Housing related job cuts

The International Times Herald attributes the loss of 100,000 jobs in the United States last year to the slowdown in the housing market, including 24,000 by homebuilders alone in the last three months. Furniture makers, who cut 28,000 jobs in 2006, and other businesses, trades and service providers that support homebuilders are generally struggling. The Joint Center for Housing Studies at Harvard University (Graduate School of Design + Kennedy School of Gov't) claims that "housing and related industries account for about 23 percent of the economy" and expects housing-related unemployment to rise this year. Whirlpool, for example, is expected to cut jobs this year. The IHT article also cites NAR:

New-home sales probably will decline to an annualized pace of 944,000 in the third quarter and then rise to 959,000 in the last quarter, the National Association of Realtors said Feb. 7. Sales of previously owned homes bottomed in the fourth quarter at an annualized 6.24 million and will rise through at least the second half of 2008.

And the US Dept. of Commerce:

Builders broke ground in January on the smallest number of new homes since August 1997 as the industry struggled to unload the record 542,000 unsold properties from last year, the Commerce Department said in a report Friday. In the past three months of 2006, housing starts fell 24 percent from a year earlier.

These last figures are certainly encouraging, suggesting that there's plenty of sobriety among homebuilders in today's tough market.

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OK, if you know anything about the DFW metroplex, you're well aware that Big D and Cowtown despise one another. The former is supposedly where the East ends, while the latter is where the West begins. LA is to Dallas as ... well, there's no equivalent for Fort Worth. It's compact enough, at least for now, to maintain a "small town" feel, yet it has first-rate cultural offerings, thanks in large parts to pre-eminent Ft. Worth families like the Basses. It's more laid back than Dallas, and arguably more friendly and more Texan.

An article in the Fort Worth Star-Telegram laments the Dallas-ification of Ft. Worth, covering the shuttering of a venerable Ft. Worth watering hole called the Wreck Room.

I suppose change is afoot, but it is a shame that venues with local character and a loyal following get elbowed out. Because of escalating land values, more residents preferring denser city living and cities encouraging mixed-use, retail/residential "urban village" concepts, it was perhaps inevitable that these types of developments would pop up near the city's core. Advocates for this transformation say it's less about the city becoming a knockoff of Dallas than it is about offering an expanded range of living, entertainment and dining alternatives for a growing and increasingly sophisticated population.

An open question: if the places (shops, restaurants, public spaces, etc.) change, will the people change with them? What's the "push" and what's the "pull"?

Housing News and Vail's Growing Pains

On page A1, the WSJ covers January new home sales, down 14.3 % from December and 37.8% from January 2006. Consumer spending has remained unfettered, despite a surge in delinquent payment among subprime loans. Some economists don't find this segment of loans to be significant enough to become a "macroeconomic event", unless late payments spread to other loan types. Dave Seiders of NAHB now believes that the cut in residential investment will shave one percentage point from inflation-adjusted growth this year.

In a semiannual monetary report issued both on 2/14 and 2/15 before Congressional committees, Ben Bernanke looked favorably upon the housing market's "tentative signs of stabilization":

New and existing home sales have flattened out in recent months, mortgage applications have picked up, and some surveys find that homebuyers' sentiment has improved. However, even if housing demand falls no further, weakness in residential investment is likely to continue to weigh on economic growth over the next few quarters as homebuilders seek to reduce their inventories of unsold homes to more-comfortable levels.

Bernanke said that the biggest risk, or downside, to the FOMC's forecast for 2.5 to 3.0 percent GDP growth in 2007 is is "the ultimate extent of the housing market correction" and any "spillover effects from developments in the housing market onto consumer spending and employment in housing-related industries."

Moving on from the dismal science, the blogging phenomenon is growing in the residential real estate world, providing ground-level intelligence in what has traditionally been the information-constrained business of buying and selling homes. Some blogs take on shoddy home construction while others sing the praises of particular neighborhoods. Realtors, meanwhile, are providing more numbers to consumers striving to be well-informed.

The NYT reports Solaris, a $250m mixed-use development in Vail that, on its face, doesn't sound too controversial: 75 mountain-view condominiums, a two-story lobby, a Japanese restaurant, shops, three cinemas, a bowling alley and a public plaza. "The controversy is an Alpine lodge building that will be constructed of steel, wood and stone. Though its style is more indigenous to the area than the faux-Bavarian style of Vail, the proposed building was criticized for not conforming to the prevailing architecture." At 113', the building would become Vail's tallest.
The developer, a Long Island transplant, wants to make Vail Village a better place for families and others to shop, dine and "conduct business", citing Edwards and surrounding areas that have had the benefit of more room to grow relative to Vail Valley's lack of elbow room. Sixty percent of the condos sold within 6 weeks, with prices ranging from $2.2 million to $18.6 million. Knobel won a 4-3 decision from city council after two opponents to the project lost their re-election bids in November. A special election in July of last year in which a vote was taken on the project showed that a resounding number of voters supported the project: 1,100 of 1,577 voted in favor, revealing a rift between the older vanguard of Vail and the growing younger families who want more retail and entertainment, but perhaps, as opponents, content don't care to preserve Vail's identity, or at least to allow the Village to grow more slowly.

Knobel's foes also claim he's feeding his ego. Here's his statement on the Solaris website:
I want to create effortless mountain living with metropolitan convenience, unsurpassed quality, amenities and service. Most importantly, I want to do it in a way that enhances Vail's pristine beauty and feels world's apart from sterile urban environments.

Are "metropolitan convenience" and "sterile urban environments", though, two sides of the same coin? Regardless, Vail is evolving, and, perhaps, this is what the (majority of) people want.

There has been a lot in the press recently, including many mountain towns that ring uber-expensive ski resorts, regarding the (un-)affordability of housing. Witness this story from the NYT on a presumed ski/ride bum renting out a closet for $200 a month. Once he came out of the closet, literally, after a year, the couch-occupant took the closet-dweller's (more privacy?), um, space. Big Sky, the MT ski area, is a sometimes treacherous 32-mile drive on a two-lane road to the nearest community of signficant size, Bozeman, where many of those who work at Big Sky live. While ski bums from Chicago might willingly live in sub-standard living conditions for a year or two, immigrants from outside the U.S. are flocking to resort communities that face labor shortage.

What Homes Will Look Like in 2015

The Orlando Sentinel kicks off the International Builders Show with an article predicting the size and shape of homes in 2015. The typical American home will remain at today's average of 2,400 square feet, up from 1,000 square feet fifty years ago. The future home will be more energy efficient and feature more amenities. The bar has been raised for community amenities and floor plans are becoming more open and practical:

Gayle Butler, editor in chief of Better Homes and Gardens magazine, said the "new urbanism" trend of recent years has "reset" expectations. People now look for wide sidewalks, winding streets, community centers and "real front porches," Butler said, all of which allow for a greater sense of openness and interaction among residents.

"A sense of neighborhood," while common in older parts of many towns, is impossible to "retrofit" in more recent subdivisions, she said. Homes of the future will have flexible floor plans but will not be quite as "wide open" as recently constructed models, she predicted. They will have flexible room dividers and "partial walls," more natural lighting, "mud rooms" for storage adjacent to kitchens, and "closet-sized" home offices.

One of the centerpieces of the show is The New American Home 2007, located in the Lake Eola Heights Historic District near downtown Orlando.
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Some homes are, however, getting bigger. In Athens, Georgia (that is), there is concern about in-town, supersized McMansions.

Forbes takes a bullish look at homebuilder stocks Beazer, Pulte and Toll Bros. Housing sectors stocks are up 24% over the past six months.

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A columnist in The Oregonian pits two landowners in downtown Portland against one another. Greg Goodman and his family own 25 prime lots where parking is a more lucrative than mixed-use development: "A city block containing 200 parking spots probably generates a steady income of $500,000 annually, less insurance and property taxes." On the other side, John Russell owns four buildings downtown and has trouble attracting tenants in buildings surrounded by lifeless parking lots. One proposed solution is to raise height limits on downtown buildings. Otherwise, Goodman contends, the Portland Development Corp. has to offer subsidies the employers and businesses it recruits.

All Aboard

In yesterday's Denver Business Journal, an article details "Denver homes selling for lower prices" -- more listings and more homes under contract.

Recognized as one of two projects nationwide with "advanced engineering and design", RTD's West light-rail line, due for completion in 2013 has secured $40 million of an overall $290 million in federal fuding, according to yesterday's DP. The Feds will cover $525 million of the approximately $880 million total cost for the southeast line.

SLC's Mayor, Rocky Anderson, a kindred spirit of Denver's Mayor Hickenlooper, talks to Grist, an environmental concern, about overcoming opposition to change, including light rail, in Utah:

We have a corresponding joke, and that is that there are two things people hate: sprawl, and density in their neighborhoods.

But you know, you come up against a lot of resistance to any change. When we put in the first line of light rail in the Salt Lake City area, there was greater opposition to that than anything I can remember in politics: the cost, the contention that it's outdated technology, that people won't give up their cars to ride it. We don't hear that any more, because it's been immensely successful. It's been so successful -- and this is one of those cases of success breeding more success -- communities that were adamantly opposed to light rail before the first line was ever built are now clamoring for it in their neighborhoods.

"Streetcars are for people who don't use public transportation", quotes the Christian Science Monitor in discussing the debate on the value of streetcars in cities and towns across the country, many of which have no mass transit precedent save for buses. The article cites the relatively cheap outlays for streetcars compared to commuter rails and subways and mentions cities -- Tampa, Little Rock and Kenosha, Wis. -- that have witnessed a net benefit from streetcars. The efficiency of streetcars is called into to question by ULI's Robert Dunphy, who likens them to "amenities", and a Charlotte booster describes her city's streetcar as a "moving museum" and an "attraction".

The Wall Street Journal, meanwhile, introduces Jennings, Mo. and Richfield, Minn., aging suburbs of St. Louis and Minneapolis, respectively, that have survived by creating the right conditions for new development. Richfield lured Best Buy with 45 acres for its new HQ, and in Jennings facilitated the redevelopment of a shopping mall and kicked off a $63 mixed-use development that is going forward with the help of city, state and federal subsidies.

The Salem Statesman Journal reports on the partitioning of lots in this OR town of 150,000. Infill development, literally in what used to be backyards, raises concerns about changing the character of neighbhorhoods.

On Monday, Merril Lynch issued a research note that warned about the growing trend of vacant for-sale homes, triggered by the Commerce Dept.'s report of the homeowner vacancy rate rising to 2.7% in 4Q06 vs. a 50-year average of between 1% and 2%.

The University of Colorado-Boulder's Leeds School of Business has released its 42nd annual Business Economic Outlook (PDF, 110 pp.) . The summary states that

"employment growth in Colorado will be moderate, similar to the soft landing experienced by the national economy. The slower growth rates that began in mid-2006 are expected to continue through the first half of the year, followed by stronger perfromance as th presidential eletion draws near...The outlook is for employment to increase at a rate of 1.9% compared to 1.4% for the United States. This will translate into 42,300 additional jobs in 2oo7. this projected growth is above the 10-year average of 36,200 jobs per year."

This is a positive outlook, but the report puts contemporary employment growth into perspective by pointing out that the average annualized rate of job growth during the 1990's was 3.8%. The report also talks about quantity (McJobs) vs. quality (high paying jobs). Positions in the Professional and Business Services category, which often fall into the latter column, netted 60,000 new jobs between 1996 and 2005. Also, the state's population is expected to grow 2% vs. 1% nationally in 2007. Other tidbits from the Outlook: "mortgage rates will stay relatively stable...retail sales will show moderate, but slower growth...the Buffs will again post a winning season in 2007". Stranger things have happened.

Can "walkable urbanity" drive national and local residential recovery?

An article in ColoradoBiz discusses the gradual shift of national homebuilders towards infill, though the author, Stephen Titus, stresses that it has in some cases squeezed their profit margins due to rising land costs, especially at transit-oriented locations. Chris Leinberger of the Brookings Institution cites the higher home values within the quarter- to half-mile "walkable" radius of Metrorail stops in the DC metro area, though Denver is more than decade away from FasTracks buildout, making such a comparsion a bit premature. Locally, Titus disucsses older homeowners who are downsizing from bigger homes in places like Highlands Ranch and younger buyers who are buying in quickly evoloving neighborhoods like Highland. Today's New York Times, by the way, talks about well-informed, proactive young buyers who are also willing to take on more debt in buying a home.

WSJ - 'Goldilocks' Economy: Can It Last

Today's "Main Event" column in the WSJ provides a clear take on this week's economic news, revisting the Goldilocks characterization -- not too hot, not too cold -- of the curent state of the national economy. On housing:

Why hasn't the housing slump slowed growth? Investors worried last year that falling home prices and slowing sales could spark a recession by cutting into consumers' spending power. The housing slump shaved 1.16% off annual GDP growth in the fourth quarter and 1.2% in the third. But lower oil prices, which fell as low as $51 last month from a high of $77 a barrel last summer, helped offset those losses. High stock prices, fueled by the 14th consecutive quarter of double-digit earnings growth, also helped to offset the slump.

The latest indicators suggest the housing recession may have bottomed out. Sales of existing homes increased at a seasonally adjusted annual rate of 4.9% in December, the largest such gain since March 2004, although that may have been influenced by unusually warm weather. Mortgage applications and building permits have also increased.

In spite of the concerns on many American minds, wages not keeping up with productivity gains along with rising benefit costs, the consumer confidence index reached a five-year high (110.3) in January.

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Also in today's WSJ, many cities have employed more innovative, market-driven approaches to parking, which has led to more expensive parking in some areas, greater use of mass transit and more "churn" to help ease parking shortage. The premise that higher prices, not more parking, is the solution to the parking crunch may or may not be true. It seems that in "newer", less dense cities like Denver, free parking is in abundance throughout the metro area, putting the central business district at a competitive disadvantage. The article discusses Donald Shoup's 2005 book, The High Cost Of Free Parking, as a key catalyst in new thinking of coming up with parking solutions. One of his precepts includes ensuring that 85% of available parking spaces are occupied at all times by adjusting rates in real time. Perhaps a technological solution for drivers, such as a "toll tag" for parking, would alleviate some of the headaches involved when rifling under car seats for loose change.

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On Wall Street, Irvine, CA-based Standard Pacific Homes stated that its profits were off 72% in 2006. CEO Stephen Scarborough: "We believe many prospective homebuyers are waiting on the sidelines for signs of stabilized pricing."

The Dallas Fed Makes Sense of the U.S. Housing Slowdown

The Dallas Fed's Economic Letter—Insights from the Federal Reserve Bank of Dallas underscores the challenges of gauging the housing market's effects on the overall national economy:

Although homebuilding declines are steep, the direct effect on the economy is likely to be less dramatic because residential construction, including multifamily units, accounts for just 6 percent of GDP. Even so, homebuilding can significantly affect economic growth. Residential construction added about 0.5 percentage point to GDP growth in 2004 and 2005 but subtracted 1.1 percentage points in third quarter 2006. Many forecasters project further, but smaller, negative impacts on GDP growth through most of 2007.

The indirect effects of a housing slowdown could be larger than the direct effects if the deceleration in home prices leads to slower growth in consumption, the largest component of GDP. The risk of a consumption slowdown is one reason policymakers are monitoring housing prices and home-equity withdrawals.

On home price uncertainties, the letter mentions tightening land supply, financial innovations boosting housing demand, the user cost of housing vs. household income or cost of renting, the differences between investors and owner-occupiers, and persistently low mortgage rates, as factors affecting home prices. The Dallas Fed piece closes by citing the relatively short history of mortgage equity withdrawal ("MEW") and the inadequacy of "traditional yardsticks" as reasons for the Fed to continue closely monitoring housing's impact on the overall economy.

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An AP article describes the recent trend of "opening up" traditional shopping malls in MD and diversifying their tenant bases.
Denver/Boulder have their own traditional malls - Cherry Creek and Park Meadows - but these typical two-story, enclosed malls with department store anchors are also surrounded by clusters of retail such as Cherry Creek North. Shopping malls don't last more than a few decades, as witnessed by Park Meadows putting the old Southglenn Mall out of business. It is being transformed now in the Streets At Southglenn by Alberta Development Partners, which has also built Northlands (130 AC, 1m+ sq. ft.) Southlands (with a "Main Street" similar to Belmar) and Wheatlands (part of 13,000 AC currently under residential development just east of Southlands). The Crossroads Mall in Boulder has already shed its skin and become Twenty Ninth Street. Residential development, however, is not yet in the offing, but Macerich, the developer, has put together a strong tenant base that is intended the ground it lost to surrounding retail clusters like Flatiron Crossing.

What does all this mean? We know that people love to shop, and it does not require a large leap of logic to grasp the attractiveness of integrating more residential development within a "lifestyle" retail development that also provides recreational and entertainment amenities.

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Light rail has fallen out of favor for RTD's Gold Line with two alternatives: heavy rail or streetcars.