Sales of luxury homes continue to slump

Several new reports suggest the luxury housing market is not doing so well:

Sales in the Hamptons, Aspen and Los Angeles fell by double-digit percentages in the fourth quarter, as the supply of unsold homes grew and prices came under pressure, according to market reports Douglas Elliman and Miller Samuel Real Estate Appraisers & Consultants.

Separate research from Redfin found that luxury properties nationwide under-performed the broader housing market for the eighth consecutive quarter. The supply of homes priced at $1 million or more rose 1 percent in the fourth quarter, while the number of $5 million-plus homes was up 15 percent.

The article starts with the suggestion that the election limited sales. But, that doesn’t do much to explain the issues over eight quarters. Perhaps there is a bit of a luxury home bubble? I mean, how many multi-million dollar properties can be bought and sold? I also feel like I have seen numerous news stories in recent years about the latest home that is breaking the record for asking price. But, such homes are only within reach of the wealthiest people.

It would be interesting to hear what experts think this slump means. Builders shifting away from super expensive homes to cheaper homes? The wealthy looking to invest in other kinds of real estate? Any problems with vacant properties in these communities?

The clustering of wealthy counties in the United States

With recently released data, the Census Bureau describes the patterns in the wealthiest counties in the United States:

A Census Bureau report on the “highlights” of the data released yesterday noted that the nation’s wealthiest counties are disproportionately in the corridor of territory that runs from Virginia and Maryland and then north along the East Coast.

“Seventy-seven counties had a median household income within the highest range ($81,129 to $125,900),” said the “highlights” report. “Forty-two of these high-income counties were located in the Northeast region, Maryland and Virginia.”…

Nationwide, the median household income in 2015 was $55,755, according to the Census Bureau. That means the local median household income in each of the nation’s three richest counties—all of which are Washington suburbs in Northern Virginia—are more than twice the national median household income.

Of the Top 20 richest counties in the nation, nine are suburbs of the city that serves as the seat of a federal government

It then wouldn’t be too hard to look for patterns in other demographic data across these wealthier counties. One marker – noted in this article – is that many of these wealthier counties are suburban. But, I’m guessing these counties are also well educated and largely white.

It would also be interesting to see how those concerned with inequality would deal with county level data. Many American counties don’t have a lot of control compared to municipalities or states. There can be a lot of variation within counties, both really wealthy and really poor pockets. Usually, recommendations about poverty or affordable housing are made at a municipal or regional level. Is there a way to leverage counties to address particular issues?

Local note: it appears that three Chicago area counties – Lake, DuPage, and Kendall – fit into the highest range in the data. See page 3 of the Census highlights.

Chicago looked good for the Cubs parade and rally…but was it the real Chicago?

For many, the city of Chicago looked good yesterday: the weather was beautiful for November 4th, the buildings gleamed, the lake was beautiful from the air, everything looked pretty clean, and joyful millions descended on the city (I’m skeptical of the 5 million figure but that may be a subject for another post) to celebrate a win for the whole city.

Yet, I want to continue some thoughts from last week: a championship, even one as unusual as that of the Cubs, does not lead to a transformed city. On the television coverage, they talked of the day’s events bringing the city together, how the team embodied different aspects of the city, and how so many hearts had been lifted. Will the poverty rate decrease? Will the uptick in shootings and murders subside? Will economic opportunities start arriving in poorer neighborhoods? Will the public schools start providing a good education for all students? Will residential segregation lessen? Will the wealthy share more with those with less?

If anything, this win will provide more money for those who already have a lot. The Cubs were already quite profitable before the win and the championship supposedly adds $300 million to a multi-billion dollar commodity. The team’s development work around the ballpark is supposed to help the neighborhood but it also follows the pattern of other teams who are using their sports franchises to make more money in local real estate and development. I know the team gives to charities – pretty much all major businesses do – but does the wealth help others?

And does a win provide Cubs fan Rahm Emanuel – alongside other city leaders who were to receive tickets to World Series games until the public got wind of it – a reprieve from tough questions?

And which Chicago is the real Chicago: the skyline, Loop, and North Side or the other areas of the city?

And how about the pretty white fan base (at least it appeared this way by who was attending the World Series games at Wrigley and those who attended the parade and rally)? How many of those who poured into the city to celebrate are from the suburbs and from outside the region?

It could still be a very good day for Chicago if that same passion and energy displayed in celebrating the winning of a game – men playing with bats, balls, bases, and gloves – could be regularly channeled into improving communities.

 

No to NIMBY, Yes to YIMBY

The housing issues of the Bay Area and other major cities has led to a new YIMBY movement:

The stubbornness of the NIMBYs has sparked a counter-YIMBY movement (“yes in my backyard”) among activists who believe the way out of the housing crisis is to build.

Trauss, the founder of the San Francisco Bay Area Renters’ Federation (SF BARF), is one of the more visible members of the growing YIMBY movement in the city. She began her activism shortly after moving to the city from Philadelphia…

The severity of the housing crisis is swinging public policy in favor of the YIMBYs. In May, Trauss and housing activists from around the state went to Sacramento to walk the halls and meet with legislators in the capitol to lobby support of Governor Jerry Brown’s latest “as of right” proposal that would streamline the permitting process for new development that meets affordable housing requirements to prevent NIMBYs from stalling proposed residential projects…

The growing organization of the YIMBYs was evidenced at their first national conference in Boulder, Colorado last weekend. The gathering included representatives from Austin, Boston, Chicago, Denver, Los Angeles, Minneapolis, New York, Oakland, San Francisco, Seattle, and several other cities, according to The Atlantic CityLab. An international conference is planned for August in Helsinki, Finland.

It will be fascinating to see if this group gets anywhere. How do you convince wealthier residents to voluntarily give up their locational privileges? It will take a lot of sustained political pressure to go against people who have resources and close connections to local officials and people involved in real estate.

If I had to guess, I would think the YIMBY groups are led by middle class people who say that cities should be affordable to college graduates and young families who are trying to start in life. It is a different conversation to push for truly affordable housing; when the average rent in San Francisco for a 1 bedroom is over $3,000, where is there actually room for lower income residents (let alone middle class residents)?

“The New Urban Blight Is Rich People”

Here is a popular magazine treatment of the debate between New Urbanism and Richard Florida against opponents and Joel Kotkin:

Many cities, in consequence, have become “Floridian,” with “loft districts” rising from industrial ashes in Cleveland and Raleigh, hipster enclaves in Chattanooga, a gayborhood in Philadelphia, reclaimed waterfronts in Baltimore and Minneapolis. Much of this work preceded Florida—but there was socialism before Lenin, too. Florida gave the New Urbanists the vision they wanted of themselves, as saviors of the American city emptied by suburban sprawl, champions of creativity and ingenuity who were going to make Indianapolis the Paris of the 22nd century.

But any intellectual movement must encounter a backlash, and the one to the New Urbanism is only growing, in part because it’s now mature enough for us to see its effects. On the face of it, the New Urbanism is very pretty: Court Street in Brooklyn looks splendid, as does San Francisco’s Valencia Street. The aforementioned travel section of The New York Times has a column, called “Surfacing,” that frequently resorts to profiling some forlorn, blighted neighborhood suddenly graced by taxidermy shops that double as yoga studios. I am, as a matter of fact, writing this from a Whole Foods in West Berkeley, California, a formerly industrial district that was recently “Surfaced” in the Times. The coffee I am drinking was roasted about 20 feet away from my Apple laptop. How’s that for local?

Problem is, surfacing is usually whitening: Gentrification by any other name would taste as hoppy, with the same notes of citrus peel. There is really only one strike against the New Urbanism, but it’s a strike thrown by Nolan Ryan: It turns cities into playgrounds for moneyed, childless whites while pushing out the poor, the working-class, immigrants, seniors and anyone else not plugged into “the knowledge economy.” Right around the time that Michael Bloomberg was remaking Manhattan as a hive for stateless billionaires, I saw a slogan that captured perfectly the new glimmer of the city: “New York: If you can make it here, you probably have a trust fund.”

You could accuse me of writing a faux-populist diatribe, but the numbers are on my side this time around. Jed Kolko, a Harvard-trained economist who was, until recently, the chief of analytics for Trulia, has found that from 2000 to 2014, more Americans moved out of urban centers than into them. Using data from the U.S. Census, he concluded, in a recent post on his blog: “While well-educated, higher-income young adults have become much more likely to live in dense urban neighborhoods, most demographic groups have been left out of the urban revival.” The people who continue to move to cities, he concludes, are “increasingly young, rich, childless, and white.” These are the creatives, the hipsters, the pioneers, who fled the countryside for the big city, where cultures would clash and ideas foment. But all they did is turn Bedford-Stuyvesant into Minnetonka.

So what? I posed this question to Joel Kotkin, an urbanist and demographer based in that decidedly suburban setting of Orange County, California. Author of the forthcoming The Human City: Urbanism for the Rest of Us, Kotkin defends the suburbs, which is nearly as radical as an evolutionary biologist defending creationism. Kotkin argues that suburbs are where middle-class families want to live, and middle-class families are, as he told me in a recent phone conversation, “the bedrock of the Republic.” A city hostile to the middle class is, in Kotkin’s view, a sea hostile to fish.

What is the answer to this debate, which like many others, have become politicized (Republican visions of small towns and suburbs and Democratic visions of thriving cities)? Could both sides have some merit to their arguments – New Urbanists regarding aesthetics and community life and Kotkin et al. with American’s continued interest in suburbia? One possible solution is to introduce more New Urbanist developments and communities in suburbs. This would allow people to have their suburban life but at higher densities and with planning that might encourage more street life.

At the same time, neither New Urbanists or Kotkin really address issues of race and ethnicity in the United States. Both do so indirectly, suggesting that their models offer better options for non-whites. But, what if the larger issue was really residential segregation, which can occur in New Urbanist communities as well as in suburbs?

Additionally, I cannot imagine too many city or suburban leaders would turn down or discourage wealthy residents moving to their community.

Miami’s luxury housing market fueled by ill-gotten gains

The latest big Wikileaks event shows what has been fueling Miami’s luxury housing boom:

Mossack Fonseca’s leaked records offer a glimpse into the tightly guarded world of high-end South Florida real estate and the global economic forces reshaping Miami’s skyline.

And MF’s activities bolster an argument analysts and law-enforcement officials have long made: Money from people linked to wrongdoing abroad is helping to power the gleaming condo towers rising on South Florida’s waterfront and pushing home prices far beyond what most locals can afford…

A Miami Herald analysis of the never-before-seen records found 19 foreign nationals creating offshore companies and buying Miami real estate. Of them, eight have been linked to bribery, corruption, embezzlement, tax evasion or other misdeeds in their home countries.

That’s a drop in the ocean of Miami’s luxury market. But Mossack Fonseca is one of many firms that set up offshore companies. And experts say a lack of controls on cash real-estate deals has made Miami a magnet for questionable currency.

Later in the article, one analyst suggests no one really wants to know this information as luxury housing is a big deal. Who benefits? City leaders who get to trumpet the new growth. Local construction firms, people in real estate, and the finance industry who are involved with the new units. Municipalities like the new tax dollars. Possibly, nearby business owners who could see an uptick in activity with more people nearby who have money to burn. And the whole region benefits from the status of some of the world’s wealthiest people plus an attractive (and expensive) housing market.

If this is happening in Miami, it is also likely affecting other important cities. Take New York: as the leading global city, wouldn’t people who have ill-gotten gains want to be there? Or, how about other leading cities in different regions like London, Hong Kong, and Tokyo?

 

“Eager to Move to the City, but Stranded in the Suburbs”

The New York Times recently profiled a number of suburbanites who would prefer to live in the big city but can’t because of high housing prices:

Like many others in her sociological cohort these days — men and women whose children are grown and who want to trade those unused rooms in Tudor- and Victorian-style houses, as well as the steep suburban property taxes, for the city’s excitement and convenience — Ms. Fomerand finds herself stranded in the suburbs.

These empty-nesters have reaped the benefits of the suburbs: They sent their children to excellent public schools and raised them in safety and comfort, in backyards, playrooms and cul-de-sacs. And their houses have increased nicely in value. Now they would like to find apartments with doormen and elevators so they don’t have to climb stairs, shovel snow and schlep packages. They want a place where they can “age in place,” as the phrase goes. But they are finding that in the past 15 years, prices for such apartments in Manhattan and Brooklyn have risen far more than the values of their suburban homes, so much that they may never make it back to living in the city they always thought they would return to. Instead, they end up staying in their houses, or downsizing to smaller suburban homes or apartments.

To be sure, this is a problem largely felt by the comfortable: New Yorkers who have had the luck and income to live where they choose, who have had the luxury of planning and expecting a certain lifestyle when they grow older. These people could live less expensively in other cities, but often their family, friends and work are here, and they don’t want to leave the area.

“This is one of the most commonly discussed issues,” said Mark A. Nadler, director of Westchester sales for Berkshire Hathaway HomeServices. “People will say, ‘Yes, I’m moving to the city,’ but unless they’re wealthy, they end up resigning themselves to staying in the suburbs.”

Two quick thoughts in reaction to this piece.

  1. Those profiled in this story generally want to move to Manhattan or Brooklyn. Why don’t they consider moving to other parts of New York City? Underlying this could be continued ideas about what areas of New York City are desirable, safe, and more white. It is not really whether they can move to the city at all; it is more about whether they can move to the trendy neighborhoods in which they would prefer to live.
  2. There is only brief mention of affordable housing in a piece that is largely about housing prices. At the same time, this is kind of an odd note to hit; New York City prices are too high because a number of older suburbanites cannot find affordable housing in the city. If you want to talk about housing prices and affordable housing, why not highlight the less wealthy in the region who could truly benefit from such a move to the city (as opposed to doing so as a lifestyle choice)? Too often, stories about affordable housing highlight empty-nesters and downsizers (often alongside young professionals) – probably the sorts of people cities would love to have – rather than consistently examining the lives of lower-class residents.