Urbanexus Update - Issue #91
Urbanexus Update - Issue #91
H. Pike Oliver compiles this weekly update of real estate and community development news. Inclusion of an article does not imply endorsement. Please note that some links may lead to items that are behind a paywall.
The economy and real estate markets
Labor force participation in the USA
The annual overall (16+ years old) participation rate peaked around 2000, and has generally been decreasing as more people retire. There are other factors involved in the decline in the overall participation rate - such as more people staying in school - but retiring workers is a key. A few years ago, the overall participation rate began to increase slightly as solid employment growth offset the large number of retirements. Now, given demographics, we are likely to see a downward trend for the overall participation rate over the next decade, even with a healthy job market
RCLCO year-end 2019 real estate market sentiment survey
Over the past few years, RCLCO Sentiment Surveys had indicated continued confidence in real estate market conditions. This trend was bucked at the end of 2018 when, amidst rising concerns surrounding the state of the economy and the stock market, respondents to the YE 2018 Sentiment Survey reported deteriorating market conditions and warned of a forthcoming recession.
In the two surveys since year-end 2018, respondents have become more positive, as improving stock market conditions and resilient underlying real estate fundamentals have given reason for optimism. Although respondents to the year-end 2019 Sentiment Survey believe that most real estate sectors are firmly in the “late stable” stage of the cycle, the general sentiment is that most asset types are not quite as close to the “early downturn” phase as they had predicted a year ago.
Finance
A multi-family acquisition bridge loan
George Smith Partners secured a $10,500,000 acquisition bridge loan for a 71-unit multifamily property in the greater Seattle area. The loan provides 75% loan-to-cost and floats at LIBOR (London Interbank Offering Rate) + 2.75% for a 3-year term. Proceeds are structured as $8,462,000 in initial funding plus holdbacks for interest reserve and capital expenditures.
Retail
Online mattress seller bets big on stores As bed-in-a-box startup Casper files for an IPO, the buzzy mattress seller is betting that the next big thing in sleep is brick-and-mortar retail outlets.
New York City stores must accept cash
New York lawmakers passed a bill that puts New York at the forefront of a national movement to ban cashless businesses. Meanwhile, some of the same cities that have floated cashless bans on businesses are considering making their own public services cash-free.
Housing
New home starts in the USA not keeping pace with demand
An analysis by realtor.com found that the 5.9 million single family homes that were built between 2012 and 2019 are insufficient to offset the 9.8 million new households formed during that time.
At the end of 2019, home builder confidence reached a two-decade high, driven in large part by robust economic growth. Single family home starts per 1,000 households grew from 4.6 in 2012 to 7.3 in 2019, taking the eight-year average to 6.2. Still, levels still remain well below the two-decade average, according to realtor.com's findings. Realtor.com economists estimate that even with an above average pace of construction, it would take home builders four to five years to get back to equilibrium.
Who’s to blame for high housing costs?
The developer is only one piece of the financial food chain that provides capital for new housing development. Jenny Schuetz of the Brookings Institution dives into the housing crisis issue.
Housing production in the San Francisco Bay Area
The Bay Area’s housing affordability and neighborhood stability crisis has been decades in the making. Although the housing crisis has many components, its foundation is clear: there simply is not enough housing, whether market-rate or affordable, given the growing number of residents and jobs.
An updated analysis by McKinsey & Company reveals that inadequate housing production results in a disproportionately negative impact on housing costs for extremely low-income households in the greater Seattle area and contributes to homelessness.
Regional and metropolitan dynamics
Demographia international housing affordability survey
For 16 years, the Demographia International Housing Affordability Survey has rated housing affordability for metropolitan areas (which are both housing and employment markets) in multiple nations. Genuine analysis of housing affordability requires consideration of house prices in relation to household incomes. The Demographia Survey uses the Median Multiple,the median house price divided by the median household income to rate housing affordability.
There were 31 severely unaffordable major housing markets in 2019 out of a total of 92 major markets. Hong Kong was the least affordable, with a Median Multiple of 20.8. Vancouver was second least affordable major housing market, with a Median Multiple of 11.9. Sydney ranked third least affordable, at 11.0, followed by Melbourne, at 9.5 and Los Angeles, at 9.0. Toronto and Auckland tied for sixth least affordable, at a Median Multiple of 8.6. San Jose had a Median Multiple of 8.5 and San Francisco 8.4. London (Greater London Authority) had a Median Multiple of 8.2 and was the 10th least affordable major market.
Critiquing the International Housing Affordability Survey
The International Housing Affordability Survey rates affordability in selected urban regions. Per Todd Littman, users of this information should be warned about its biases
More debate about how to measure relative affordability
Houston has been held up as a rare example of an American city that is both large, thriving, and cheap. But on January 17, 2020, Texas Monthly published an article with the provocative headline, "Houston is now less affordable than New York City." The piece argues that once the costs of transportation are factored into the equation, auto-dependent Bayou City becomes much less of a bargain. Indeed, a closer look at how affordability is measured by HUD reveals some serious problems with the Texas Monthly article's analysis, suggesting that the traditional view of Houston as a big, affordable place to live still holds up.
Community develoopment
Using Google Earth aerial imagery from June 2010 and September 2019 (the closest available to the start and end of the 2010s), Denver Infill blog has compared the “before” and “after” condition of over a dozen downtown-area districts showing those parking lots disappearing. Go to the link and use the little slider to see the 2010 image on the left and the 2019 image on the right. Images highlighting one example of this dramatic change in the Union Station District are posted below. Hat-tip to John Durham for finding this.
Per Greg Howes, mass timber and DfMA (Designing for Manufacturing and Assembly). Cross-laminated timber itself is not cheap. It is more expensive per unit than steel or concrete. The savings comes in reduced labor costs.
Efficiency and cost-savings are primarily made possibly by "teams" of experienced architects, engineers, fabricators and builders who know how to design and engineer for manufacturing and assembly DfMA and have experience in the specific regulatory environment in the location of the building.
Learn about a digital proof-of-concept that Sidewalk Labs is working on for a 35 story mass timber structure here, here and here.
Around the world
Holocaust survivors struggle to recover property in Poland
Home to one of the world's largest Jewish communities before World War II, Poland is the only EU country that has not legislated on property restitution. To make matters more difficult, Jews say documents proving property ownership were often destroyed in the Holocaust.