Thursday, August 7, 2014

Saturday, August 2, 2014

It is Becoming Electric!

BMW's i8 Concept car - hybrid (for now)
Long time readers know well my issues with electric cars, not the concept or the idea but the government’s (state and federal) tax credits and other juicy bits that help to make the car more affordable. In other words take from you to give to me. And of course the headlong rush to promote the electric car as the savior of the world has or will lead to other unintended consequences.

Most state and federal highways in the United States are paid for out of the various taxes placed on the sale of gasoline. It doesn’t take a high school math student to understand that as we sell less gas there will be less money for the roads and highway infrastructure such as bridges and tunnels. Electric cars put as much wear and tear on these facilities as gas powered vehicles—no matter what the HOV sticker on the rear bumper of the electric car says. Look for a revolution in how we fund our highways. The tax fund will decline—decisions on how to go forward will have to be made now not later. This will be a significant change to how we fund this all-important part of the American fabric. Will there be point of sale assessments? Will there be usage fees charged through internet connections with the car talking to state and federal computer (now that will be interesting)? Will there be usage assessments made at the electric meter at you house? It will get complicated before its simplified.

With the decline in gasoline demand the urban architecture of America will change. Across the American landscape, at prime highway corners, are gas stations, tens of thousands of them. Think what will happen as they disappear, what will replace them? What new architectural gem will fill this half-acre of extremely prime real estate? The corners are too small for most land uses, access is difficult (we make allowances for service stations), and clean-up is necessary. I think that housing has a chance here.

There may be the inevitable shift to replaceable batteries. These would require a location like the gas station but would allow for the quick replacement of a standardized battery pack—thus freeing the electric car from its extension cord. It is this flexibility that will allow the electric vehicle to achieve parity with gas.

There are now eleven all-electric cars available on the American market—and maybe another dozen more coming soon from GM, BMW, and the other international brands. A significant change in the overall transportation industry is coming. And it’s coming very quickly. These cars are simpler and safer. Less moving parts, no container of high explosive fuel under the rear seat, no pollution, and no having to take the car in for 3,000 mile oil changes. You know there’s a change when Ferrari is making an electric car (hybrid of course).

And when this change reaches the tipping point when there are more electric vehicles than gas vehicles on the road—what will the environmental crowd bitch about then?

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

Thursday, July 24, 2014

Is Housing Too Expensive?

Roller-Coaster Housing Prices
I read a post the other day that said the reason for the flat rate of housing sales is that they are too expensive. According to the article by Frank Anton, only 1 in 6 homes sold is a new home. Currently the percentage is even lower. One of the reasons is the national average has new homes costing 45% more than an existing home. I’m shocked that it took this long to figure out what has been the norm for more than fifty years—new homes almost always cost more than existing homes.

It is this relationship between the new home and the existing home that has provided the base line for affordable housing—the existing older home is the affordable home market. The twisted belief that we can build new affordable housing is the mantra pushed by agencies, charities, and cities. And the only way it happens is by subsidies, fees tacked on new housing, and grants. In other words new affordable housing exists because someone other than the homebuyer is contributing to the bottom line cost of the house. Which brings me back to home prices.

Outside of those few who believe that all homebuilders are carpetbaggers, speculators, and opportunists, almost every builder I know won’t build unless he has a confirmed market. There is little if any speculative building today, this is a lesson they learned in 2008 when it all when to hell in a lender’s basket. To believe that builders just throw out product like they were chumming for tuna is just plain silly—the forces of the marketplace would kill them.

At any time in any market housing will be too expensive—until it's not. What controls housing costs are five things: land cost, entitlements, materials, labor, and profit. Working backwards the builder makes choices through these five factors to set his price. He narrows his profit, he finds cheaper or non-union labor, he buys materials in bulk, he begs for fee reductions (building the park may be cheaper than paying the park fees), and lastly maybe he can renegotiate the land cost. It is a complex dance played to the tune of the band—the marketplace—that has its own balancing act of interest rates, debt, and income.

The difficulty today, especially in dense urban markets, is the newest player in the game—the non-profit affordable home builder (the non-profit thing is a ruse, they make a lot of money, it’s just called something different). They compete directly and unfairly with the for-profit builder at the first-time-buyer market. Why would a builder go through all the sturm and drang of the entitlement process to compete at the lowest cost/profit level when, with government assistance, he can and will be undercut? They won’t, they will just build to a different price point.

So, the real reason for the rising cost of housing is that we are not building enough housing—period. The only way that housing costs can go down is to noticeably modify one of the five factors. I don’t see this happening in the near future. Land costs are dramatically rising in urban areas, my experience recently is that cities are not interested in reducing their fees (some are raising or expanding their fees), materials costs are holding steady but this is a result of more supply than demand, labor is flat (but the push on the minimum wage may have an effect), and profit is what it is, except when there is competition which can noticeably affect the price.

It’s my opinion the biggest problem right now is the first time homebuyer market. They are unsure about the future and will bide their time. If they can settle into a good apartment, get their student debt managed, and maybe even find a willing partner to share the burden, the market will change. But right now I think they are marking their time—which is not good for the merchant homebuilder.

Stay Tuned . . . . . . . .

Saturday, July 12, 2014

Traffic To Die For

When I listen to the latest on traffic in the Bay Area and San Francisco (Galaxy Base for Cogito Urbanus) you would think we were in a free fire zone of automotive chaos and collisions. Here are a few videos that make you wish for those future days of robot cars.

The above is in Addis Ababa, Ethiopia (I bet some of you thought is was Columbus Circle in New York City). Makes you kind of dream about stoplights and left turn arrows. What is most fascinating are the pedestrians dancing in and amongst the cars. I hate to think of the number of accidents, though libertarians might think this all normal which proves that we don’t need the heavy hand of government over-management.

Note the seven lanes demarcated in the upper left lanes (Traffic Engineers of Africa) with appropriate turn and directional arrows. Watch how they are stringently followed. And I also note the lack of bicycles, I guess they are not as useful in a third world country as I was led to believe.

Now Ho Chi Minh City, Vietnam is an entirely different matter. One difference is the dominant use of motorcycles and mini-bikes. The intersection also has a traffic signal, one I believe, that hangs over the center. As with Ethiopia, pedestrians must fend for themselves.

Mumbai, India looks like any intersection in New York (mostly taxis and pedestrians) or Columbus Street in San Francisco.

Driving in China – Linyi City style. Lanes? I don't need no stinking lanes.

Pedestrian crossing Japanese style. This near the Shibuya train station in Tokyo.

And you thought Los Angeles traffic was bad.

What more can you say when you mix vodka and traffic. This is near St. Petersburg, Russia.

And you can always bet on the Japanese to solve the problem – Nagoya, Japan

Stay Tuned . . . . . . . . .