Monday, November 10, 2014

A RARE SIGHTING

IN SAN FRANCISCO THESE RENTS ARE  TRIPLED 
I saw something last week that has been rarer than a republican in California, a model home sales center. And not just one, but eight of these nearly extinct complexes and all in the same master planned development. And to top it off, the project, Mountain House, was once the poster child of poor planning, speculative buying, and rapacious development. East of Oakland, California and next to Tracy and in the same county as Stockton, Mountain House is the first master planned community a home hunter finds when they climb the Altamont summit on I-580 and enter the Central Valley. Four years ago it was a community of foreclosures, dead lawns, and single-family rentals – now it’s building hundreds of new homes, and adding schools and parks.

Such is the story of the past decade – bust, boom, bust, and now rebirth. The Bay Area has suffered through these cycles, but with less affect than the communities in the Central Valley. The growth of industries in Silicon Valley, the usual transient migrations in and out of San Francisco, and the slow growth attitude of most Bay Area cities actually contributed to reducing these impacts of the last five years. Yes, there were foreclosures and a total shut done of the homebuilding industry, but values held better than most other regions (New York and Washington D.C. excepted).

But values for new and old homes have now gone through the proverbial roof.

Case in point:
We owned a home in San Francisco for more than ten years. It was a delightful 900 square foot cottage on the city’s southwest side. Built in 1926, it had wonderful floors, lath and plaster, solid foundation, just great for a first home. And it was unlike most of the homes in San Francisco, it was on a detached lot. We paid about $80,000 in 1979 – by national standards three times the price in Chicago or Iowa. After all it’s California. Ten years later we sold it for four times the price. I chanced googling the house a few months back – it was on the market for $1,050,000. True, and to make it even more hysterical, nothing had changed in the house, the kitchen was exactly the same as when we sold it in 1990. And so was the small single bathroom, the small bedrooms (2), the one car garage, and the one extra room I added in the basement. It had not even been painted. That’s how bad things have now gotten in San Francisco. A thousand units are built each year (hopefully), when 5,000 are needed. The housing stock is aging with little to no replacement and at the insane price for a 900 sf house, no one will buy, tear down, and replace.

So the pressure on the existing housing stock continues to build and prices rise beyond reason. Now Bay Area rents have gotten to a point where the monthly would allow you to buy a new home – in Mountain House. I have seen this movie before and it did not end well.


Stay tuned . . . . . . . . . .

Friday, October 31, 2014

The Water Bond – But It’s Raining

More Than Half Empty
I have an issue with the California legislature, for almost five decades they have done little to move the number forward on water storage and supply. If anything, it has been the local water districts that have accomplished more with regards to reservoir construction and storage. After all these districts are selling a product and the demand is increasing. But water statewide it is a labyrinth of water districts, federal agencies, environmental concerns, and …. politics.

Here are a few facts:
  • California will grow by more than 30% during the rest of this decade to 50 million citizens (current population 38.3 million)
  • No significant statewide improvements to the distribution system have been built since the California Aqueduct in the late 1960s.
  • At my house in northern California here are the past annual rainfall amounts:

2008-2009       18.0 inches
2009-2010       22.0 inches
2010-2011       28.0 inches
2011-2012       16.5 inches
2012-2013       15.5 inches
2013-2014       13.0 inches

Most non-Californians don’t know that we here in the Golden State only get rain from October to early April, six months. That’s it. It’s like working for six months and having to live off the income for a year. Tough, real tough. And what we have learned is that nothing gets done until there is a crisis – and this one is a dozy.

The water bond on the ballot this year is needed. Not everyone is on board. Farmers and manufacturers have serious concerns, but again they are users. This is about storage and distribution. There is bond money for distribution of recycled (treated effluent) water, this alone can help reduce the demand on potable water for residential irrigation and agriculture. There’s money for reservoirs, groundwater improvements, recreation use, and of course environmental improvements. As with any bond of this kind every palm needs to be greased. Cynicism aside, this is a needed step into the future of the state.

To be honest though, the total funding is pennies. Much more is needed. Massive projects, like the San Francisco Hetch Hetchy system, built more than a hundred years ago, need work. Distribution systems under older urban neighborhoods leak and lose significant amounts of water (not to mention burst and undermine streets). The bond is for $7.545 billion dollars, which comes to $196.80 per person – I think we can do better. And the governor wants to spend more than $70 billion on a high- speed train? More than ten times the water bond – please. Hopefully we can use the train to deliver water to southern California from northern California.

Stay Tuned . . . . . . . . . .

Tuesday, October 21, 2014

How Green is Your Valley?

Homebuilders and homebuyers are odds. The political and “moral” push to design and construct “green” homes has now forced homebuilders in many communities to throw their collective hands in the air and say, “Damn the economics, full steam ahead.” For many, this will require substantial changes in how they design, build, and market these environmentally friendly homes to a skeptical and often disinterested homebuyer. For others it may put them out of business (HERE)

Most buyers want what I’ve been saying for years: They want the biggest home, on the biggest lot, they can afford—period. I realize this is open for significant debate, but most housing growth is still in the suburbs and will be for the short and long term. It is the detached single family home that the buyer wants. And if it’s a choice between an extra bedroom, or a photovoltaic roof top electrical system – the building industry is finding that the bedroom wins.

For the last few weeks there has been an interesting series in Builder Online on the acceptance and costs of building green homes. They found that in some instance the costs of building green can add more than $150,000 to the cost of a home. These costs are for solar thermal and PV systems, more efficient equipment, tighter homes, and insulation. Some of these systems and building standards are even mandated under many state laws.

Most new homebuyers are interested in the following in order of important:
  • Location (city, neighborhood, schools, culture, etc.)
  • House Cost
  • Debt Cost
  • Maintenance Cost
  • Affordability – the blending of the three
  • Design and Layout
  • Environment

Yes, like it or not, in my opinion, the last and least important is environment (HERE). Buyers will say they value these elements of a house: Energy Star ratings for appliances, windows, and certifications as important to their decision, but most buyers expect the home they buy will be energy efficient (insulation, windows, water heater, etc.), the heating and cooling the state of the art, and appliances will not waste energy (i.e. dollars). They do not expect to pay for these as extras.

We are heading for a time when new homes will essentially be cost free for electricity. Solar PV systems (with battery type storage systems) will become ubiquitous like modern HVAC systems, and as the two become better integrated, homes will essential become zero electricity users. Cost of heating will drop with better design and insulation (and cheaper natural gas). The issue is always how much will the buyer pay to reach these levels – they do not see these as trade offs.

What is more critical is the quality of the construction itself – not the whistles and bells. Better insulation and moisture control reduces everything from nail pop in drywall to cracks in drywall and moldings. These are actually more for the builder themselves than the buyer – call-backs and repairs are very costly.

One of the problems at the moment is the velocity of new home sales is still slow. This is due to many factors from student debt, costs of down payments, and very high cost of new homes. If the demand were higher many new products would literally hit the street. Competition and markets would bring these new products to the industry.

We will see substantial changes to the “green” side of the housing industry, they may not be flashy but they will save the homebuyer money in the long term. But one thing is for sure, the basic home will be more expensive.

Stay Tuned . . . . . . . .

Tuesday, October 7, 2014

SMASHING URBAN VIDEOS

Urban videos are the rage and some of the people doing the work are just amazing and outstanding. One of the best I found is Hal Bergman –photographer and video maker.


Here are a couple of his finest on California, Paris, London, and the last a compilation.

I apologize for not having all the videos through YouTube but Google has this thing about only using their tubes on blogspot - so to speak. The Vimeo version are all HD and wonderful, just click on the URL or the title and it will take you there.


California

YouTube – low res.










Friday, September 26, 2014

Rooftop Salad


When I was a kid one of the most popular songs was Up On The Roof, by Gerry Goffin and Carole King. The Drifters released the best version of the song in 1962 – fifty-two years ago. For a kid in the Midwestern suburbs with absolutely no knowledge of urban living, I looked at the roof of my house and couldn’t understand any of it. Steeply pitched, shingled, I imagined trying to sit up there and “get away from the hustling crowd,”—whatever that was. Confusion until all was revealed in watching West Side Story – “So that’s what they meant!” by “up on the roof.”

Roofs have been in the news a great deal during the last decade. One idea was to paint them white which would reduce the heating effects of the sun during summer. Another was to cover them with solar panels thus helping the planet and the building owners pocketbook at the same time (thought fire departments have great concerns over accessing a burning building and trying to get through hundreds of those aluminum panels).


The “Green Roof” movement also comes to mind; just put plants all over the roof and great saving will be yours and the planet will be protected. There have been reports of collapsing ceilings when planters freeze up and become incredibly heavy boxes of solid ice, so the savings become questionable if the structure of the building needs beefing up for that roof top garden. And don’t even mention the costs of maintenance. Plants will grow and will in time need to be replaced, a very expensive proposition.

But there is now an effort in dense urban areas to place greenhouse farms on these roofs. An aerial view of any major city shows hundreds of thousands of square feet of empty rooftops just waiting for entrepreneurial gardeners to seize the roof—so to speak.

What is driving these opportunities is the high-end value and quality of the agricultural products. Most restaurants demand the best produce and these rooftop farms, through their controlled environments, provide produce that exceeds traditional produce grown on old fashion truck farms. And when the costs of preparation, pest controls, and transportation come into the equation these operations begin to look better and better—and profitable.

As in any industry there is a learning curve, and as more employees learn the rooftop gardening trade they will seek out more roofs and expand the market.
Less water use, higher densities of planting, high-end organics, minimal or no pesticide use, the ability to use the building’s excess heat during winter, and provides an insulator during the summer and winter. Even more importantly food is grown within the market itself, sometimes as in the case of the Whole Foods Store in Brooklyn, that market is right down stairs.

What will change is that many future urban buildings will be built to use the rooftop as an integral component of the design. It is easy to imagine the vertical mixed-use project taking the final step of using the roof for agriculture. The new urban building could be retail on the ground floor, offices on the next three or floor floors, multiple residential floors, and a farm on the roof.


Stay tuned . . . . . . . . .