Showing posts with label Land law. Show all posts
Showing posts with label Land law. Show all posts

Wednesday, December 27, 2017

The Rent Is Too Damn High: Record High 30% Of U.S. Adults Now Live With A Roommate

A staggering new analysis from Zillow highlights perfectly the unintended consequences of central banking policies that drive massive asset bubbles but minimal job/wage growth.  According to the study, surging home prices and rising rents have now resulted in a record 30% of American adults, up from 21% in 2005, being forced take on roommates just to afford monthly rent payments.








As rent consumes a growing share of household income in many cities, some people must relocate or find ways to offset rising prices. An increasingly popular way to cut costs is by adding a roommate. Nationally, 30 percent of working-age adults—aged 23 to 65—live in doubled-up households, up from a low of 21 percent in 2005 and 23 percent in 1990.


 


We define a doubled-up household as one in which at least two working-age, unmarried or un-partnered adults live together. For example, a 25-year-old son living with his middle-aged parents would constitute a doubled-up household, as would two 23-year-old roommates who are not partnered to each other. A doubled-up household contains people who might choose to live apart under different circumstances, financial or otherwise.



Not surprisingly, large metropolitan areas like New York, LA, Miami and San Francisco saw the highest percentage of their adult populations doubling up on housing.



Of course, as the following chart illustrates, there is a strong correlation between doubling-up and rent affordability with the most expensive cities seeing more than 40% of their adult residents living with roommates.








"As rents have outpaced incomes, living alone is no longer an option for many working-aged adults," said Zillow senior economist Aaron Terrazas. "By sharing a home with roommates -- or in some cases, with adult parents -- working adults are able to afford to live in more desirable neighborhoods without shouldering the full cost alone. But this phenomenon is not limited to expensive cities. The share of adults living with roommates has been on the rise in historically more affordable rental markets as well. Unless current dynamics shift and income growth exceeds rent growth for a sustained period of time, this trend is unlikely to change."




As we"ve noted frequently, the biggest increases in doubled-up houses has come from the millennial generation as thousands of college seniors, armed with their $250,000 anthropology degrees, are apparently finding it difficult to land their dream jobs after graduation.  That said, while millennials have seen the biggest increases, people across the age spectrum have also become increasingly reliant on roommates to meet their monthly rent obligations...



...so at least we all have that to look forward to in retirement.


With that, here are the full results from Zillow:










Saturday, December 16, 2017

This Map Shows Where Millennials Are Buying Houses (And For How Much)

Millennial homeownership rates are essential to understanding the housing market because they facilitate additional home sales for other people.


How does this work? As HowMuch.net explains, suppose you make an offer on a house. The current owner is also probably on the market, and he or she likely has a contingent offer on another house. This sets off a chain reaction throughout the economy. Millennial homeownership rates are therefore an easy way to judge the economic vitality of any given area.


That’s why HowMuch.net created this new map...



Source: HowMuch.net


Our viz takes millennial homeownership data from Abodo and maps it by metro area across the country. Abodo adopted the data from the U.S. Census Bureau, which regularly collects a variety of information about the population, including the age of homeowners, the estimated value of their homes, and how long it would take to accumulate a 20% down payment. Our numbers are from 2015. We then overlaid this information across metro areas with bubbles representing the portion of millennial homeowners in each market: the bigger the bubble, the more millennial homeowners there are. We also color-coded each bubble to represent the median value of their homes—dark red circles mean the homes are worth over $500k, and dark blue means under $200k. This gives you a quick snapshot of the overall economy and the housing market.


The first trend you can see on the map is a clustering of red circles on both the West Coast and along the Northeast.


The most expensive city in the country for millennials is San Jose, CA, where the average millennial buys a home worth $737,077. Seattle, WA in the Northwest is also relatively expensive at $342,769. These are population-dense areas with booming tech sectors. At the other end of the spectrum, you can see clusters of blue bubbles across the Midwest in old manufacturing cities like Detroit, MI ($148,404) and Cleveland, OH ($160,251). Memphis, TN is the cheapest place for millennials at $142,795. Southern states like Texas and Florida are also relatively affordable thanks in large part to their suburban sprawl, which Zillow predicts will expand next year.


It’s no surprise that homes are more expensive in California (think Silicon Valley) than the industrial heartland, but consider how homeownership rates change based on affordability. The red bubbles all tend to be smaller than the blue bubbles. This means that as homes get more expensive, millennials become increasingly unable to afford them. It’s not like there’s a surplus of ultra-rich millennials buying up all the houses in California and New York. Millennials are just as sensitive to high prices as everyone else.


Let’s break the map down into a top ten list of the urban areas with the highest rates of millennial homeownership, combined with the average price of their home. A full 42% of the millennials living in Minneapolis-St. Paul, MN own their own home, the highest rate in the country.


1. Minneapolis-St. Paul-Bloomington, MN-WI: 42.4% and $222,528


2. St. Louis, MO-IL: 40.2% and $167,791


3. Detroit-Warren-Dearborn, MI: 40.2% and $148,404


4. Louisville/Jefferson County, KY-IN: 38.5% and $158,974


5. Pittsburgh, PA: 37.5% and $152,731


6. Indianapolis-Carmel-Anderson, IN: 37.4% and $161,856


7. Kansas City, MO-KS: 37.1% and $170,254


8. Nashville-Davidson--Murfreesboro-Franklin, TN: 37.0% and $213,090


9. Oklahoma City, OK: 36.7% and $172,485


10. Baltimore-Columbia-Towson, MD: 36.3% and $272,805



Buying a home is often the biggest financial decision anybody makes, and that’s especially true for young people. And there’s a lot to consider when buying your first home, but one thing other than affordability to keep in mind is how many other millennials are in the same situation. If you’re a millennial looking to buy a home, and you want to live next to other young people, you just might have to move to the Midwest.









Sunday, October 29, 2017

Why Cities All Across America Are Suddenly Buying Up Trailer Parks

Much like the historic run that nearly resulted in the collapse of the global financial system in 2009, home prices in the U.S. are once again looking more like an Amazon or Facebook stock price chart than a stable store of value that should probably grow roughly inline with overall inflation. 



And while these price gains are great news for the private equity firms that scooped up foreclosed homes after the last housing crisis, they"re once again making it nearly impossible for the average American family to find affordable housing. 


As such, as the Pew Charitable Trusts points out, municipalities all across the country are suddenly scooping up trailer parks in an effort to prevent them from being converted to the next McMansion track-housing project and maintain some affordable housing options.








Here in the heart of one of Colorado’s most expensive cities, Isabel Sanchez bought a mobile home seven years ago for just $6,000. Her four-bedroom bungalow now sits on a lot she rents for $355 a month.


 


The mobile home park Sanchez and her family live in offers a glimpse of Boulder’s hippie past. Small houses and trailers, many dating to the 1960s and ’70s, sit close together on tree-lined streets. “I love the space, I love the location, I love the community here,” Sanchez, 55, said recently, relaxing in a blue armchair in her spotless living room.


 


Affordable neighborhoods like these have become hard to find in Boulder and cities across the country where home prices are soaring. In some metro areas, rising prices are prompting park owners to sell their land to developers, affordable housing advocates say. “When the mortgage crisis came about it sort of slowed down, and now it’s heating up again,” said Carolyn Carter, deputy director of the National Consumer Law Center.


 


So Boulder and a handful of other localities, desperate to hang on to homes middle- and working-class people can afford, have stepped in to buy parks, fix them up, and transfer ownership to residents or to a nonprofit on condition that rents be kept low.


 


Portland, Oregon’s housing authority financed a deal last year that saved a mobile home park from being sold to a developer. Pitkin County, Colorado, is buying a park it intends to set aside for people who work in the area. And Boulder bought a park this summer, with the twin goals of improving its infrastructure and maintaining affordable housing.


 


Affordable housing advocates say that the best way to preserve mobile home parks is to turn them into co-operatives owned by residents. But in Boulder, land is so valuable — and parks need so many infrastructure upgrades — that it wouldn’t be possible for low-income residents to finance the purchase alone.  



TPB


As Pew notes, roughly 8 million Americans live in trailer parks around the country and when their land is sold off for the next housing development they have no choice but to scramble to find new housing.








About 20 million Americans live in manufactured homes — so called because they’re built in a factory, rather than on site — and about two-fifths of those can be found in mobile home parks, mostly in suburbs and exurbs.


 


Mobile homes are an important source of low-income housing. But homeownership can be precarious for people who live in mobile home parks. Because they don’t own the land beneath their houses or trailers, they have to move if the park closes down.


 


And many mobile homes aren’t all that mobile. Sanchez, who works at a nonprofit in Denver, says she could probably move her house if she had to because it was built recently. Her daughter’s house across the street may be a different story. It has sat there for over 40 years, like most of the homes in the park.


 


The closure of a mobile home park can create a crisis for residents and for the city or town they live in as dozens of displaced people scramble to find new housing, says Esther Sullivan, a sociologist at the University of Colorado Denver who has studied mobile home parks in Texas and Florida. In her research, she found that city council members who agree to rezone a park often argue that park residents can move into low-income housing elsewhere. But that’s not always the case, she said.



Meanwhile, national nonprofits have sprung up to help residents form co-ops and finance purchases.








One way to preserve mobile home parks is to give the people who live in them a chance to buy the park themselves at a fair market rate, says Carter of the National Consumer Law Center. A national nonprofit called ROC USA will, with the permission of the park owner, help residents form a co-operative and finance a purchase. ROC USA has sponsored some 200 resident-owned communities in the United States.


 


At least 19 states have laws on the books that help residents buy a park, Carter says. Some states require park owners to give residents months of advance notice before a park is sold, to notify residents if they request a zoning change for the property, or to allow residents to organize into homeowners associations. Other states will free up money when a park closes to help residents pay their relocation costs or require park owners to chip in.



Of course, we could also just reduce artificial demand for McMansions by reversing a decade of misinformed Fed policies...but that might result in the bursting of yet another nasty little bubble...










Sunday, July 23, 2017

Record Apartment Building-Boom Meets Reality: First CRE Decline Since The Great Recession

By Wolf Richter of WolfStreet


Even the Fed put commercial real estate on its financial-stability worry list.


No, the crane counters were not wrong. In 2017, the ongoing apartment building-boom in the US will set a new record: 346,000 new rental apartments in buildings with 50+ units are expected to hit the market.


How superlative is this? Deliveries in 2017 will be 21% above the prior record set in 2016, based on data going back to 1997, by Yardi Matrix, via Rent Café. And even 2015 had set a record. Between 1997 and 2006, so pre-Financial-Crisis, annual completions averaged 212,740 units; 2017 will be 63% higher!


These numbers do not include condos, though many condos are purchased by investors and show up on the rental market. And they do not include apartments in buildings with fewer than 50 units. This chart shows just how phenomenal the building boom of large apartment developments has been over the past few years:


The largest metros are experiencing the largest additions to the rental stock. The chart below shows the number of rental apartments to be delivered in those metros in 2017. But caution in over-interpreting the chart – the population sizes of the metros differ enormously.


The New York City metro includes Northern New Jersey, Central New Jersey, and White Plains and is by far the largest metro in the US. So the nearly 27,000 apartments it is adding this year cannot be compared to the 5,400 apartments for San Francisco (near the bottom of the list). The city of San Francisco is small (about 1/10th the size of New York City itself), and is relatively small even when part of the Bay Area is included.


Other metros on this list are vast, such as the Dallas-Fort Worth metro which includes the surrounding cities such as Plano. Driving through the area on I-35 East gives you a feel for just how vast the metro is. However, I walk across San Francisco in less than two hours:



Special note: Chicago is adding 7,800 apartments even though the population has begun to shrink. So this isn’t necessarily going to work out.


This building boom of large apartment buildings is starting to have an impact on rents. In nearly all of the 12 most expensive rental markets, median asking rents have fallen from their peaks, and in several markets by the double digits, including Chicago (-19%!), Honolulu, San Francisco, and New York City.


And it has an impact on the prices of these buildings. Apartments are a big part of commercial real estate. They’re highly leveraged. Government Sponsored Enterprises such as Fanny Mae guarantee commercial mortgages on apartment buildings and package them in Commercial Mortgage-Backed Securities. So taxpayers are on the hook. Banks are on the hook too.


This is big business. And it is now doing something it hasn’t done since the Great Recession. The Commercial Property Price Index (CPPI) by Green Street, which tracks the “prices at which commercial real estate transactions are currently being negotiated and contracted,” plateaued briefly in December through February and then started to decline. By June, it was below where it had been in June 2016 – the first year-over-year decline since the Great Recession:



Some segments in the CPPI were up, notably industrial, which rose 9% year over year, benefiting from the shift to ecommerce, which entails a massive need for warehouses by Amazon [Is Amazon Eating UPS’s Lunch?] and other companies delivering goods to consumers.


But prices of mall properties fell 5%, prices of strip retail fell 4%, and prices of apartment buildings fell 3% year-over-year.


So for renters, there is some relief on the horizon, or already at hand – depending on the market. There’s nothing like an apartment glut to bring down rents. See what the oil glut in the US has done to the price of oil.


Investors in apartment buildings, lenders, and taxpayers (via Fannie Mae et al. that guarantee commercial mortgage-backed securities), however, face a treacherous road. Commercial real estate goes in cycles as the above chart shows. Those cycles are not benign. Plateaus don’t last long. And declines can be just as sharp, or sharper, than the surges, and the surges were breath-taking.


Even the Fed has put commercial real estate on its financial-stability worry list and has been tightening monetary policy in part to tamp down on the multi-year price surge. The Fed is worried about the banks, particularly the smaller banks that are heavily exposed to CRE loans and dropping collateral values.


But the new supply of apartment units hitting the market in 2018 and 2019 will even be larger. In Seattle, for example, there are 67,507 new apartment units in the pipeline.


Wednesday, May 3, 2017

The Vancouver Housing Bubble Is Back, And It's (Almost) Bigger Than Ever

For a while it seemed that the Vancouver housing bubble, the direct result of a relentless tidal wave of Chinese "hot money", had burst after last August the British Columbia province implemented a 15% property tax to stem the inflow of offshore funds. And indeed, in the immediate months that followed, Vancouver"s housing priced tumbled from record highs.


However, it was not meant to be, and less than a year later, the Vancouver housing bubble is back, and it"s (almost) bigger than ever.


Over the past few months, with many suspecting - as we did - that the housing market in Vancouver had finally normalized, attention shifted to what emerged as the next hotbed of rampant housing speculation in Canada, Toronto, where last month average selling prices surged by 33%.



As it now turns out, ignoring Vancouver, and underestimating the persistence of aggressive Chinese buyers turned out to be a mistake, because earlier today the Real Estate Board of Greater Vancouver announced in its latest monthly report that while home sales in the Vancouver housing market had predictably slowed down in April compared with a year ago, prices - which had dipped slightly in recent months- once again surged.


First the (somewhat) good news: the overall turnover in the Vancouver resi market slowed down appreciably, with property sales in the region totaling 3,553 in April 2017, a 25.7% decline compared to April 2016 when 4,781 homes sold and a 0.7% decrease from the 3,579 sales recorded in March 2017. Sales of single-family homes in April 2017 were hit the hardest, reaching 1,211, a decrease of 38.8% from the 1,979 detached sales recorded in April 2016. Meanwhile, sales of apartment, or condominium, properties reached 1,722 in April 2017, a decrease of 18.3 per cent compared to the 2,107 sales in April 2016.


Yet while sellers and buyers were less likely to agree on a closing price than just a few months ago, that does not mean that sellers were more aggressive, or that prices had declined at all. In fact quite the opposite: the benchmark price for all types of residential properties in Metro Vancouver, Canada"s most expensive real estate market, was C$941,100 ($686,583.50) in April. That was up 5 percent over the past three months and 11.4 percent higher compared with a year ago.


The breakdown was even more stark by category:


  • For condominiums, the benchmark price was C$554,100 last month, a 16.6% jump over the past 12 months and 3.1% more than March.

  • The benchmark price of an attached unit was $701,800, 15.3% more than a year ago, and a 2.4% increase compared to March 2017.

  • The benchmark price for detached properties is $1,516,500, an 8.1% increase over the last 12 months and a 1.8 per cent increase compared to March 2017.

And the visual testament to just how strongly the Vancouver housing bubble has returned, and as of April has almost surpassed last year"s all time highs:



In other words, all that the 15% surtax achieved was to drastically slowdown the rate of transactions (or perhaps home flipping). Meanwhile, as sellers held out to find more aggressive buyers, they were in luck as the new wave of buyers has emerged, and undeterred by the 15% premium, they have been slowly but surely lifting all available offers.


"In the condominium and townhome markets, demand has been increasing for months and supply is not keeping pace, said the board"s president, Jill Oudil. "This dynamic is causing prices to increase and making multiple-offer scenarios the norm," she said in a statement.


She added that “Home buyers are looking to get into the market and they’re facing fierce competition”, and it mostly comes out of China. Or perhaps it is simply other Canadians armed with cheap money loans, rushing to fill the void, because as the following charts show, whether it is due to Chinese buyers or not, China has a very big housing problem on its hands, and explains why the recent collapse of alt-mortgage lender Home Capital Group, which accounts for just 1% of all loans in the market, has escalated all the way to the finance minister. The reason is simple: one the first domino falls, nobody knows just how far the resultant avalanche will go.


To put Canada"s housing market, and bubble, in perspective, first here is a chart of total Canadian household debt. Most of this is in the form of mortgages.



Next, despite Canada"s low rates, the debt service ratio of an average Canadian household is nearly 40% higher than when compared to the US.



And finally, the punchline: indexed home prices in Canada compared to the US.



In retrospect, perhaps Canada was lucky that the attempt to deflate the Vancouver housing bubble failed, had it succeeded and spread across the nation, leading to a collapse in collateral values and widespread defaults, the "mean-reversion" outcome may have been far more devastating. Which of course, is not to say that Canada"s problem has been fixed, but at least for the time being, the can has been kicked once again.

Friday, January 6, 2017

Ruled by DC: Get The Feds Out Of Western Lands

In the final days of his administration, President Obama has decided that with the stroke of pen, he shall further consolidate direct federal control over lands within Western states. Specifically, Obama created the Bear Ears National Monument and the Gold Butte National Monument in Utah and Nevada, respectively. The Obama Administration claims that Obama"s unilateral edict was necessary because Congress had not passed any legislation on the matter.


Indeed, the Obama-appointed Interior Secretary stated that "protecting the area using legislation would have been preferable" but that in the absence of legislation, it was necessary to simply declare the lands to be National Monuments. 


In other words, the democratic, constitutional process of Congressional lawmaking was inconvenient for the President. So, he decided to rule by proclamation instead, giving the Governor of Utah barely an hour"s notice before the proclamation was made public. 


It"s Not About Conservation — It"s About Federal Control


Now, we should first note that the overwhelming majority of lands newly designated as National Monument lands were already federal lands to begin with, and have been controlled largely by the US Bureau of Land Management and the Forest Service.


Moreover, it is not the case that opponents to the new designation are mostly people who want to privatize the land or make it easier to mine or develop the land. In fact, many opponents of the designation oppose it because they fear Monument status will lead to greater development of the area as a tourist mecca.


In other cases, members of Indian tribes object to making sacred lands part of a federally-controlled National Monument area.


And, of course, throughout Western states, public lands continue to be a lucrative source of tourist dollars and eco-tourism. The old caricature of pro-conservationist leftists and strip-mining conservatives has long been just that: a caricature.


The reality is that nowadays many private firms and local governments depend on public lands for their livelihood and revenue, and these groups have quite a bit of influence at the state legislatures in question. Preserving natural spaces from development can mean big business and Western-state politicians know it:





It is not at all clear that markets or local governments would prefer that land be used for agricultural purposes as opposed to other purposes. For example, were Rocky Mountain National Park to become a locally-controlled park or state park, there is, realistically speaking, zero chance that it would be handed over to ranchers or miners. The park is far too valuable to the local economy as part of the recreation and tourism industries. To turn the park into range land would devastate the economies of the local communities, many of which contain wealthy and influential voters.



But, say that the park were broken up into parcels and sold to a number of private owners. (We"re in the realm of pure fantasy at this point.) It would make little sense to use the land for mining or ranching even in this case. Given the infrastructure in place and the relative closeness to a major metropolitan area, the lands in and around the Park are likely far more lucrative for recreational purposes than for mining or ranching. 



There is little doubt, however, that much of the controversy over the site will be framed like this: on one side are the conscientious environmentalists and others who want to preserve these pristine lands from destruction. On the other side are oil executives who want to strip-mine the land.


The real debate here, however, isn"t over strip mining vs. conservation. It"s about whether or not a president thousands of miles away can — with the stroke of a pen — dictate how millions of acres in a faraway state can be used, and do so over the protestations of the state legislature.


Nor can it be demonstrated that federal agencies are better custodians of lands than are states. Indeed, the federal government has routinely been more inclined to allow overgrazing on federal lands while subsidizing ranchers at taxpayer expense. It is the states that have demonstrated more prudent stewardship of resources.


Moreover, The Denver post in a 2014 editorial noted other cases in which the federal government hapless mismanaged fish and wildlife issues:






One has only to look at the great elk management debacle in Rocky Mountain National Park. When populations grew out of control in the park, federal decision-makers chose to pay significant sums to bring in contract killers to thin the herd. A proposal by Colorado wildlife managers to use well-trained hunters and donate the meat to struggling families was cast aside.


We could further examine the sad case of game fish being electrocuted and buried on the Yampa River in northwest Colorado at the insistence of the U.S. Fish and Wildlife Service to preserve the pikeminnow, while the same pikeminnows are slaughtered and dumped in Washington state to preserve the wild salmon. All of this, in a never-ending nightmare of bureaucratic red tape with no firmly stated goals or objective in sight, by design.




Moreover, federal lands can be manipulated for political purposes putting local communities at risk.


Perhaps the most memorable recent example of this occurred in 2013 when the federal government shut down national parks and other federal lands as part of the usual "government shutdown" ploy. The federal government dispatched federal agents armed with assault rifles who forcibly ejected visitors from the allegedly “public lands.” Meanwhile, nearby towns that rely on tourists for the local economy were powerless to open the parks themselves. State officials, who are far more sensitive to local economic needs than members of Congress or the White House, were also powerless to do anything.


Eventually, after much political pressure was applied, the federal government kindly allowed states to pay millions to the federal government to open the parks again.


These are just some of the reasons why Utahns of various interests have opposed greater federal power over lands in their states. 


Federal Lands Are the Problem


This Obama Administration"s move with Bear Ears is the latest "screw-you" to Utah in an ongoing effort by the State of Utah to exercise more control over federal lands. For years now, the Utah legislature and the state"s delegation in Congress have been exploring ways to limit federal control over lands within the borders of Utah.


What is steadfastly ignored in the debate however, is the questionable legitimacy of federal control over so many immense swaths of land. 


Today, the feds control 640 million acres (not counting the far larger federally-owned areas of coastal sea floor). And in most Western states, the Federal government owns more than a third of all the land. In the case of Utah and Nevada, where the two new monuments are created, the federal government owns 65 percent and 85 percent of all land, respectively.





This means that these lands are ultimately controlled by politicians thousands of miles away who are not citizens of those states. In the case of Utah, for example, federal lands are controlled by executive-branch bureaucrats — few of whom are from Utah — or they are controlled by Congressional laws passed by a Congress composed of 529 non-Utahns and 6 Utahns.


The fact that lands in Utah should be largely controlled by Californians, Texans, and New Yorkers — many of whom have never even set foot in Utah — should strike reasonable people as both objectionable and bizarre.


At the same time, if those lands are truly sacred sites, as some groups contend, then those sites should be Tribal lands and neither federal or state lands. (See "Why Indian-Tribe Sovereignty Is Important.")


Repeal the Antiquities Act?


Other observers of the Obama Administration"s many executive orders on federal lands have called for the abolition of the Antiquities Act of 1906 which empowers the president to designate federal lands as National Monuments. The Act allows presidents to act unilaterally without any consent from Congress as to how these lands might be designated. Moreover, as critics of the Act note, the Act was supposed to protect small areas of archeological or geographical interest. But, the Act has been abused in order to make many thousands of acres into areas similar to National Parks. 


Repealing the acts would be a step in the right direction, but it fails to tackle the larger problem of federal lands. After all, if federal lands were not so expansive to begin with, the Antiquities Act would be far more limited in its scope. And, even if Congress were the body designating Monument status, that would only be a tiny improvement. It"s true that giving a single person in the Oval office the ability to control lands in faraway states is a problem. However, giving that same control to 535 people in a building down the street form the Oval Office isn"t exactly a significant improvement.