Tuesday, July 13, 2010

The Housing Crisis: Investors

This NY Times opinion piece by Paul Reyes left a bad taste in my mouth. What Mr. Reyes seems to be missing is his own point. Alan, the savior of neighborhoods, is simply continuing a streak of predatory lending and crap renovations. The result will be owners with limited incomes who will need to make major repairs down the road. Guess what? These homes have no equity so these new homeowners will have to pay out of pocket or get more questionable lending to make these repairs. It seems the cycle continues on and on.

From the article:

True, the very speculators who helped lead this economy into a crisis are becoming an increasing part of the solution, especially as banks continue to shy away from financing, preferring instead to work with “all cash” offers. But if banks persist in their financial stubbornness, you could very well see such investors filling the financing void for a portion of the housing market — a longstanding trend known as “owner financing.”

Here’s how it works: Alan buys property on the cheap — he sets his threshold at $50,000; other investors I’ve met set theirs even lower. He makes a few repairs (or not, depending on the condition of the property) and puts out a sign to attract a buyer.

In many cases, in poor and blue-collar neighborhoods especially, the would-be homeowner has trouble getting traditional financing from the bank. And this is where Alan and others fill the void left by the banks, financing a mortgage or even leasing with an option to buy. In the past, Alan had success financing mortgages to new buyers for a low down payment (around $5,000) and a reasonable rate of interest (around 10 percent). To protect himself — and to give him a return on his money so he could reinvest it — he’d set a balloon rate, in which the new buyer was given three to five years to find a conventional mortgage before the entire sum on the house was due.

I firmly believe we don't have a housing market currently. We have not bottomed out and new buyers looking at rehab of foreclosures are going to loose out in the end. We need some national leadership right now and a program to support it. More tax credits for first time home buyers are not the answer.

Monday, July 12, 2010

Portland's Worst Enemy: Itself

When neighborhoods, cities, and regions become to successful that people want to move there in droves it can sometimes have the impact that is not what that city had intended. Many places are the victim of their own success and it seems Portland these days is having that struggle about keeping its identity, while being on the national and international spot light.

This NY Times article explains:

Portland ranks high nationally for its rate of entrepreneurship, as measured by things like self-employment and the number of small businesses. Even during the recession, some local independent restaurants and manufacturers have increased sales and opened new outlets.

While other states lost workers, Oregon’s labor force grew because people kept coming. The livability crowd led the way: young, white, well-educated people drawn to an outdoor — and local — lifestyle.

“We get people who self-select,” said Joe Cortright, a longtime economist here. “And there’s no fervor like the converted.”

That does not mean the local economy has figured out how to absorb the stream of newcomers: the Portland area’s unemployment rate was 10.2 percent in May, compared with 9.7 percent nationally.

As the city’s corner coffee shops, indie bands and handmade bicycles have gained national and international renown, becoming — gasp — brand names, cries of corporatism have followed them.

The question seems to be can Portland keep its identity while being a victim of its own success? I guess we will just have to wait and see how they manage this over the coming years.

Thursday, July 8, 2010

Housing Choice that is affordable

Two articles this week have proven that what we need in this country is not a fight of urban vs suburban and ultimately which is better. The NY Times article profiled this couple who had to move from the city to the suburbs to get what they wanted at the price point they could afford.

Ultimately, deciding which lifestyle best suits you — and where to buy — comes down to personal preferences. But if the deciding factor is the relative cost of each, the answer is quantifiable, even if it not immediately obvious given the different tax rates and other variables.

So we set out to do the math, based on an apartment and a house in the New York metropolitan area. Here’s what we found: a suburban lifestyle costs about 18 percent more than living in the city. Even a house in the suburbs with a price tag substantially lower than an urban apartment will, on a monthly basis, often cost more to keep running. And then there’s the higher cost of commuting from the suburbs, or the expense of buying a car (or two) and paying the insurance.

The NY Times math is very fuzzy and doesn't really prove much at all. Urban living can be quit costly, but so can the suburbs. The choices you make in regards to both is what really dictates costs. With the unaffordability of homes in NYC these folks decided to go to the suburbs. A clear lack of housing choice that is affordable for all.

In this post Joe Kotkin blasts Richard Florida for pushing a "back to the city" theme when that is not what is really happening. He blames the over abundance of downtown condos as one reason people aren't excited about the city. He clearly believes that the Amercian Dream is a singly family home. Kotkin states:

But the great migration back to the city hasn't occurred. Over the past decade the percentage of Americans living in suburbs and single-family homes has increased. Meanwhile, demographer Wendell Cox's analysis of census figures show that a much-celebrated rise in the percentage of multifamily housing peaked at 40% of all new housing permits in 2008, and it has since fallen to below 20% of the total, slightly lower than in 2000.

The problem again is that we deem suburbs single family homes on large lots and cities are high rise condo buildings. This simply is not the truth when it comes to many urban and suburban neighborhoods. Actually many places have a decent amount of mixed housing (single family, duplex, apartments, condos, ect.) so I am not sure why we have drawn this line in the sand.

What we need to discuss is how to provide housing opportunity for all people regardless of where they want to live. Not everyone in the suburbs wants a single family home and not all city dwellers want to live with 40 other units. Housing choice needs to be a key factor and the cost of that housing. I find all these arguments wrong because there are suburbs, long island for example, that are denser than some of our biggest cities. What we need to do is find a way to integrate these different housing typologies so that we can accommodate all our current and future residents.

Tuesday, July 6, 2010

The Great Plains: Making a Come Back?

For people who live in the Great Plain states this news is no big surprise. For quite some time people have known that salaries are relatively high when associated with the cost of living. A dollar goes a lot further in North Dakota than say on the east or west coasts. What also is a key factor is the high quality of life that people enjoy. I have always thought there would be a steady migration to the area because good jobs can be had, housing is affordable, commutes are short, and schools are good. Regardless of the suburban or urban conflict, living in one the Great Plain states has its advantages once you get past the stereotypes.

Joel Kotkin has this great article and explains what is happening to attract these new comers:

The trend has been particularly strong in urban areas. Based on employment growth over the last decade, the North Dakota cities of Bismarck and Fargo rank in the top 10 of nearly 400 metropolitan areas, according to data analyzed by economist Michael Shires for Forbes and NewGeography.com. Much of that growth has come in high-wage jobs. In Bismarck, the number of high-paying energy jobs has increased by 23 percent since 2003, while jobs in professional and business services have shot up 40 percent.

That’s not bad for a region best known by East Coast pundits for the movie Fargo. It got so bad a decade ago that even local boosters suggested North Dakota jettison the “North” to make the place seem less forbidding. Two Eastern academics, Frank J. Popper and Deborah Popper, predicted that the region would, in a generation, become almost totally depopulated, and proposed that Washington speed things along and create “the ultimate national park.” Their suggestion: restock the buffalo.

Nowhere is this potential clearer than in Fargo, which is emerging as a high-tech hub. Doug Burgum, from nearby Arthur, N.D., founded Great Plains Software in the mid-1980s. Burgum says he saw potential in the engineering grads pumped out by North Dakota State University, many of whom worked in Fargo’s large and expanding specialty-farm-equipment industry. “My business strategy is to be close to the source of supply,” says Burgum. “North Dakota gave us access to the raw material of college students.”

While Fargo is mostly known for the movie (although very little of the actual film takes place in Fargo) it might just be the next big urban destination in the upper Midwest after the Twin Cities.

Friday, July 2, 2010

Planes, Trains, and Flying Cars

Once again we prove that we just don't get it. We need fewer cars and planes and a lot more trains. The solution is not the flying car. Maybe these flying cars (which are right out of Disney cartoons) can be parked at the new Disney McMansions?

Thursday, July 1, 2010

Safeway leads the pack

I live in a wasteland of big box stores with miles and miles of asphalt. Well, not entirely true, but the Twin Cities is plagued with parking lot footprints that exceed the footprint of the store it is supplying parking for. I get frustrated because this is such a simple fix to create a more user friendly store in the core urban areas and even the suburbs. As with most things, we need an example we can point to so that the large retailers can see that it actually works.

This safeway in Georgetown is a becon of light:

The recently rebuilt "Social Safeway" on Wisconsin Avenue NW, at the northern edge of Georgetown, is not just another remodeled supermarket. It represents a positive evolution in thinking about merchandising strategy and about being a good citizen through pedestrian-friendly architecture and urban design.

This new supermarket follows a completely different set of rules than its predecessor. Safeway and other supermarket chains traditionally have adhered dogmatically to rules about selection of sites for stores and, in particular, rules about how such sites should be developed. And one of the primary rules was: Cars rule.

For decades, supermarket thinking was driven by one dominant premise. Motorists approaching a shopping destination absolutely had to see -- and expected to see -- a parking lot with plenty of spaces directly in front of the supermarket. Otherwise, it was assumed, they would drive elsewhere to shop. Further, part of the gospel was the belief that setting back a supermarket from the road gives drivers more time to see the store and read its signage.

Maybe we can bring this new concept to the Midway (picture above) in the heart of the Twin Cities.