McMansions into Multi-Family Housing

[dbarberic]

Re: Kunstler's sources wanted this in the 70s and 80s

It seems to me that the only part that iTulip got wrong in their real estate forecast is the speed the downturn is moving throught the sequence of forecasted events. Step F was originally forecasted somewhere around 2012-2014. We are now three years early and even a major cable network is picking up on the idea.

[Jeff]

Re: McMansions into Multi-Family Housing

Just a note on the need for rental housing, here's an anecdotal tidbit. I own a portion of 6 residential apartment complexes across the US and occupancy is pretty much DOWN across the board. Data is not the plural of anecdote, but still I was very surprised. I expected occupancies of 100% as people lost their houses.

Could they all be living in cars or with relatives? I'm perplexed.

[jimmygu3]

Re: McMansions into Multi-Family Housing

Just a note on the need for rental housing, here's an anecdotal tidbit. I own a portion of 6 residential apartment complexes across the US and occupancy is pretty much DOWN across the board. Data is not the plural of anecdote, but still I was very surprised. I expected occupancies of 100% as people lost their houses.

Could they all be living in cars or with relatives? I'm perplexed.

I think so. I have relatives, a family of 4, who can't pay their $1500 mortgage on their 3br/2ba house. The alternatives are a nice 3br apartment for $1200 (still can't afford it), a crappy 3br apartment for $900, or a 2br for $700 (with their boy and girl sharing a room). None of these are as appealing as living for free or cheap in a relative's finished basement in a nice subdivision.

Remember, apartments generally require a deposit and good credit report, both of which are unlikely to come from people who just lost their home to foreclosure.

Jimmy

[don]

Re: McMansions into Multi-Family Housing

My Great Grandmother, the family matriarch, built two mirror image triplex apartment houses in the heart of the Depression, when cash was king. They were 3 stories each, with a flat on each floor. She housed the entire family in those two buildings. I lived in one until I was 7.

When my Grandfather married my Grandmother they lived there too. Early on, my Grandmother told my Grandfather that they either get their own place or she was leaving him, an extreme action in those days. She felt she would drown in that dominating family environment.

She got her wish and they rented a house across town. Within 6 months the bank stopped by and asked my Grandfather if he wanted to buy the place. He was a novice at real estate and asked could he afford it? They asked him what he could afford and priced the place accordingly. My Grandfather then told the bank there were too many things that needed fixing to buy the house. The bank asked for a list.

Within a week workmen arrived and made all the repairs. My Grandfather then bought the house and lived there until he died 60 some years later.

My only point is that it's always been a mixed deal, living with or away from "the family". I'd caution about gilding the lily on a permanent family get together ;)

[GRG55]

Re: Kunstler's sources wanted this in the 70s and 80s

A bit harsh on Mr. Kunstler. Don't forget that famous iTulip respect for others.

I think you are misrepresenting Mr. Kunstler's view. Mr. Kunstler feels strongly that we are approaching Peak Production Oil. Please explain how you can maintain a sprawling, resource intensive, suburban lifestyle, with a growing population and nowhere near enough national raw materials, while world wide resources rapidly decline? It's simply not possible.

The burbs are going to die. There are not enough natural resources in the world, and the world demand will grow far too fast, to support this uniquely American wasteful lifestyle.

Your psychoanalysis of Mr. Kunstler, is a little unfair.

I find it curious that there seem to be so many, like Kunstler, that say with such certainty that the suburbs are going to die. Speculating on future energy availability and price, and then extrapolating that to the death of the suburbs, completely ignores all the other drivers behind the decision as to where people choose to live.

Among those are demographics [Boomers are starting to retire; they don't need to live in the city], dramatic shifts in work patterns [for example wireless communications technology], the potential that the city-centric FIRE economy will give way to another cycle of production of real goods [factories are not built in city centres, so maybe fewer jobs on Wall Street and more on the outskirts?], and simple economics [suburban housing will stabilize at the point where it offsets the extra energy cost of living there, and no further].

The hoary arguments about resource constraints have been proven false time and time again. If copper is temporarily in short supply the price will rise and we'll use more aluminum wiring, just like we have in the past. If oil production caps consumption then we'll substitute more NGLs or electricity. If the cost of resources ultimately inflates [and given the global money printing now underway it seems difficult to expect anything else] then there will be a price adjustment in the relative costs of living in suburbia vs an inner urban area. But to suggest the suburbs are going to be obliterated as a worthless and wasteful concept, as Kunstler repeats ad nauseum, appears to show a great lack of understanding of human behaviour, and human ingenuity.

[GRG55]

Re: McMansions into Multi-Family Housing

My Great Grandmother, the family matriarch, built two mirror image triplex apartment houses in the heart of the Depression, when cash was king. They were 3 stories each, with a flat on each floor. She housed the entire family in those two buildings. I lived in one until I was 7.

When my Grandfather married my Grandmother they lived there too. Early on, my Grandmother told my Grandfather that they either get their own place or she was leaving him, an extreme action in those days. She felt she would drown in that dominating family environment.

She got her wish and they rented a house across town. Within 6 months the bank stopped by and asked my Grandfather if he wanted to buy the place. He was a novice at real estate and asked could he afford it? They asked him what he could afford and priced the place accordingly. My Grandfather then told the bank there were too many things that needed fixing to buy the house. The bank asked for a list.

Within a week workmen arrived and made all the repairs. My Grandfather then bought the house and lived there until he died 60 some years later.

My only point is that it's always been a mixed deal, living with or away from "the family". I'd caution about gilding the lily on a permanent family get together ;)

I tend to think that one of the contributers to the aggregate demand for housing units, urban & suburban, owner-occupied or rental, is the sheer number of singles and single-parent households. Whether because of delaying or never marrying, increasing divorce rates, or whatever other reasons the total number of households to population level is greater than it was a century ago. This severe downturn may reverse that trend, but you're right...it'll be damn hard to learn how to "permanently live together" all over again.

[GRG55]

Re: McMansions into Multi-Family Housing

Just a note on the need for rental housing, here's an anecdotal tidbit. I own a portion of 6 residential apartment complexes across the US and occupancy is pretty much DOWN across the board. Data is not the plural of anecdote, but still I was very surprised. I expected occupancies of 100% as people lost their houses.

Could they all be living in cars or with relatives? I'm perplexed.

Jeff: Things could be a lot worse. Imagine being in these folks shoes...

Tishman’s Stuyvesant Town Fund May Run Dry This Year

Jan. 23 (Bloomberg) -- Tishman Speyer Properties LP and BlackRock Realty, owner of Manhattan’s largest apartment complex, are relying on a reserve fund to pay debt on the property and have only six months of money left before it runs out, Fitch Ratings said in a report.

The fund for the Stuyvesant Town and Peter Cooper Village apartments has declined to $127.7 million as of Jan. 15, from $400 million when it was established. Property cash flow is not expected to improve from 2008 based on the borrower’s restated budget for 2009, the ratings company said.

‘Although the property’s performance remains consistent, the cash flow generated from the property continues to require significant reserves to cover debt service obligations”...

[Guest]

Re: McMansions into Multi-Family Housing

When I lived at the beach there were a large percentage of beach homes that had been converted into multiple units as home prices rose from cheap to ridiculous. These were usually not high end homes, but they were still $1M places due to the rise up in beachfront land values. In one case I discovered a smallish beach home that had been coverted into FOUR units. This trend did NOT do wonders for the locale and that part of the island where it was allowed is now kind of seedy, with rents reflecting that.

I'm thinking that zoning laws and motivated neighbors pushing to keep them in place will prevent this from going on in suburban areas where the most empty McMansions exist. It's considered quaint in town to have a big house with 3-4 tenants living in various sections, but it's considered destructive to property values to have that occur in a neighborhood of upscale homes. It might happen in an area where the neighborhood is otherwise abandoned, but probalby not in any established neighborhoods with just a few unsellable and vacant homes in it.

[Quincy K]

Re: Kunstler's sources wanted this in the 70s and 80s

The point made here was specifically a post housing bubble forecast. How else are "home owners" going to pay the mortgage without boarders? And a depression provides an abundant supply of under and unemployed in need of cheap rent.

iTulip made a post housing bubble depression forecast. Kunstler, on the other hand, is a Utopian. He had a lousy childhood in the burbs and is taking it out on the rest of us.

Millions of middle class were not eager to return to this after the war.

They went for this, a huge improvement.

Kunstler conveniently forgets the details. Unless you were rich, citites were horrific places to live. That is still true today, but less so.

As this contraction continues, you do not want to be living anywhere NEAR a downtown city plagued with government-subsidized recipients. Those(condo owners) that are proclaiming otherwise are in denial. It's only a matter of time before many of these types of people become desperate and resort to crime to prolong their existence.

You are at risk of becoming a victim anytime that you are in walking distance of these individuals.

[Guest]

Re: McMansions into Multi-Family Housing

Yuppies love city life....until the first time they get their front teeth knocked out for the $76 in their wallet. (unlike in woody allen movies, they don't ask you for it first) Or when they have a baby and it gets woken up and cries all night from the barflies pouring out of the nearby taverns screaming at the top of their voices. Or they have to go to the grocery store 4x/week because they have to park 200 yds away and then drag them up a few flights of stairs, so you're limited to what you can carry or put in a collapsable cart. Then there's just the mundane crime. My city loving cousin's been broken into 3 times in the last year or so. Meanwhile I don't even have to close my garage door or lock my vehicles if left in the driveway.

There's more to life than dollars and cents.

[FRED]

Re: Kunstler's sources wanted this in the 70s and 80s

It seems to me that the only part that iTulip got wrong in their real estate forecast is the speed the downturn is moving throught the sequence of forecasted events. Step F was originally forecasted somewhere around 2012-2014. We are now three years early and even a major cable network is picking up on the idea.

We have been consistently over-optimistic in our rate of change forecasts.

This raises three questions:

1) Does this mean we get to a "bottom" faster?
2) Does it mean the bottom is deeper than we imagined?
3) Does it mean a recovery may be as swift?

Hard to say.

[we_are_toast]

Re: Kunstler's sources wanted this in the 70s and 80s

The hoary arguments about resource constraints have been proven false time and time again. If copper is temporarily in short supply the price will rise and we'll use more aluminum wiring, just like we have in the past. If oil production caps consumption then we'll substitute more NGLs or electricity. If the cost of resources ultimately inflates [and given the global money printing now underway it seems difficult to expect anything else] then there will be a price adjustment in the relative costs of living in suburbia vs an inner urban area. But to suggest the suburbs are going to be obliterated as a worthless and wasteful concept, as Kunstler repeats ad nauseum, appears to show a great lack of understanding of human behaviour, and human ingenuity.

Yes, I'm familiar with the "they'll think of something", or "we've been through worse", or "technology will find a way" arguments. But I prefer to base an argument on data, and the data says that discovery of oil and strategic minerals is not keeping up with current consumption much less future rates with higher populations and far more demand from the 3rd world.

To believe the "hoary arguments about resource restraints" are now, have been, and will continue to be false, is to believe there is an infinite supply of everything in the world that can support an infinite population. A truly giant step outside the realm of reality, akin to believing we can expand the use of credit ad infinitum.

[BK]

Re: McMansions into Multi-Family Housing- On the Bright side

I think there are lots of advantages to a family and society when extended families live together - Obviously, it isn't without its price.

Children get to spend more time with their grandparents (education), less money spent on Day Care and Baby sitters, shared dining (may be this leads to better nutrition), fewer elders suffering from loneliness.

Perhaps Society would reap some real benefits if the extended family home comes back into style. I notice the Chinese Immigrants in my area always (often) have extended families living together. It seems to benefit the entire family.

[don]

Re: McMansions into Multi-Family Housing

When I lived at the beach there were a large percentage of beach homes that had been converted into multiple units as home prices rose from cheap to ridiculous. These were usually not high end homes, but they were still $1M places due to the rise up in beachfront land values. In one case I discovered a smallish beach home that had been coverted into FOUR units. This trend did NOT do wonders for the locale and that part of the island where it was allowed is now kind of seedy, with rents reflecting that.

I'm thinking that zoning laws and motivated neighbors pushing to keep them in place will prevent this from going on in suburban areas where the most empty McMansions exist. It's considered quaint in town to have a big house with 3-4 tenants living in various sections, but it's considered destructive to property values to have that occur in a neighborhood of upscale homes. It might happen in an area where the neighborhood is otherwise abandoned, but probalby not in any established neighborhoods with just a few unsellable and vacant homes in it.

This will be first and foremost a political decision, not a property value one.

[FRED]

Re: Kunstler's sources wanted this in the 70s and 80s

A bit harsh on Mr. Kunstler. Don't forget that famous iTulip respect for others.

He's not part of our community, so he's fair game. Have you ever seen the way we write about Alan Greenspan?

I think you are misrepresenting Mr. Kunstler's view. Mr. Kunstler feels strongly that we are approaching Peak Production Oil. Please explain how you can maintain a sprawling, resource intensive, suburban lifestyle, with a growing population and nowhere near enough national raw materials, while world wide resources rapidly decline? It's simply not possible.

Simple: more efficient cars. The Utopian animal is easily identified by his or her inability to see how adaptation to change occurs in a society and economy. You don't throw away 100 years of energy and transportation infrastructure just because the fuel the infrastructure conveyances run on got expensive. It is always cheaper to fix a broken infrastructure system than build a new one; the missing ingredient in Kunstler's fantasy destruction of the suburbs and buildout of cities is: money. Also, visit countries where gasoline is already two to four times the US price. Did the suburbs die there? Nope.

Our recommendation to Kunstler: visit Economics for Dummies regularly.

The burbs are going to die. There are not enough natural resources in the world, and the world demand will grow far too fast, to support this uniquely American wasteful lifestyle.

Not so. We will leverage every part of the existing infrastructure that is already in place as much as possible. Plus, by solving the problem with more efficient cars someone gets to sell a bunch of new cars. Yeah!

Your psychoanalysis of Mr. Kunstler, is a little unfair.

Contempt is a key element of Kunstler's act. It's entertaining. If he can dish it out, he can take it, right?