Monthly Archives: February 2014

McMansions can derail your retirement plans

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Amidst concerns baby boomers will have difficulty selling their homes, here is a suggestion that buying a McMansion can derail retirement plans:

We occasionally hear about a friend who somehow saved up enough money, or just decided to chuck it, and walks off to retire at age 60, 55 or even 50. It can be done.

Also, some people live in a McMansion, drive a Tesla, and vacation in the south of France. But we know it’s a very expensive lifestyle. And we know we all can’t afford it, as the real estate bust of the 2000s so cruelly reminded us. We need to appreciate that, like buying a McMansion, taking early retirement is a very expensive proposition. Yes, a fortunate few can afford it. But most of us just have to get real.

Two things are interesting here. The first is that purchasing a McMansion seriously hampers retirement plans. Purchasing one uses up a lot of money and saddles the owner with a large mortgage (plus the home might be underwater and it can cost a lot to fill such a large home). A more prudent investor would purchase a more modest home rather than splurging on a McMansion.

The second interesting part of this is the comparison to owning a Tesla or vacationing in France, both relatively rare things. For example, Teslas start around $70,000 and only about 22,500 were sold in 2013. In the 2000s, it was common to see McMansion purchases compared to SUVs, a mass production item that cost much less than a Tesla. The implication then is that McMansions are even rarer today, making it even more of a folly to own one.

Decreasing interest in McMansions in Melbourne, Australia

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The demand for McMansions has decreased in recent years in Melbourne:

MELBURNIANS are moving away from McMansions with the number of medium density home approvals in Victoria growing a whopping 109.5 per cent over five years.

The Bankwest Housing Density report shows that 23,390 medium density approvals were granted in Victoria in the past 12 months. Five years ago that number was just 11,164…

KPMG Australia demographer Bernard Salt said Melbourne, in particular, was densing up.

“A new generation of Generation Y and X have different values to preceding generation that wanted a three-bedroom brick veneer on the edge of town,” Mr Salt said.

This and other stories I’ve seen in recent months from Australia seem to suggest that the McMansion craze may have run its course. Older adults wanted to have the big house outside the city but for a variety of reasons, including a change in preferences among younger Australians, interest in smaller housing, and interest in more affordable units, fewer McMansions have been built.

What will be interesting to observe is whether the McMansion paths in the United States and Australia diverge in the future. Does the average Australian want to join the United States and leave a legacy of McMansions?

Addressing the lack of big city toilets with an $8 a day NYC toilet membership

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It is not easy to find a decent restroom in many big American cities and a new company in New York City wants to fill this hole in the market:

A New York company has started marketing what amounts to an upscale pay toilet service. Posh Stow and Go will offer visitors to the Big Apple “clean, safe and soundproof” bathrooms worthy of “the greatest city in the world,” in addition to such other amenities as “luxury showers” and private storage rooms.

Prices for the Midtown facility, which is set to open around June, start at $24 for a three-day pass (or $8 a day), plus a mandatory $15 annual membership fee. The company envisions opening other locations throughout the city—lower Manhattan is next on the list—but warns that “only a limited number of memberships will be sold so as to provide the best possible experience.”…

Parks may have a point: The lack of clean and comfortable public restrooms in major American metropolitan areas—especially New York—is an issue that’s been raised for years. The aptly named Phlush , a public restroom advocacy group based in Portland, Oregon, goes so far as to argue that “toilet availability is a human right” and “well-designed sanitation systems restore health to our cities.”

But the issue for cities remains twofold: Public restrooms are expensive to build and maintain and they are seen as a potential magnet for vagrants. For the latter reason alone, the city of Pensacola, Fla., recently approved an ordinance making it illegal for homeless individuals to wash or shave in public restrooms. (The ordinance was part of a larger push to address problems involving the homeless, though city leaders are now considering reversing the policies.).

I had never heard of Phlush but they make some good points: it is hard to be in a city if bathrooms are not available for all. Additionally, a city planning expert is cited later in the article suggesting that pay toilets go against the “democratic urban ideal.” This seems like one of the basic requirements of having a truly public space. Think of a space like Times Square that is consistently full of people: if most bathrooms are privatized, what is everyone supposed to do?

It would be really interesting to see the business plan of Posh Stow and Go. Just how many memberships can they sell before they reach a tipping point and the restrooms are not as luxurious and exclusive? Just how much money do they think is in private bathrooms? How much does it cost to retrofit existing retail space to fit this new use?

Monorails as a vision of the future

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“What I’d say?” “Monorail!” “What’s it called?” “Monorail!” “That’s right – monorail!” I was reminded of this classic parody of The Music Man when I ran into this brief review of a new book looking back at Seattle’s attempt to build a monorail:

“Rise Above It All” by Dick Falkenbury (Falkenbury Enterprises, $14.36). The Seattle resident writes about his effort to establish a 40-mile monorail system. He describes it as a cautionary tale about “a city that once led the way.”

Read an overview of the Seattle Monorail Project here.

While all of this seems quaint – as does the monorail that takes you from the Disney World parking lot to the front gates of the Magic Kingdom – it is always interesting to consider what people in the past thought the future would be like. A quiet and elevated form of mass transit was an exciting possibility in the post-World War II era. Or perhaps we should have flying cars by now (everyone seems to remember this idea) or life should look like that of The Jetsons. But, what do we now think about the future that will look similar absurd in a few decades? The key to these follies doesn’t seem to be whether the technology is possible but whether it is worthwhile to put the new technology into widespread use. Monorails are not that difficult to build but aren’t necessarily much better than other forms of transportation. Flying cars are doable but can they be practical? It might be Google Glass or space elevators or driverless cars.

In first half of 2013, roughly 20% of Chicago area home purchases by institutional investors

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A good portion of the homebuying activity in the Chicago region during the first half of 2013 was driven by institutional investors:

Chicago home prices climbed 11 percent in November from a year earlier, the biggest jump in almost a quarter century, according to S&P/Case-Shiller data. While gains are slowing across the country, the Windy City was one of nine areas in the group’s 20-city index to show a year-over-year increase in housing values…

Institutional investors, led by companies such as Blackstone’s Invitation Homes and American Homes 4 Rent (AMH), have bought as many as 200,000 U.S. properties in the last two years, taking advantage of real estate prices that fell as much as a third from the 2006 peak, and rising demand for rentals among Americans who lost their houses in the foreclosure crisis. Their reach has stretched from the hard-hit regions of California to small Ohio towns to the sprawling suburbs of Atlanta…

In Chicago, investors accounted for about 20 percent of purchases in the first half of last year, according to Geoff Smith, executive director of the Institute for Housing Studies at DePaul University in Chicago.

Like the portfolios of other investors, Invitation Homes’ Chicago-area holdings are mostly filled with properties in suburbs such as Barrington and Oak Park. The smattering of houses they own in the city itself is evidence that the rebound is starting to broaden. Even in some neighborhoods where prices fell more than the rest of Chicago during the foreclosure crisis, values are climbing.

The average homeowner may not pay much attention to this because at least their home values are increasing again. The Chicago area housing market has been sluggish and local media has made much of the uptick in home prices. Additionally, these investors are filling a void in the market.

But, this could lead to more questions in the long run.

1. What will these institutional investors do with these properties years down the road?

2. What happens when the Chicago market is no longer profitable for these institutional investors?

3. Does this mean that the average homebuyer has a better chance to buy a home or does this simply concentrate buying power in the hands of the already wealthy? In other words, this may not provide more affordable housing.

4. Since communities, particularly suburbs, tend to think homeowners are better community members than renters, is it a problem when so many homes are purchased with the intention of having more renters?

Rare events may happen multiple times due to the law of truly large numbers plus the law of combinations

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Rare events don’t happen all the time but they may still happen multiple times if there are lots of chances for their occurrence:

Improbability Principle tells us that we should not be surprised by coincidences. In fact, we should expect coincidences to happen. One of the key strands of the principle is the law of truly large numbers. This law says that given enough opportunities, we should expect a specified event to happen, no matter how unlikely it may be at each opportunity. Sometimes, though, when there are really many opportunities, it can look as if there are only relatively few. This misperception leads us to grossly underestimate the probability of an event: we think something is incredibly unlikely, when it’s actually very likely, perhaps almost certain…

For another example of how a seemingly improbable event is actually quite probable, let’s look at lotteries. On September 6, 2009, the Bulgarian lottery randomly selected as the winning numbers 4, 15, 23, 24, 35, 42. There is nothing surprising about these numbers. The digits that make up the numbers are all low values—1, 2, 3, 4 or 5—but that is not so unusual. Also, there is a consecutive pair of values, 23 and 24, although this happens far more often than is generally appreciated (if you ask people to randomly choose six numbers from 1 to 49, for example, they choose consecutive pairs less often than pure chance would).

What was surprising was what happened four days later: on September 10, the Bulgarian lottery randomly selected as the winning numbers 4, 15, 23, 24, 35, 42—exactly the same numbers as the previous week. The event caused something of a media storm at the time. “This is happening for the first time in the 52-year history of the lottery. We are absolutely stunned to see such a freak coincidence, but it did happen,” a spokeswoman was quoted as saying in a September 18 Reuters article. Bulgaria’s then sports minister Svilen Neikov ordered an investigation. Could a massive fraud have been perpetrated? Had the previous numbers somehow been copied?

In fact, this rather stunning coincidence was simply another example of the Improbability Principle, in the form of the law of truly large numbers amplified by the law of combinations. First, many lotteries are conducted around the world. Second, they occur time after time, year in and year out. This rapidly adds up to a large number of opportunities for lottery numbers to repeat. And third, the law of combinations comes into effect: each time a lottery result is drawn, it could contain the same numbers as produced in any of the previous draws. In general, as with the birthday situation, if you run a lottery n times, there are n × (n ? 1)/2 pairs of lottery draws that could have a matching string of numbers.

Rare events happening multiple times within a short time also tends to provoke another issue in human reasoning: we tend to develop causal explanations for having multiple rare events. These multiple occurrences can still be random but we want to know a clear reason why they occurred. Having truly random outcomes doesn’t mean outcomes can’t be repeated, just that there is not a pattern to their occurrence.

Another contender for “The Anti-McMansion”

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Combine a tiny house and minimalist design and the New York Times gives you another contender for an anti-McMansion:

Living in a one-room house with an ultra-minimalist aesthetic and two small children sounds more like the setup for a joke than something any reasonably sane person would attempt.

And yet that’s exactly what Takaaki and Christina Kawabata set out to do when they renovated an old house here. They were convinced that an open space with as few toys and material possessions as possible was a recipe not for disaster, but for domestic calm…

“Most of the people we’ve invited here are shocked by how we live,” Ms. Kawabata, 41, said. “How we can raise kids without toys and clutter and stuff everywhere.”…

Eventually, there will be an addition, a 1,500-square-foot structure that may be connected to the main house with an open walkway. But that’s a few years off. For now, instead of walls, the family makes do with transparent room dividers created out of metal frames wrapped with nylon string.

There are three features that set up this home apart from conceptions of a McMansion:

1. A smaller size. This one-room house has 1,200 square feet. It is interesting to note that the home will eventually include another 1,500 square feet which would then put it above the average for a new American home at 2,500 square feet.

2. A different and better design. Rather than having spaces for everyone to do their own thing, this home is one big open space where the family is always together. Additionally, the minimalist design is presumed to be better aesthetically (and presumably in durability and appeal to others) than the typical McMansion attempt to impress and mash together numerous styles.

3. The commitment to live with less stuff. McMansions might be so large because even as the average American household has decreased in size, the average new home has increased dramatically in order to hold more consumer goods.

At the same time, I would guess most Americans would not accept this particular design as the best anti-McMansion: it is too open (do household members want to be that close?) and minimalist design does not appeal to everybody.

Call for more comparative study of poor urban neighborhoods using new techniques

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Urban sociologist Mario Small recently argued sociologists and others need to adopt some new approaches to studying poor urban neighborhoods:

Small, who is also dean of UChicago’s Division of the Social Sciences, studies urban neighborhoods and has studied the diversity of experiences for people living in poor neighborhoods in cities across the country.

Studying only a few neighborhoods extensively fails to capture important differences, he said in a talk, “Poverty and Organizational Density,” at a session Feb. 15 at the annual meeting of the American Association for the Advancement of Science in Chicago…

“The experience of poverty varies from city to city, influenced by neighborhood factors such as commercial activity, access to transportation and social services, and other facets of organizational density,” Small said.

He explained that new sources of information, ranging from open city data to detailed, high-resolution imagery from commercial mapping services, provide new opportunities to compare the experience of the poor among multiple cities, in turn pointing cities and service providers toward optimal decision-making about policies, investment, or other interventions.

One of these changes is driven by changes in technology, the ability to collect big data. This can help sociologists and others go beyond surveys and neighborhood observations. Robert Sampson does some of this in Great American City with the ability to map the social networks and neighborhood moves of residents from poorer neighborhoods. Big data will be enable us to go even further.

The second suggestion, however, is something that sociologists could have been doing for decades. Poor neighborhoods in certain cities tend to get the lion’s share of attention, places like Chicago, New York City, Boston, and Philadelphia. In contrast, poor neighborhoods in places like Dallas, Miami, Seattle, Denver, and Las Vegas get a lot less attention. Perhaps I should return to a presentation I made years ago at the Society for the Study of Social Problems about this very topic where I suggested some key factors that led to this lack of comparative study…

Recent sociological findings: many evangelicals think science and religion can work together, few highly invested in evolution/creation debate

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Two recent studies suggest there may be less conflict between religious Americans and science than is typically portrayed.

1. Sociologist Elaine Ecklund on how religion and science interact:

“We found that nearly 50 percent of evangelicals believe that science and religion can work together and support one another,” Ecklund said. “That’s in contrast to the fact that only 38 percent of Americans feel that science and religion can work in collaboration.”…

  • Nearly 60 percent of evangelical Protestants and 38 percent of all surveyed believe “scientists should be open to considering miracles in their theories or explanations.”
  • 27 percent of Americans feel that science and religion are in conflict.
  • Of those who feel science and religion are in conflict, 52 percent sided with religion.
  • 48 percent of evangelicals believe that science and religion can work in collaboration.
  • 22 percent of scientists think most religious people are hostile to science.
  • Nearly 20 percent of the general population think religious people are hostile to science.
  • Nearly 22 percent of the general population think scientists are hostile to religion.
  • Nearly 36 percent of scientists have no doubt about God’s existence.

RUS is the largest study of American views on religion and science. It includes the nationally representative survey of more than 10,000 Americans, more than 300 in-depth interviews with Christians, Jews and Muslims — more than 140 of whom are evangelicals — and extensive observations of religious centers in Houston and Chicago.

Ecklund comes to similar conclusions in her 2010 book about scientists and religious faith Science vs. Religion.

2. Sociologist Jon Hill on how Americans view the evolution debate:

As part of a recent project funded by the BioLogos Foundation, I have fielded a new, nationally representative survey of the American public: The National Study of Religion and Human Origins (NSRHO).

Unlike existing surveys, this one includes extensive questions about human origins that allow us to develop a more accurate portrait of what the general public—and, in particular, Christians—actually believe. The survey includes questions on belief in human evolution, divine involvement, the existence of Adam and Eve, historical timeframe, original sin, and more. For each of these questions, participants are allowed to respond with “not at all sure” about what they believe. If they claim a position, they are also asked to rate how confident they are that their belief is correct. Lastly, they are asked to report how important having the right beliefs about human origins is to them personally…

If only eight percent of respondents are classified as convinced creationists whose beliefs are dear to them, and if only four percent are classified as atheistic evolutionists whose beliefs are dear to them, then perhaps Americans are not as deeply divided over human origins as polls have indicated. In fact, most Americans fall somewhere in the middle, holding their beliefs with varying levels of certainty. Most Americans do not fall neatly into any of the existing camps, and only a quarter claimed their beliefs were important to them personally.

So what does this mean for the church? I think it shows that most people, even regular church-going evangelicals, are not deeply entrenched on one side of a supposed two-sided battle. Certainly, the issue divides Christians. But Christian beliefs about human origins are complex. There’s no major single chasm after all.

In other words, the average religious American doesn’t have think this issue is a matter of life and death, even if the rhetoric from both sides is that the other is a clear enemy.

Limit power outages by burying power lines

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An editorial from USA Today argues for burying power lines in order to limit the effect of storms:

People served by buried lines have dramatically fewer outages, according to two studies by the Edison Electric Institute, which represents investor-owned utility companies.The idea is good enough that many American cities put most lines underground years ago, and lines for most new subdivisions are buried. Overall, though, roughly 80% of lines in the USA still hang overhead.

Such “undergrounding” of power lines can be pricey. But the figure opponents commonly cite — 10 times as expensive as stringing lines overhead — is misleading. The actual cost can be half that, or less, depending on local conditions and whether lines are buried when developments are built or when roads are being torn up anyway.

The best idea is to identify the lines most likely to get knocked down and begin by burying those. A study for Pepco, the underperforming Washington-area utility, found that while burying all lines would cost $5.8 billion and add a ridiculous $107 a month to customer bills for 30 years, burying just the most vulnerable lines would cost about one-sixth as much and prevent 65% of outages, a more reasonable tradeoff.

Even with a reduced figure for burying the power lines now, this serves as a reminder that the best time to bury the power lines would have been years ago when the developments were first built. Doing so after the fact costs more money and mars a lot of property while the burying is taking place. Putting the money into burying the lines in the first place saves a lot of hassle down the road (hence, different rules for newer developments).

An added bonus: having fewer overhead lines looks better. Imagine pristine residential or commercial streets without power lines and poles all over the place.