Author Archives: legallysociable

Mapping Chicago area income inequality by Metra route

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Crain’s Chicago Business put together an interactive map that shows income levels by Metra train stop:

The geographic disparity in Chicago’s wealth can be seen by tracking household income in the ZIP codes of Metra train stations. The Union Pacific North and Milwaukee District North lines pass through some of the wealthiest ZIP codes, while the Metra Electric and Rock Island lines go through some of the poorest.

Several quick thoughts:

1. This reflects historic settlement patterns in the Chicago region.

2. I wish there was another set of data layered on top of this: daily ridership from each stop. This way, we could see if income is related to ridership. Could these mass transit lines primarily benefit people from wealthier areas in the Chicago region? In other words, do these commuter lines reinforce income differences? Are these train lines generally a boon for communities compared to Chicago suburbs without commuter train stations?

3. Of course, looking at ZIP codes of the train stations is inexact. Depending on the location of the station, people might drive from other zip codes. What we really need is more exact information from riders themselves: where do they live, what is their income, why do they utilize this particular stop, etc.

4. Also, why use average household incomes rather than median household incomes? Using the average likely increases the variation among train stations but also allows outliers in income to have more influence in the data.

h/t Curbed Chicago

Defining what makes for a luxury home

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Here is how one data firm defines what it means to be a luxury housing unit:

Although upscale housing is selling better in some cities than in others, a monthly analysis by the Altos Research data firm for the Institute for Luxury Home Marketing says that overall, that segment of the market is gaining momentum and prices are rising…

Q: “Luxury home” is probably one of the most abused phrases in real estate-ese. How do you define it?

A: A price range that’s considered the high end of the market in one place might be something that’s average in another. So, “luxury” is local: Our organization generally defines it as the top 10 percent of an area’s sales in the past 12 months. But for the purposes of the research that we do with Altos for our monthly Luxury Market Report, we’ve taken the ZIP codes within each of 31 markets that have the highest median prices, and for about five years we’ve tracked the sales of homes in those (areas) that are $500,000 and above.

There are two techniques proposed here:

1. The highest 10 percent of a local housing market. Thus, the prices are all relative and the data is based on the highest end in each place. So, there could be some major differences in luxury prices across zip codes or metropolitan regions.

2. Breaking it down first by geography to the wealthiest places (so this is based on geographic clustering) and then setting a clear cut point at $500,000. In these wealthiest zip codes, wouldn’t most of the units be over $500,000? Why the 31 wealthiest markets and not 20 or 40?

Each of these approaches have strengths and weaknesses but I imagine the data here could change quite a bit based on what operationalization is utilized.

Interestingly, the firm found that luxury sales rebounded quicker than the rest of the market:

The interesting thing about this recovery is that the luxury segment, that group of affluent households, was able to recover fairly quickly. They shifted their assets around, and a lot of them were able to see opportunities in the down market. By 2010, there were almost as many high-end households as before the downturn, not just in the United States, but internationally, as well. This group focused on residential real estate as a pretty desirable asset — for them, a second or third home turned out to be a portfolio play.

This shouldn’t be too surprising – when an economic crisis hits, the wealthier members of society have more of a cushion. While the upper end is doing all right, others have argued the bottom end, those looking for starter homes, are having a tougher time.

Australian expert says McMansions should be divided into apartments

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An Australian expert tackles the problem of McMansions and affordable housing:

Western suburbs “McMansions” should be converted into apartments to help deal with Perth’s population growth, an expert says.

Leading WA environmental scientist David Kaesehagen said walls or divisions could be built within big properties in the most affluent suburbs to add to housing stock in a rapidly growing market…

The Australian Bureau of Statistics has forecast Perth’s population will grow from 1.8 million to 4.2 million in the next four decades…

Mr Kaesehagen said with the right laws and incentives, owners of large mansions could be persuaded to divide their properties. “This is a way of using existing built form to increase density without introducing high-rise or changing the aesthetic of these established suburbs,” he said.

This is not the first time this has been suggested but I have yet to see a community or significant number of people push for this. I suspect it would be really difficult to do this kind of retrofitting in suburbs often so concerned about property values and density: who would want to be the first resident to have your house subdivided as your neighbors look on and wonder about their housing values? How much would it cost to convert larger homes into multiple units when they were originally intended for single families? This might work best in McMansion neighborhoods that are abandoned or not yet opened (each of these would pose their own set of problems) so there would be no community members in opposition. But, then why not build higher density developments in the first place?

Is Miami more of a global city because of a booming real estate market?

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The Financial Times looks at the increasing prices in the Miami housing market and suggests this is related to the city’s rising status as a global city. This leads to an interesting question: does an in-demand housing market mean that a city is necessarily a global city or does it simply make it more popular than before? I would tend to lean toward the second – being a global city is related more to a city’s role in global finance and status as a cultural center. Miami may be a regional financial center but is it really on the scale of the major cities in the United States? Check out the 2012 Global Cities Index from AT Kearney where Miami is #36. Miami may be popular these days but it has a long ways to go…

 

Argument: “Why more McMansions are bad news for first-time home buyers”

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McMansions may be good for builders but not so much for people looking to purchase their first house:

Home building has been steadily picking up this past year after taking a sharp nosedive during the recession, although production is still far below historical norms. Orr said home builders are moving forward with cautious optimism, being wary of their pre-recession mistake of overbuilding.

So to help make up for the slowdown, builders are now making homes larger once again. Bigger homes means bigger sales revenue — and for only a minimal bump in construction costs, Orr said.

The trend has been to the detriment of first-time and lower-income buyers, who are finding both the new and existing home markets offer them very few options today.

“They (home builders) have kind of abandoned that sector,” Orr said.

The existing home market nationwide — but particularly in Phoenix — has been facing a chronic shortage of homes for sale, and the problem is most severe in price ranges below $200,000.

Many buyers have thus turned to new construction out of frustration. But given the sharp price hikes of new homes recently, lower-income buyers aren’t finding the same relief, Orr said.

In other words, builders can make more money on the bigger homes for those who still have money to play with. But is this just about builders? I wonder if there are two other things going on here:

1. The article hints at a depressed existing house market, suggesting that there isn’t enough movement in the housing market for these older smaller homes, what might be called “starter homes,” to become available in large numbers.

2. In addition to not much existing inventory opening up, perhaps there simply aren’t enough buyers for smaller houses for builders to take notice. What numbers are we talking about – how many first-time home buyers in the Phoenix are not able to find a home they want? This reminds me of recent data from the Chicago area: while housing starts may be up a large percent, the housing market is still not operating at normal.

That all said, if people want to get into purchasing a home can’t do so or are delayed, this could contribute to more long-term problems for the US housing market.

Targeting Santa Monica homeowners in order to build mini-mansions

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The housing market in Santa Monica, California is apparently in good shape: homeowners are being targeted by those who want to tear down their smaller homes and build bigger ones.

Santa Monicans are being targeted by real estate agents representing developers looking to turn small homes in desirable neighborhoods into mini-mansions that can be sold for double the original asking price.

The agents tend to single out older homes, often taking up a relatively small portion of the parcel on which they sit, offering a cash purchase and a promise by the buyer to take care of normal closing costs, provided the homeowner does not broadcast their intent to sell.

Residents report notes left on their doors, direct mail bearing a picture of their own home and even direct phone calls soliciting sales.

That practice is called by many names, including off-market listing, pocket listing or quiet listing, and while it is completely legal, it often is a bad deal for sellers in hot markets like Santa Monica, said Don Faught, president of the California Association of Realtors…

Sosin led the charge in the late 1990s against “McMansions,” homes built to the margins of their property lines. They overshadowed neighboring properties, and led to the death of many mature trees that had to be removed so that the home could be built out.

Her work resulted in new rules around single-family homes, requiring set backs and imposing controls over how much of a parcel can be covered.

The attempts to build to even those restricted maximums are unwelcome, she said, because they only succeed in making neighborhoods more expensive to move in to and replace quaint, well-loved homes with larger versions.

It sounds like the resident quoted above is ready for a teardown battle, should one develop, but the article makes it sound like people are generally unhappy with this approach. The real question in my mind is whether these sorts of real estate tactics are successful. Does this suggest developers are worried about how the community will react to more public plans to build bigger teardowns or is this primarily a way to get real estate at a cheaper price before it hits the open market? Either way, I would want to know how many homeowners actually sell their homes in such a way and how they negotiate the peer pressure in the neighborhood versus the offer from developers.

Also, is the use of the term “mini-mansion” intended to avoid using the term McMansion? I would expect McMansion in this sort of situation, particularly from unhappy residents…

h/t Curbed

Argument for a flat tax for both electric and gas drivers

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There is ongoing discussion in several states about a flat tax for electric and gas cars per mile driven:

“EV drivers want to pay their fair share,” says Jay Friedland, the legislative director of Plug-In America. “We want the roads to be supported, but we’re still in a phase of early adoption and there’s a greater public good.”

That “greater good” is to give electric vehicle technology a chance to crack through its niche status, reducing the continued reliance on fossil fuels from unstable nations. The more state and federal breaks EVs get, the greater the possibility that drivers will look to them as an alternative. But they still need to contribute to the greater good of roads and infrastructure, and Plug-In America agrees.

The advocacy group believes a flat road tax is a better solution – taxing all drivers equally, no matter how their vehicle is powered. That idea is gaining momentum.

In New Jersey, a road tax proposed by Sen. James Whelan, a Democrat from Atlantic City, would charge all drivers 0.00839 cents per mile driven. For the average driver who travels 12,000 miles per year, that comes to a little more than $100. It’s an easy way for Jersey to recoup some cash from EV drivers without targeting them directly.

It’s the same idea with Virginia’s HB 2313, which eliminates the $0.175/gallon tax on fuels in favor of a tax of 3.5 percent for gasoline and six percent for diesel fuel, while imposing larger annual registration fees and a $64 per year for EVs, hybrids and alt-fuel vehicles.

There seem to be several competing interests in these discussions:

1. States who desperately need money to pay for roads.

2. Advocates of electric vehicles who don’t want new taxes and fees to limit the adoption of electric vehicles.

3. Where are the gasoline drivers and the trucking industries? There has not been much reporting on their status in these ongoing discussions…

Another factor that makes these conversations more difficult is the potential changing nature of driving in the coming years. States need certain levels of funding for roads but it is unclear how many people will be driving what and what the status of miles driven per capita will be down the road. All of this means it is harder to make projections and also suggests that whatever is decided in the near future will probably have to be revisited soon.

Continuing political battles over Census data

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Megan McArdle provides a reminder of the political nature of the Census:

If the Census is the key to political control, then you can expect parties to put more energy into gaming the census.  Arguably, you’re already seeing this: Republicans are now making their second attempt to defund the American Community Survey, which uses sampling to generate data between censuses.  The American Community Survey is not used for districting, but it is used for all manner of other policy purposes.

As the political fault lines harden in Congress, the battlegrounds are moving back to more hidden levers of policymaking.  There are the courts, of course: we’re now in the third decade of a mostly undeclared war to gain control of the Supreme Court and do some unelected legislating.  Data gathering and research funding are coming under fierce scrutiny.  And on the national security front, secrecy and executive orders seem to be the order of the day for whoever is in the White House.

Before you say it, no, this isn’t just Republicans.  But it’s not good on either side.  As the legislature has ceased being able to legislate, both parties almost have to resort to more undemocratic methods to achieve their goals.  The casualties, like judicial impartiality and good data for policymaking, are vastly more important than the causes for which this war is allegedly being fought.

To see more details of the recent Republican defunding attempt, see here.

Data is rarely impartial: the processes of by which it is collected, interpreted, and then used in policy can be quite political. That doesn’t mean that is has to be. Much of the grounding for social science is the idea that data can be more objectively collected and analyzed. Yet, within the realms of politics where data is often a means to victory, having a good handle on data can go a long way, as we saw in the 2012 presidential election or currently in debates among Republicans about how to handle voter data.

In the end, it will be fascinating to see how big data, from the Census to Facebook, does or does not become political. There are a couple of fault lines in this debate. First, there are people who will argue that having such data is in itself political and dangerous while the opposite side will argue that having such data is necessary to have more efficient and business government and business. This could be a debate between libertarians and others: should there even be big data in the first place? Second, there is a good number of people who like the idea of collecting and using big data but debate who should be able to benefit from the data. Can the data be used for political ends? If government should have its hands on big data, perhaps it is okay for businesses? Should individual consumers have more power or control over their contributions and participation in big data?

h/t Instapundit

Sociologist on the growing achievement gaps between upper, middle, and lower-class children

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A sociologist explains the “substantial” growing achievement gaps in recent decades among students of different classes:

One way to see this is to look at the scores of rich and poor students on standardized math and reading tests over the last 50 years. When I did this using information from a dozen large national studies conducted between 1960 and 2010, I found that the rich-poor gap in test scores is about 40 percent larger now than it was 30 years ago…

The same pattern is evident in other, more tangible, measures of educational success, like college completion. In a study similar to mine, Martha J. Bailey and Susan M. Dynarski, economists at the University of Michigan, found that the proportion of students from upper-income families who earn a bachelor’s degree has increased by 18 percentage points over a 20-year period, while the completion rate of poor students has grown by only 4 points.

And why is this happening?

It boils down to this: The academic gap is widening because rich students are increasingly entering kindergarten much better prepared to succeed in school than middle-class students. This difference in preparation persists through elementary and high school…

High-income families are increasingly focusing their resources — their money, time and knowledge of what it takes to be successful in school — on their children’s cognitive development and educational success. They are doing this because educational success is much more important than it used to be, even for the rich.

In other words, it appears social reproduction is occurring through the schooling system. Sounds like the ideas of sociologist Pierre Bourdieu, who argued social class differences are reinforced by education systems, as well as sociologist Annette Lareau who suggests different classes have different parenting approaches. In the end, those who already have resources can put them to use in getting the best out of the system while those with fewer resources can’t keep pace.

Getting married in a Going Solo world: more married couples living separately

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More Americans are choosing to live alone but what happens if they want to get married? Here is one solution that appeals an increasing number of couples: get married but live apart.

It may seem unusual, but these non-traditional arrangements are more common than you think. The U.S. Census Bureau estimates 1.7 million married couples in the U.S choose to live apart, and experts say that number is on the rise.

Marriage and family therapist Dr. Jane Greer said the looming 50 percent divorce rate has couples worrying about the future before they even say “I do.” She said living apart allows them to avoid all the daily little conflicts that can lead to big problems down the road…

Ultimately, Haisha said, they avoid all the business of being married and they can just enjoy the marriage…

“We want to be the wind beneath each other’s wings, not clip each other’s wings,” Haisha said.

Judging from the comments made in this article, it sounds like these couples want to maintain the perceived strengths of living alone, which means you can escape from other people and don’t have to get too involved in daily life which might lead to conflict, while still enjoying their marriages. In other words, the ideals of autonomy and individualism are preserved while still committing to marriage. But, doesn’t this redefine marriage to some degree as another relationship that can be had at the time of one’s choosing?

Who should be really happy about this trend? People in real estate as it suggests more couples need two place to own or rent.