Gas Prices Clobber McMansions, SUV Makers

[c1ue]

Re: Gas Prices Clobber McMansions, SUV Makers

Steve,

I suggest that you not consider all cities the equivalent of LA or San Diego.

San Francisco actually has huge areas where living is very affordable.

Between the rent control, Sunset suburban districts, and public transportation, there are a lot of people who get by on very little.

Food is also really cheap; last week I walked to Chinatown and bought cherries for 89 cents a pound.

[flintlock]

I don't think the suburbs will wilt, but the absurd rate of growth they've seen for the last 20 years will slow to a crawl. There's a difference.

A myth that seems prevalent these days for some reason is that everyone in America works at some big corporation office job or auto plant, and must commute to the inner city or face unemployment. We don't live in a manufacturing society anymore that requires that , nor do we have the need to have all business to be located in a CBD like in the past. A lot of that is a holdover from the past, linked more out of tradition than necessity. Businesses need to be near the Educated and skilled labor force. Historically that was why cities grew at the expense of the rural areas. The rural folks didn't have the education business needed, and the cities had all the roads and railroads needed for commerce. Well railroads haven't grown in decades, and most suburban areas have as good or better road networks than any city. We no longer need to ship in huge quantities of raw materials for production, nor do we need the mass labor for factories that the city provided.

Contrary to what many city dwellers think, the world doesn't revert back to 1840 once you leave the outer perimeter. As an example, today I drove to a house to do some work about 40-50 miles out from Atlanta. Flowery Branch, GA. On the way I must have passed a dozen quite large industrial manufacturing plants or warehouses. I passed a sparkling new hospital, shopping centers, new homes of all sizes and shapes. Office buildings. A luxury marina. I arrived at a quite handsome yet modest ranch home. Probably a 2000 sq ft ranch with a full finished basement, 3/4 acre lot, in a well maintained neighborhood. The guy said he just paid $212,000 for it. He, like most of his neighbors I'm sure, works 15-30 minutes away. I seriously doubt these people are going to give that up for a slum costing twice as much in the city, just so they can save $2000 year in gasoline. Hell the city taxes alone cost more than that.

No, I'm more inclined to think this energy crisis may just be the beginning of the end for the city instead. Businesses will move out and leave the crap behind. Atlanta would have been dead long ago if they'd built a decent airport north of town. Just look at their chronic budget shortfalls.

I was reading Sunday in the paper about how lower middle class neighborhoods in the city are being trashed at an alarming rate. Seems that people couldn't afford the homes, they got foreclosed on, and then the vagrants and vandals moved in. Then on the next page, I'm reading how the city is paying people to move back into the city, just to try and "revitalize" things. Seems to me, in a free market, you wouldn't have to pay people to live somewhere that is supposedly more in demand.

[GRG55]

Re: Gas Prices Clobber McMansions, SUV Makers

I don't think the suburbs will wilt, but the absurd rate of growth they've seen for the last 20 years will slow to a crawl. There's a difference.

A myth that seems prevalent these days for some reason is that everyone in America works at some big corporation office job or auto plant, and must commute to the inner city or face unemployment. We don't live in a manufacturing society anymore that requires that , nor do we have the need to have all business to be located in a CBD like in the past. A lot of that is a holdover from the past, linked more out of tradition than necessity. Businesses need to be near the Educated and skilled labor force. Historically that was why cities grew at the expense of the rural areas. The rural folks didn't have the education business needed, and the cities had all the roads and railroads needed for commerce. Well railroads haven't grown in decades, and most suburban areas have as good or better road networks than any city. We no longer need to ship in huge quantities of raw materials for production, nor do we need the mass labor for factories that the city provided.

Contrary to what many city dwellers think, the world doesn't revert back to 1840 once you leave the outer perimeter. As an example, today I drove to a house to do some work about 40-50 miles out from Atlanta. Flowery Branch, GA. On the way I must have passed a dozen quite large industrial manufacturing plants or warehouses. I passed a sparkling new hospital, shopping centers, new homes of all sizes and shapes. Office buildings. A luxury marina. I arrived at a quite handsome yet modest ranch home. Probably a 2000 sq ft ranch with a full finished basement, 3/4 acre lot, in a well maintained neighborhood. The guy said he just paid $212,000 for it. He, like most of his neighbors I'm sure, works 15-30 minutes away. I seriously doubt these people are going to give that up for a slum costing twice as much in the city, just so they can save $2000 year in gasoline. Hell the city taxes alone cost more than that.

No, I'm more inclined to think this energy crisis may just be the beginning of the end for the city instead. Businesses will move out and leave the crap behind. Atlanta would have been dead long ago if they'd built a decent airport north of town. Just look at their chronic budget shortfalls.

I was reading Sunday in the paper about how lower middle class neighborhoods in the city are being trashed at an alarming rate. Seems that people couldn't afford the homes, they got foreclosed on, and then the vagrants and vandals moved in. Then on the next page, I'm reading how the city is paying people to move back into the city, just to try and "revitalize" things. Seems to me, in a free market, you wouldn't have to pay people to live somewhere that is supposedly more in demand.

In most [but not all] of the cities that I am familiar with, one of the biggest deterrents is the lack of, or quality of, public schools in the inner city. In some cities the wealthy can afford the private school fees, but there will never be any mass migration of the middle class into North American cities without solving this problem.

[jk]

Re: Gas Prices Clobber McMansions, SUV Makers

In most [but not all] of the cities that I am familiar with, one of the biggest deterrents is the lack of, or quality of, public schools in the inner city. In some cities the wealthy can afford the private school fees, but there will never be any mass migration of the middle class into North American cities without solving this problem.

empty nest baby boomers don't worry about the schools, and will want to downsize even more when faced with high utility bills. they're the prime demographic for moving from the suburbs back into the cities.

[GRG55]

Re: Gas Prices Clobber McMansions, SUV Makers

empty nest baby boomers don't worry about the schools, and will want to downsize even more when faced with high utility bills. they're the prime demographic for moving from the suburbs back into the cities.

No argument on the demographic. And as C1ue pointed out there will always be an affordable niche for young, urban singles or childless couples. Powerful demographic though that may be, that is not representative of our societies as a whole, so I am not sure what kind of cities this creates.

And besides, that would mean we need to fix the inner city hospital problem instead of the school system...

[flintlock]

Re: Gas Prices Clobber McMansions, SUV Makers

In most [but not all] of the cities that I am familiar with, one of the biggest deterrents is the lack of, or quality of, public schools in the inner city. In some cities the wealthy can afford the private school fees, but there will never be any mass migration of the middle class into North American cities without solving this problem.

I completely forgot to even mention the school situation. Lets face it, a lot of big cities( not all) tend to have small islands of well to do yuppies, surrounded by an ocean of crime, poverty, and broken down infastructures. Give it a few years. The movie "Escape from New York" won't look so much like science fiction, although ironically, I think NY will be a city somewhat immune to this phenomena.

[metalman]

Re: Gas Prices Clobber McMansions, SUV Makers

I completely forgot to even mention the school situation. Lets face it, a lot of big cities( not all) tend to have small islands of well to do yuppies, surrounded by an ocean of crime, poverty, and broken down infastructures. Give it a few years. The movie "Escape from New York" won't look so much like science fiction, although ironically, I think NY will be a city somewhat immune to this phenomena.

nyc is an island so as long as you can get over the bridges you'll be cool.

boston, san fran, etc? gates with sensors on your car that tell the gates the good guys from the bad guys the way you pay at the toll booth. cops with weapons that stun not kill the bad guys. used against american citizens. no shit.

ps: good guys will = guys with $$$ or poor guys who suck it up. that's a fact.

[bill]

Re: Gas Prices Clobber McMansions, SUV Makers

It will take government intervention to crack the codes http://www.lexisnexis.com/municipalcodes/ and develop high density housing inter-city.
I don’t envision the potential residents to be quite like this http://www.americanaatbrand.com/.
Middle class America in trouble looking for affordable/gov. sponsored housing will be future customers.
http://www.itulip.com/forums/showthr...8320#post38320

bill 06-14-08, 02:54 PM
I find value in acquiring inter city single vacant lots or homes if you have the nerves to be a landlord. Take advantage of middle class migrating into lower class intercity communities and supply them with affordable housing with closer proximity to jobs. One example of what’s going on is here. http://www.dallasnews.com/sharedcont...1.467d3f2.html
The inventory is abundant.
http://www.hud.gov/homes/index.cfm

http://www.guardian.co.uk/world/2008...subprimecrisis

June 25, 2008 Subprime crisis: US foreclosures bring homelessness to the middle class
As mortgage foreclosures continue rising month on month, growing numbers of middle-class professionals are losing their homes and downsizing from four bedrooms to four wheels.

[Guest]

Re: Gas Prices Clobber McMansions, SUV Makers

"Wealth Evaporates as Gas Prices Clobber McMansions, SUV Makers" (Bloomberg)

ITulip had a two year lead on this phenomenon (see Reports from the Front), but I am seeing more and more reports in the MSM.

"House prices in his rural subdivision beyond the Blue Ridge Mountains in Charles Town, West Virginia, have plunged as commuting expenses have soared. A four-bedroom home down the street from his is listed for $239,000, after selling new for $360,000 five years ago...

"Our whole economy reflects the relative costs of energy: the cars we drive, the houses we occupy, the kinds of factories we have and the equipment in them,'' says Dana Johnson, chief economist at Comerica Bank in Dallas. "I'm expecting relatively large changes in all of these things''...

The lifestyle of the exurban commuter may be one casualty. Emerging suburbs and exurbs -- commuter towns that lie beyond cities and their traditional suburbs -- grew about 15 percent from 2000 to 2006, nearly three times as fast as the U.S. population, as Americans moved further out in search of more affordable houses or the bigger ones that are sometimes derided as McMansions.

``It was drive until you qualify'' for a mortgage, says Robert Lang, director of the Metropolitan Institute at Virginia Tech in Alexandria, Virginia. ``You can't do that anymore. Your cost of transportation will spike too much."..."

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Speaking personally and anecdotally, I live about 20 miles outside of town, where I work. If I drive in every day, I figure 280 miles per week * 52 weeks per year / 30 mpg = 485 gallons per year. At $2 a gallon for gas, fuel costs were not a significant consideration in our purchase; at $6, annual commuting costs would be the equivalent of 2% per year surcharge on our house (145K), over ten years, a 20% surcharge. Imagine if I traveled in a 15 mpg SUV, then I'd be sitting on a 4% annual surcharge to live at my distance from town.

Consequence--as fuel costs increase, the value of our property decreases. So begins the slow death of the exurbs?

Kudos to Itulip's foresight.

I'm sure gas and energy prices have an effect, but I suspect it's overrated.

The only reason homes were built out in the sticks was affordability. During the boom some buyers were priced out of close-in homes. If you had your choice of a now-affordable close-in home that fell into your price range you'd probably take it.

Distance is a factor. But I suspect it's at least as much a function of lower drive TIME than fuel costs. Who wants to drive an hour to work if they can find a nice place 1/2 hour away? 3 years ago you didn't have the choice, it was living in the sticks or remaining a renter.

Energy will also cause homes to get smaller, especially in markets with climate extremes. So it will have a still-subtle effect on prices in that way also.

[FRED]

Re: Gas Prices Clobber McMansions, SUV Makers

I'm sure gas and energy prices have an effect, but I suspect it's overrated.

The only reason homes were built out in the sticks was affordability. During the boom some buyers were priced out of close-in homes. If you had your choice of a now-affordable close-in home that fell into your price range you'd probably take it.

Distance is a factor. But I suspect it's at least as much a function of lower drive TIME than fuel costs. Who wants to drive an hour to work if they can find a nice place 1/2 hour away? 3 years ago you didn't have the choice, it was living in the sticks or remaining a renter.

Energy will also cause homes to get smaller, especially in markets with climate extremes. So it will have a still-subtle effect on prices in that way also.

For the benefit of newcomers, this is as we forecast a couple of years ago.

[c1ue]

Re: Gas Prices Clobber McMansions, SUV Makers

The cost of the gasoline itself is not the only factor.

If everything costs more because of the distances involved, the actual net cost might be considerable.

Think on this:

While your car may only cost $2000 more a year, what about the gardeners? The shop attendants? The other service employees?

What about the increased transportation costs to bring goods into the warehouses and stores?

The increased utilities overheads for businesses and your home? The greater inefficiencies serving low density rural utility customers? Rural areas have historically had poorer utility services because densities make servicing relatively expensive.

The fewer jobs available now that construction is going into a decade long sleep?

Suburbs also, by definition, tend to be much farther away from ports/railroads/freight centers.

The cheaper cost of the suburbs may well have been an artifact of cheap gasoline.

If true, then should gasoline prices remain high it may be that suburbs are MORE expensive than living in the city relative to income levels.

[Starving Steve]

Re: Gas Prices Clobber McMansions, SUV Makers

The cost of the gasoline itself is not the only factor.

If everything costs more because of the distances involved, the actual net cost might be considerable.

Think on this:

While your car may only cost $2000 more a year, what about the gardeners? The shop attendants? The other service employees?

What about the increased transportation costs to bring goods into the warehouses and stores?

The increased utilities overheads for businesses and your home? The greater inefficiencies serving low density rural utility customers? Rural areas have historically had poorer utility services because densities make servicing relatively expensive.

The fewer jobs available now that construction is going into a decade long sleep?

Suburbs also, by definition, tend to be much farther away from ports/railroads/freight centers.

The cheaper cost of the suburbs may well have been an artifact of cheap gasoline.

If true, then should gasoline prices remain high it may be that suburbs are MORE expensive than living in the city relative to income levels.

"Your money or your life, Mac."

Go rent a copy of Bronson's Death Wish series. Any of the series will teach you about the real costs of living in Los Angeles or New York City.

That is why I say that beyond pot parties, what are kids learning in universities to-day, especially in economics classes?

[c1ue]

Re: Gas Prices Clobber McMansions, SUV Makers

Los Angeles is not really a city, it is really a collection of suburbs.

While there are some pockets of high density - these pockets are not accompanied by grocery stores. Just high rise condos in a sea of single family homes for the most part.

As for New York - the city is very different now than in the 'Death Wish' era. Admittedly crime will almost certainly rise as times get tough again, but then again I don't see any signs of a new crack epidemic either.

Detroit, on the other hand...

The point is that while certainly all cities have some area which is unsafe - it is not necessarily because the city is inherently that way. Don't forget the urban poor - whether it is housing projects in Chicago, San Francisco, or wherever these epicenters of generational urban poverty are the source of a lot of the violent crime.

And why are these in the city? Because it is cheaper to house/feed people there as well as to administer said welfare programs.

Otherwise you need to give them sharecropper farms - not practical in this modern era.

[GRG55]

Re: Gas Prices Clobber McMansions, SUV Makers

Los Angeles is not really a city, it is really a collection of suburbs...

And that's one reason what "works" for transit and inner city housing in NYNY won't ever work in the city of angels. The idea that all North American cities are going to become some sort of Eurodesign nirvana just because gasoline costs 6 or 8 bucks is farfetched. This is not Europe, and as you point out LA is not NY...and never will be.

I've heard that only a small percentage of US citizens have passports and have ever been outside their country. I sometimes get the impression a lot of US citizens haven't seen much of their own country either.

EJ can confirm that Bakersfield ain't Boston, and what works to deal with transport energy issues in one, won't in the other. The solutions will be as creative and as diverse as America itself.

[World Traveler]

America's Future - Buses

I think we need not look further than Latin America and the third world to catch a glimpse of our future at $7-10 per gallon of gas. Or maybe I should say, back to the past, like the '50's and '60's, when Greyhound and Trailways were how America's less affluent traveled the country.

The huge suburban sprawl around major American cities cannot be undone overnight, or even in the mid-term future. There's too much money invested in that infratructure of single family homes and suburbs. (I disagree with Kuntzler on that).

Buses. It's a solution that can be implemented a lot faster than rail systems, is more compatible to the design of American cities like Atlanta, Los Angeles, Houston, that grew up after WW 2, AND, bus systems do not need nearly as much lead time, which may be important if gas prices continue to spiral.

Latin America, for most part, does not have good rail systems, nor can majority of population afford cars. But most have decent bus systems that connect the major cities and mid-size towns. And, most of the largest cities, have good internal bus systems.

I'm most familiar with with Houston's Park and Ride. There are major parking lots in strategic sites in suburbs and outer city. Folks can drive, park in lot all day, take the bus downtown, then pick up car for a short ride home. The bus systems in cities like LA, Houston, etc., could be expanded, so cars in suburban areas are used more for shorter trips, while longer trips are done via bus. Inconvenient, but if gas prices go high enough, it will be used by bottom half of income scale.

Also noteworthy, at height of last gasoline price hikes (around 1981 or so), Houston voters approved a $.01 sales tax to finance an improved public transportation infrastructure. That's where money for Park and Ride came from. If gas prices get high enough, voters in other cities may do the same.

Another possibility are motorcycles, ubiquitous in places like Thailand and India. If gasoline prices go high enough, U.S. authrities may try to make motorcycle riding safer and therefore more popular, by legislating motorcycle only lanes, etc. etc..