Monthly Archives: May 2014

Federal move toward making more credit available for homeownership

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New actions announced this week are intended to help more Americans own homes:

On Tuesday, Mel Watt, the newly installed overseer of Fannie Mae and Freddie Mac, said the mortgage giants should direct their focus toward making more credit available to homeowners, a U-turn from previous directives to pull back from the mortgage market.

In coming weeks, six agencies, including Mr. Watt’s, are expected to finalize new rules for mortgages that are packaged into securities by private investors. Those rules largely abandon earlier proposals requiring larger down payments on mortgages in certain types of mortgage-backed securities.

The steps mark a sharp shift from just a few years ago, when Washington, scarred by the 2008 crisis, pushed to restrict the flow of easy money that fueled the housing bubble and its subsequent bust. Critics of the move to loosen the reins now, including some economists and lenders, worry that regulators could be opening the way for another boom and bust.

For the past year, top policy makers at the White House and at Federal Reserve have expressed worries that the housing sector, traditionally a key engine of an economic recovery, is struggling to shift into higher gear as mortgage- dependent borrowers remain on the sidelines.

Both Treasury Secretary Jacob Lew and Federal Reserve Chairwoman Janet Yellen last week noted the housing market as a factor holding back the economic recovery.

Two thoughts:

1. It is not surprising that the federal government would want to support homeownership: pretty much every President since the 1920s has extolled the virtues of owning a home. Additionally, since the late 1800s homeownership has been a key marker of the American Dream.

2. The comments made earlier this week make it sound like the government sees housing as a sector that should help lead the economy. In other words, housing is an industry with a wide impact from developers to the construction industry to real estate agents to individuals looking for a home. Housing doesn’t necessarily have to be viewed this way; the article also hints that housing is lagging behind other parts of the economy. Put differently, housing improves after other parts of the economy improve.

Comic strip about development, architecture, and urban life

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Check out this overview of Ben Katchor’s comic strips about urban design and life:

In a comic strip he’s authored for Metropolis magazine since the late 1990s and in several compilation books, Katchor looks at design and at the development of homes and neighborhoods. His strips are usually one page long and place characters at the helm of strange or unsettling experiences.

During a recent phone interview, Katchor, a winner of the MacArthur Genius Grant and professor at Parsons, described his work as a part of the “American, Yiddish, socialist” tradition and “a form of social activism. You could blow things up too,” he said, referring to the radical arms of environmental groups, “but I don’t really relish the thought of being in prison. I’d rather make comic strips.”…

Katchor leads his readers from simple to complex ideas in the space of one page. For example, in “A River View,” two contractors try to profit on a large set of glass windows that have been recently replaced in a high-rise: the removed windows have the imprint of the skyline that has been baked into the glass over time. By the time they find the recycling yard where the windows have been taken, they’re told that, “a European art dealer took the whole lot sight unseen.” The final frame of the strip shows a group of people overseas looking at one pane when it is displayed like a work of fine art. Everyone involved is looking to profit.

From Katchor’s perspective, profit motivates much of recent development. Though he doesn’t believe new design is worse compared to earlier periods, mentioning that there were dull buildings in the past, he thinks today’s wealth replicates itself, with a push to “maximize profits” in many fields. Like the panes in “A River View,” Katchor sees replication: “Rather than spinning off the money into other things, giving it to other people,” design suffers from the “failure of imagination of corporate interests.”

The sample strips here are pretty interesting. A few thoughts:

1. Providing commentary through comic strips has a good history. Yet, I don’t think I’ve ever seen it applied to urban development. Perhaps it is too abstract an idea (beyond the immediate experiences of characters) for most strips to address?

2. The argument that profits drive developments sounds like the political economy view in urban sociology which emphasizes the actions of powerful people, politicians or business leaders, to make money.

3. I wonder if such humor really has a market these days. These comic strips are relatively long, have lots of text, and address complex topics that go beyond one-liners.

Don’t let your McMansion turn into a financial McPrison

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A real estate firm argues buyers shouldn’t buy a home that could turn into a McPrison:

McMANSION OR McPRISON?
WHICH ONE WOULD YOU RATHER HAVE?

The sprawling McMansion that someone said you can afford may quickly turn into a McPrison when all of your money is locked up in it. There are lots of home affordability guidelines out there. Start with this one:

  • Don’t spend more than 300% of your gross household income.
  • Another is to pay no more than 150 to 200 times the monthly rent of a comparable property.
  • All of that said, don’t buy a home unless you plan to spend at least seven years in that area.

Some conservative guidelines for buying a home, particularly from those whose livelihoods depend on moving houses. Yet, the contrast between a McMansion and a McPrison is interesting. According to this advice, the main negative of a McMansion is that it can cost too much. The McMansion can appear to be a good thing that ends up trapping the homeowner. This has been a common argument after the economic crisis: too many people and lenders overextended themselves in purchasing and enabling McMansions. Part of the definition of McMansion from Investopedia reinforces this idea:

Many McMansion homeowners live beyond their means as mortgages on these monstrous properties may be 100% mortgages, interest-only mortgages and/or amortized over 40 or more years. The cost of utilities and maintenance in a larger home are also more significant, as is the cost of commuting from the distant suburban settings in which these homes are often located.

Two quick responses:

1. Of course, non-McMansions can be pricey as well depending on their size, location, and design.

2. Ultimately, this ignores the numerous other critiques leveled against McMansions (i.e., you could be trapped by a lack of community in McMansion neighborhoods) and focuses on the financial implications. If the homebuyer wanted a McMansion and could financially make it happen, there is nothing on this page to suggest the realtors would disapprove.

Designing Chicago to provide a better video game experience

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Making Chicago the setting of the new video game Watch Dogs includes changing the city to improve the gaming experience:

He described the basic creation of Chicago this way: “Essentially we started with a top view of Chicago, the actual Chicago map, which we put in our game editor, and from there we carved into it. It’s a big, empty space at first. So we start laying out roads by going with the real road and adjusting from there, making sure, for instance, that Wacker follows the river correctly, but adjusting a bit too. You also make sure roads connect properly, but we didn’t go with the Chicago grid because it was so straight, too many right angles. It’s better for the game play if you can’t see far ahead of yourself. So we curve things. Once the roads are laid down and the city reduced, you went street by street putting in neighborhoods, landmarks …”

Like many an open-world video game city, building the open-world Chicago of “Watch Dogs” became a dance between game play, accuracy and urban planning. In general, what Arriola described is the same process that created cities in “Saints Row” and “Grand Theft Auto”: Four-lane roads became six lanes to encourage driving (nobody likes digital gridlock, either), buildings were pressed together to encourage rooftop-to-rooftop leaping and only the most visually unique neighborhoods survived (albeit incongruously, mashed up against other neighborhoods).

“An open-world city in a good video game is a riff on a city, not a city,” said Brian Schrank, co-chairman of the game development program at DePaul University. “It’s a little exploitative, a little like a remix of familiar elements. You are seeing a suggestion of unending choices, but in reality a game developer is being subtle and laying out the breadcrumbs that pull you through their city.”

Hence, the isle of Chicago.

The Chicago River needed widening, and the Northwest Side needed geographic diversity, so, in the game, the north edge of the Gold Coast becomes actual coastline, the farthest northern point in this Chicago. A player can pilot a boat from the lake and around the downtown area without hitting a dead end.

See this earlier post about using Chicago in the new game.

This isn’t just the issue of creating a copy of the city of Chicago. That in itself could be interesting and/or jarring, seeing a faithful reproduction on the screen but being able to do things the average resident or visitor could not. But, this goes a step further to “improve” the city for the gamer. One way to think about it is that the city is not compelling enough as it is but needs to be tweaked to allow for features that gamers expect like easy yet unclear driving and using a boat. The isle of Chicago? A grid system of street that now curves? Urban sociologists and other urbanists are often drawn to big cities because of their dynamism – from social interactions to culture to architecture, to economic and political activity – that is plenty interesting without tweaks.

The gamification of the world continues, with the big city as yet another victim…

A video goes viral with 320,000+ views in one week?

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This silent newsreel of the 1919 Black Sox World Series is a great find. A news story about the video suggests it went viral with over 320,000 views in its first week online. Is this enough views to go viral?

This is an ongoing issue for stories and reports regarding online behavior. When does something go from being an online object of interest to some people to being a trend? Reporters often find Facebook groups or a few blog posts and turn that into a trend. Perhaps this is better than interviewing a few people on the street – also still done – but there are plenty of online groups, tweets, and posts.

We need some sort of metric or guidelines for making such proclamations. Unfortunately, there is little agreement about this for websites: should we count page views, unique visitors, click-throughs or something else? Should we just count the number of Twitter followers even though they can be purchased? Other mediums have agreed-upon metrics like Nielsen ratings or book sales or digital downloads.

In the meantime, I would suggest 342,000 viewers is not quite going viral.

Unclear how much student debt is holding back the housing market

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The sluggish housing market is likely not helped by the amount of student debt held by young adults:

[T]he Federal Reserve Bank of New York reports today that in 2013, student debtors between the ages of 27 and 30 were less likely to own a home—or, specifically, to have a mortgage—than their peers who were student-debt free. Homeownership rates have fallen fast among all young adults since the recession. But, as shown below, they’ve dropped most precipitously among those who borrowed for school.

6a01348793456c970c01a511b13bd1970c450wi_1Federal Reserve Bank of New York

There’s one key detail this graph leaves out, however, which the Fed shared in a separate report from early last year (and which I’ve written on before). It turns out that, at the end of 2012, borrowers who were current on their student loan payments were actually more likely to take out a mortgage than other young adults. Borrowers who were delinquent on their student loans, however, took out barely any mortgages at all. In other words, young people who already couldn’t handle their debt simply weren’t in the market for houses.

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Federal Reserve Bank of New York

A key point: having college debt doesn’t completely stop mortgage originations. So, reducing college debt (and look at the median, not the average) could help free up the housing market but it isn’t the only problem.

I wonder if there isn’t another way to think about this: more young Americans are willing to trade a college degree for homeownership before they are 30. This could be due to a variety of reasons including earning potential due to a college degree but also a decreased interest in owning a home as opposed to accomplishing other goals like living in an exciting place or establishing themselves in a career. In other words, this issue may not really be about college debt holding people back but rather about the relative interest young adults have in owning a house.

Strong spurious correlations enhanced in appearance with mismatched dual axes

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I stumbled across a potentially fascinating website titled Spurious Correlations that looks at relationships between odd variables. Here are two examples:

According to the site, both of these pairs have correlations higher than 0.94. In other words, very strong.

One issue: using dual axes can throw things off. The bottom chart above shows a negative relationship – but this is only because the axes are different. The top chart makes it look like the lines really go together – but the axes are way off from each other with the left side ranging from 29-34 and the right side ranging from 300-900. Overall, the charts reinforce the strong correlations between the two variables but using dual axes can be misleading.

Presenting big data about Chicago

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The Chicago Architecture Foundation has a new exhibit highlighting the use of big data in Chicago:

Architects, planners, engineers and citizens, it contends, are increasingly using massive amounts of data to analyze urban issues and shape innovative designs…

But data, the show argues, is useful as well as ubiquitous. We see some classically gritty Chicago stuff to back this up, though it’s not quite powerful or precise enough to be fully persuasive…

More convincing are the show’s examples of “digital visualization,” which is geekspeak for using digital technology to present and analyze urban planning data.

Take a monumental, crowd-pleasing map of Chicago, 15 feet high and 30 feet wide, which presents the footprints of thousands of buildings, even individual houses, and color-codes them by the era in which they were built. We see the impact of the city’s three great building booms, from Chicago’s earliest days to 1899, from 1900 to 1945, and from 1946 to 1979. The recent surges that filled downtown with new skyscrapers look puny by comparison.

Also worth seeing: Video monitors which display data for Divvy, the city’s bike-sharing program. They offer neat tidbits: Divvy’s most popular station, for example, is at Millennium Park.

Sounds interesting. Big cities are complex social entities who could benefit from large-scale and real-time data collection and analysis. Of course, as Kamin notes at the end, there still is a human side to cities that cannot be ignored but getting a handle through data on what is happening could go a long way.

Another dimension to this is how to best present big data. While the online presentation of maps has grown popular, how can this be done best in person? I look forward to seeing this exhibit in person as I already like what the Chicago Architecture Foundation has done with this space. Here is part of the gallery a few years ago:

CAFChicagoAug11This is a great free place to learn more about Chicago and then choose among the cool offerings in the gift shop or sign up for one of the architecture tours that cover all different aspects of Chicago.

Summarizing research on the Moving to Opportunity program

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Here is a brief overview of the sociological findings regarding the federal Moving to Opportunity program that moved poor urban residents to the suburbs in the hope of improving their life chances:

The findings revealed that while many study participants “successfully” escaped dangerous and stressful neighborhoods at first, most did not escape income poverty, and many ended up living back in high-poverty areas after a few years…

The experiment was conducted in five U.S. metro areas: Baltimore, Boston, Chicago, Los Angeles, and New York. While the experiment showed that it was possible to dramatically improve quality of life for the poor, helping them escape poverty was another matter. “Many of us underestimated the barriers to employment, for example, for this highly disadvantaged group, and how small a difference relocation alone would make,” says Briggs, an associate professor of urban studies and planning…

The barriers were the greatest in sprawling Los Angeles, Briggs says. “The physical distances are so enormous, and many jobs are not accessible by public transportation. We spent time with moms who were getting up at 4 a.m. and driving 25 miles in one direction to leave their kids with a family member, and then 30 miles in another direction to work at a job where they might be put on a different shift, on a moment’s notice. The job itself was insecure, volatile, and poorly compensated. Lining up housing, work, and child care, and keeping them aligned, was immensely difficult.”

On the upside were dramatic changes in safety and security, particularly for young girls. They fared better overall in these new neighborhoods, escaping the predatory climate of their old neighborhoods. And parents in the study saw major reductions in anxiety and depression, and improvements in mental health, likely because of increased security and “freedom from fear.”

For more details, I recommend the book Moving to Opportunity: The Story of an American Experiment to Fight Ghetto Poverty. One takeaway: simply moving poor residents from one neighborhood to a better suburban one does not necessarily quickly lead to positive outcomes. Indeed, poverty is on the rise in the suburbs (here, here, and here) and it is difficult to provide services in these communities.

Chicago area homebuilders, buyers expanding into cheaper Indiana

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Some homebuilders and homebuyers are seeking out locations in northwest Indiana that are still within the Chicago region but offer lower costs:

Casting aside long commutes, higher home prices and often mind-boggling property taxes, some Illinois residents are branding themselves as Hoosiers, and more Chicago-area builders are thinking of expanding into Lake County, Ind., to capture that business. Their arrival will change a housing market dominated by local companies for generations and prompt municipalities to act to make sure the growth comes on their own terms.

Three years ago, the region caught the attention of D.R. Horton, the nation’s largest homebuilder by revenue, and it began buying lots in established subdivisions and building homes. Finding success, the Fort Worth, Texas-based company this spring is seeking the zoning necessary for it to move forward with a deal to acquire about 90 acres of former farmland on the east side of Interstate 65 in Crown Point for a 200-home subdivision…

Between 2007 and 2011, a net total of more than 5,600 people relocated from Cook County to Lake County, Ind., according to census figures. More than 55,000 residents of the northwest Indiana county worked in Cook County in 2012, according to state figures obtained by Metrostudy, a housing consulting firm.

Commuting may become easier in years to come. Last week, Illinois and Indiana signed an agreement regarding the development of a 47-mile toll road, the Illiana Expressway, that would connect I-65 near Lowell, Ind., to Interstate 55 near Wilmington.

A few quick thoughts:

1. As the article notes, this might require Illinois residents to rethink their stereotypes of Hoosiers. I enjoyed living in the South Bend area during graduate school but I do remember being struck by the number of people who drove pickup trucks and smoked when I first moved there.

2. There are certain areas of the Chicago region that still have plenty of room for growth: northwest Indiana as well as south and southwest of Chicago in Illinois (roughly between Plainfield and Chicago Heights).

3. This article focuses on areas further in Indiana like Crown Point. According to Google Maps, driving from Crown Point to State and Madison in Chicago is just over 47 miles. That is quite a trip.

4. How much does the presence of Gary affect the willingness of people to move to northwest Indiana? Despite efforts to revive Gary, it still has a negative reputation. Imagine Gary and the surrounding area were nicer suburbs – how many people might want to live that close to Chicago as well as be near the shores of Lake Michigan? Instead, there is a community known for industry, depopulation, and a poor quality of life.