and ecological factors often worked in coordination. Perfection became a commodity of post-World War II prefabricated housing such as Levittown, N. Y., in the late 1940s. Mowing became a priority of the bylaws of such communities.”
Its not just a suburban phenomenon:
Even in this weekend’s NYT article by Tracie Rozhon Opening Up a Duplex, Letting the Sunshine In, grass seemed to be an important design element in the reconfiguration of a duplex apartment.
In the new design, the terrace becomes the platform for yet another staircase, which leads to â€” guess what? â€” a third-level terrace built on top of what had been a second-floor bedroom. This third level is planted entirely in grass, a party oasis that has a lovely view of a nearby church.
Posted by Jonathan J. Miller -Monday, May 15, 2006, 12:01 AM
A glimpse into the growth of Wal-mart provides an eye-opening view of their saturation of the retail market (via the boxtank) as presented by economist Thomas J. Holmes of the University of Minnesota as a movie [windows media].
The movie was a companion to a working paper called The Diffusion of Wal-Mart and Economies of Density [pdf].
On a lighter note, remember in the tv trailers advertising the Fox show called The Simple Life a few years ago, when Paris Hilton thought Wal-mart was a store to buy walls?.
Wal-mart’s dominance has been long controversial in small town America as downtown areas have often fought to protect their central business districts by keeping them out. Wal-Mart has become the posterchild for this movement, especially after small towns grew dependent on the tax revenues the stores generate and put suppliers in a pickle.
With the gaining momentum of new urbanism and the revitalization of downtown areas by converting obsolete commercial buildings into residential, the entry of big box stores like Wal-mart are believed by many to disrupt the natural economic evolution of downtown residential centers, or stop them all together. With the saturation of Wal-mart stores, it would appear likely that there will be new pressures for them to develop in urban areas, but this will likely add to their current public relations woes [Newsweek] as they attempt to remake their public image [NYT].
Wal-mart organic growth movie [windows media].
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