Charlotte down 6%? Where's Sebastian to tell us otherwise?
CR, take your time. You earned it. Looking forward to the Canyon de Chelly and Whitehouse Ruins pictures. Heehee. That last one is just too ripe for snark. Sorry.
Several threads back there was a story about the rare Bugatti turning up....for those who love Bugattis & other grand old cars: If you are in France, visit the Bugatti museum in Mulhouse. It's magnificent.
So, 2009 is here. Gentlemen/Ladies: Start your engines (if you still have one)!
Not to be too confrontational but consider the possibilty that Detriot is not an exception. No one has yet to prove to me that stable prices in Flyover America wasn't their bubble. Interestingly the cities that have declined most are Sun Belt America. Maybe energy dependence isn't as important as some assert. There's also the issue of "the 20." Cities like Worcester, Springfield, Hartford, Buffalo are absent. Maybe the Sunbelters are only over represented because they tend to be bigger.
Rob Dawg writes:
Charlotte down 6%? Where's Sebastian to tell us otherwise?
I am sure condo's are more than 6% off. There were several projects that went TA. I know one realty company which was heavy into flipping houses and they went bustt!
Academic Question: Since Detroit did not enjoy a housing bubble to get its housing bust, what exactly could happen to turn that market around? Anything? Hypothetically, more/better jobs and lower taxes, but realistically, what?
Looking at those charts, i'm pretty convinced that the bottom has been reached. Our economy is set up for a long term bull run.
There are many profitable sectors of our economy, which will serve as a major engine of growth moving forward. Refer to the following list: money supply manipulation, government spending, warmongering, population control, asset trading/swapping.
My optimism is reaching all term highs. It is a great time to buy or sell assets.
oh, and BTW, the market is getting in rally mode for O. Oil up, dollar up, t-bonds off big.....
Reminds me of a 5th dimension song I heard one time....
I dont believe so Dennis atleast not from the pics I have seen, however my first game as a young-boy at Stanford Stadium in 1970 featured TWO Native American quarterbacks (i.e. Jim Plunkett for SU and Sonny "Six-Killer" for Washington).
Academic Question: Since Detroit did not enjoy a housing bubble to get its housing bust, what exactly could happen to turn that market around? Anything? Hypothetically, more/better jobs and lower taxes, but realistically, what?
Detroit will not recover without the emergence of a new, growth industry. Same as the rest of the country. Period.
I do not see it happening soon. The most likely candidate IMO is alternative energies, and Detroit does not look energy rich to me...
Apparently I woke up on the wrong side of the bed today, and I'm staring into the pit of despair.
Seattle is also in the "zoned zone" and only down about 11%. But one of our local news stations assured me this morning it was a great time to buy a condo downtown.
One of the few interesting points in the segment was that no new projects have broken ground in over a year (which seems wrong to me, as I'm sure I've seen a few new sites in the past two months). Anyway, one of the benefits to being late to the party is, perhaps...perhaps ... we won't have quite the gruesome oversupply of some areas.
But the idea that it's a great time to buy a Seattle condo made me laugh.
Looking at those charts, i'm pretty convinced that the bottom has been reached. Our economy is set up for a long term bull run.
There are many profitable sectors of our economy, which will serve as a major engine of growth moving forward. Refer to the following list: money supply manipulation, government spending, warmongering, population control, asset trading/swapping.
You had me there for a moment. Almost had an aneurysm.
From where I sit - small coastal town in San Diego county - banks seem to be forcing a bottom. No change in the foreclosure and 2 short sales on my street in almost a year. IF prices were to sink back to the beginning of the bubble - say 2000 - it would mean total meltdown in San Diego. So, the empty foreclosures sit and the 'tenants?' stay in the short sales.
But the idea that it's a great time to buy a Seattle condo made me laugh. \t tranches of lint | \t \t \t \t01.02.09 - 2:07 pm | #
The new big downtown "luxury" condo complex down the road from me (Central California) still has no more than four or five units (out of 70) lit up on any evening. The other day I drove by in the evening and saw a group of six or eight seniors sitting in a circle in the lobby, and I realized it was probably an owner's meeting.They're in deep sht. But if you like deep sht, it's a great time to buy!
One of the few interesting points in the segment was that no new projects have broken ground in over a year (which seems wrong to me, as I'm sure I've seen a few new sites in the past two months). Anyway, one of the benefits to being late to the party is, perhaps...perhaps ... we won't have quite the gruesome oversupply of some areas. tranches of lint | 01.02.09 - 2:07 pm | #
That no new projects claim is BS. I was there at the end of June and there were several recent starts in plain view. Seattle and ummm... WaMU? Supply/demand is a ratio. That bottom number. demand can be a killer. Late to the party? Maybe left to drink the dregs while all the best dates have gone home.
I call BS on the Washington -25% number. That must be the average for the MSA -- Woodbridge down 50% but Arlington, VA (or places people want to live) down 0%.
This probably means New York house prices will decline by a larger percentage over the next year or two than other bubble areas
I would say the same about Boston. The Great Recession started later in some areas--homebuilding and autos tanked earlier, and the North Atlantic cities didn't have much of either. Which means they escaped the first wave of distressed sales that drove prices down. Look for several cities to experience precipitous drops this year.
Paulson told the Financial Times that imbalances between fast-growing nations which save, such as China, and those who spent were at the root of the problem.
Just a shout-out to all the Bugatti fans out there. Those cars are perfection on wheels.
Somehow I have cars on my mind right now. LOL!
What I have learned from 15 + years of Mitsubishi ownership: every piece of electronics in that car was, at one point or other, replaced, including the wiring harness. The door fell off once. At just over 100,000 miles, the engine blew up.
Yes, I was religious about servicing the car.
I guess US carmakers are not the only ones making POS cars.
Gavshire Hathaway writes: I do not see it happening soon. The most likely candidate IMO is alternative energies, and Detroit does not look energy rich to me...
Apparently I woke up on the wrong side of the bed today, and I'm staring into the pit of despair. Gavshire Hathaway | 01.02.09 - 2:06 pm | # ----- Not to invoke Mad Max scenarios, but what do you do with the husks of these former great (Size; Pop. Density, etc) cities? Is there any risk them trending more feral ala Mogudishu? If you have no job creation/growth and are sitting on empty properties that run the risk of increasing the size of the ghettos of a given city, what keeps it all together?
Maybe more to the point, what do you do with the former "boundaries" of a city as it shrinks? Have we ever had a city in this country give up land to the county or state?
I call BS on the Washington -25% number. That must be the average for the MSA -- Woodbridge down 50% but Arlington, VA (or places people want to live) down 0%. badger boy | 01.02.09 - 2:14 pm | #
@Yagij,
That's a very good question. Frankly if I were a government official looking out for the best interest of the nation -- I wouldn't even try to resurrect detroit. Instead I would focus on other parts of the country which still might be salvaged. In which case detroit will just see a long term exodus.
IMO it makes more sense to create new jobs in cities which have a healthy base of industry -- that way they can build off each other and reinforce whatever service industry remains.
Detroit is so far into atrophy that it is now beyond the point of no return.
There are still 2 foreclosure moratoria in place. The Fannie-Freddie moratorium comes off January 9. The California wildfire moratorium ends in February. I also think the banks, while maybe not having a moratorium of there own, are really dragging their feet.
Areas such as Northwood Point in Irvine also down maybe 10% and still up 14% annualized since 2001. Methinks the mortgage stimulus plan is a bit premature when houses are still inflated. Welcome back, CR, hopefully you are recharged for another eventful year.
But it would be an interesting study to watch what happens to a major city in its death throes. I'm of the opinion that rising crime levels and a dearth of white collar jobs would become a self-reinforcing death spiral. Anyone smart/affluent enough to leave will do so. And those that remain would be increasingly poor and government dependent. Which in turn creates an unstainable burden on businesses which remain.
Could detroit turn into one huge hooverville? The only reason to stay is if the cost of living is so remarkably low that a government check goes a long ways.
IMO it makes more sense to create new jobs in cities which have a healthy base of industry -- that way they can build off each other and reinforce whatever service industry remains.
Detroit is so far into atrophy that it is now beyond the point of no return. Gavshire Hathaway | 01.02.09 - 2:26 pm | #
We thought about this once before with the mill towns of New England. We collectively and correctly accepted the inevitable. The problems are that 40 years later we are a far more centralized goverment and Detriot is not Worcester from a demographic perspective.
Another possibility is that through the ashes of the failing city, labor costs get so low that industrial companies return. Perhaps Detroit could be ground zero for a resurgence of American industry.
Gavshire Hathaway writes: Detroit is so far into atrophy that it is now beyond the point of no return. Gavshire Hathaway | 01.02.09 - 2:26 pm | # ----- The reason that I use Detroit is that I can imagine other cities following close in its footsteps, and I'm not sure who is spending the brain power wondering what you do with all of the square milage of increasingly unproductive--if it was ever productive?--land. As places like Detroit gets worse, do we just let it go feral and try to contain its problems?
Most--if not all--of our limited history has dealt with growth or at least boom & busts. However, when you are facing metropolis-sized cities facing sustained declines, what else are you facing but growing regionalism? What does history show?
In its heydey, Harrah's auto museum in Reno was quite a place. But I'm sure it's much diminished since Harrah died, if it's still there at all. Bob Dobbs | Homepage | 01.02.09 - 2:19 pm | #
Bob,
Here is the link. It has an incredible collection.
It will probably go all the way down into local barter economy, garage sales, little services here and there. Just like it is already in many downtown areas of major cities among the poor folks...except now the middle class suburbia will join the crowd.
Rob Dawg writes: The problems are that 40 years later we are a far more centralized goverment and Detriot is not Worcester from a demographic perspective. Rob Dawg | Homepage | 01.02.09 - 2:31 pm | # ------ Rob Dawg is thinking more along the lines that I am. When you are dealing with multi-generational poverty--in this case, "demographic" differences--left at the core of a declining city, I would imagine that you could consider other cities such as Memphis that may follow in the footsteps of Detroit. As I stated earlier, it was just a purely academic question, but if you have problems with roaming bands of thieves playing with political boundries to escape one jurisdiction for the protection of another, you can find yourself in a world that is very much unnerving to say the least.
I would think ghettos of unowned/unoccupied (officially) housing will cause much troubles in the days ahead.
Persecuted Comrade Anonymouse writes:
OT - Sold half of SPY, Q's, EEM I bought Monday for 7-8%. This faux rally will puke violently, just not yet.
Persecuted Comrade Anonymouse | Homepage | 01.02.09 - 2:41 pm | #
"Now Youngstown wants to close entire streets and bulldoze abandoned properties so it can shut down city services like street lighting, police patrols and garbage pick-ups that it can no longer afford to maintain."
"However, when you are facing metropolis-sized cities facing sustained declines..."
Might be similar to the decline of major city centers during the 1950s, which was the growth period of suburbanism. Major cities all tried clear-it-out 'urban renewal'. This met with intense social criticism years later, but it is hard to really get an objective conclusion because you can never get the emotionalism out of it.
When you are dealing with multi-generational poverty--in this case, "demographic" differences--left at the core of a declining city, I would imagine that you could consider other cities such as Memphis that may follow in the footsteps of Detroit. yagij | 01.02.09 - 2:42 pm | #
Yes, we even have an early example albeit less severe; Buffalo. It pains me to have to speak in politically correct code because it isn't about racism. It unfortunately sometimes manifests as appearing racist. Were Detroit nothing but of Northern European extraction it would still be beyond saving. IMO the kind thing to do is provide housing vouchers and bus tickets even though that didn't work so well in Katrina.
"I call BS on the Washington -25% number. That must be the average for the MSA -- Woodbridge down 50% but Arlington, VA (or places people want to live) down 0%."
It is for the entire MSA. But Arlington is down more than zero percent, and will eventually fall like the outer regions. If houses in Prince William county tripled in short time, then fell back to their old values, what do you think will inevitably happen to Arlington which doubled in the same short time? Back down!
sidd writes: "Now Youngstown wants to close entire streets and bulldoze abandoned properties so it can shut down city services like street lighting, police patrols and garbage pick-ups that it can no longer afford to maintain."
offering 50K to move. sidd | 01.02.09 - 2:45 pm | # ----- Thanks for the link. I figured that it had to have been tried before now, but I hadn't found any news articles.
I'd imagine that providing services to lightly populated areas within a city would be cost prohibitative, and I wonder if/when cities get the ability or idea to start offering the "dead" land to some other entity. Think divorcing spouses trying to dump the underwater house on each other but in this case, cities & munis trying to dump 'em onto counties, other munis, or even the state. Heck, it may get to a point that states would try to dump parts of states for either protecting a 'healthy' core or bartering with other states for resources (e.g. GA & TN fight over TN River access).
The reason that I use Detroit is that I can imagine other cities following close in its footsteps, and I'm not sure who is spending the brain power wondering what you do with all of the square milage of increasingly unproductive--if it was ever productive?--land. As places like Detroit gets worse, do we just let it go feral and try to contain its problems?
yagij | 01.02.09 - 2:34 pm | #
Detroit is going back to nature. The city is growing new trees in streets, parking lots and even on top of buildings. It's also a haven for wild pheasants I believe.
"yagij writes:
Academic Question: Since Detroit did not enjoy a housing bubble to get its housing bust, what exactly could happen to turn that market around? Anything? Hypothetically, more/better jobs and lower taxes, but realistically, what?"
I've looked at this in some depth. There are several things which could help.
Recovery of the Big 3 automakers.
Bringing several large new employers to the area. Unfortunately, because of the drop in auto industry jobs, you need a lot of new employers. Unless, it's #3 or 4.
Put in a large new university. Several parts of the City are well-suited to this. Plenty of infrastructure, lots of cheap land and housing. I don't think people appreciate how much raw land with utilities there is now in Detroit.
Put in a big new federal operation, like a military base.
I am disappointed to say that Detroit doesn't seem well suited to wind farms or big solar arrays.
The Auto und Technikmuseum_Sinsheim ( Sinsheim Auto & Technik Museum - Wikipedia, the free encyclopedia ) has Bugattis, and what stuck me the most, after noticing that the oil was being collected by a drain pan, as the vehicles are still in complete operating condition, was the paint. I still believe that the car was truly an original, without any 'restoration' at all, apart from necessities such as new tires. Amazing to see something from the past like that - and to recognize that even today, many vehicles are still inferior in diverse ways to a true masterpiece. Of which essentially every component was manufactured by hand.
Of course, around Bruchsal and Baden-Baden, you do have the chance to see some truly unique vehicles, including non-reproduction 3 wheelers from this model series -
' The newest model from Mercedes-Benz comes complete without doors, seat belts, a windshield and one less wheel than other cars, all for about $50,000.
After a 116-year hiatus, Mercedes has resumed production of the original three-wheeled vehicle recognized as the world's first automobile. Resembling a large tricycle and armed with a 0.75 horsepower, single-cylinder engine, the No. 1 Patent Motor Car can reach a top speed of 10 mph, just like the original.'
Sometimes, in historical intervals, Mercedes likes to recreate the world's first car trip, including a stopover in the Bruchsal Schloss, in large part, due to this -
''Although the patent motor car – the great invention of her husband, Karl Benz – was already two years old, sales were sluggish. So in order to demonstrate the possibilities and reliability of this new mode of transportation, Bertha Benz and her two sons, Eugen and Richard, drove the 106 kilometers from Mannheim to the town of her birth, Pforzheim. Unbeknown to her husband, she set off early that morning, and on reaching Wiesloch the three adventurers stopped off at a chemist’s shop to fill up with “ligroin” – as gasoline was still known at the time. In Bruchsal the services of a blacksmith were required to repair the drive chain; in Bauschlott a shoe smith fitted new leather to the brake shoes – and an interim report was sent by telegram to Carl Benz. At regular intervals Bertha Benz also had to unblock the fuel line using a hat pin. And she sacrificed one of her stocking garters to insulate the ignition. But these were mere minor inconveniences – they arrived safe and sound in Pforzheim that evening without experiencing any major difficulties, and Carl Benz received a second telegram informing him of the success. Three days after this pioneering achievement, the three of them drove safely back to Mannheim.'
That's right, Bruchsal is arguably where the world's first true auto repair was made. And these days, when they wheel one of those out, it is surrounded by a team of mechanics. It is not easy finding a good blacksmith these days, after all.
Born and raised in the Detroit area myself until moving in 2000. My observations about the area:
Dirt cheap housing prices won't be enough to revitalize the city and suburbs. First, they have to stop the bleeding of graduates from the state's relatively solid colleges to warmer, brighter climes. Otherwise they move to Chicago or Columbus.
They need one auto company (F?) to shine/compete with Toyota/Honda while the other (GM?) either merges with auto company one, or fades away.
They need responsible civil governments. They need cohesion between the "Detroit - Don't need 'em" counties (Oakland, Macomb, Washtenaw) surrounding Wayne.
Will this ever happen? At least they have a decent port/cargo location (Windsor, Canada) to keep them going. Otherwise there's nothing to stop the city from declining even further.
For those of you who haven't seen it a very important and sobering article at Naked Capitalist ... a new study by Economists Carmen Reinhart and Kenneth Rogoff ...
Their latest piece looks at how crises generally progress and resolve themselves. The usual outcomes are worse than most commentators forecast for the US (save the fall in average real estate prices):
1. Real housing price declines average over 35% over a six year period. Note in other crises, residential real estate was not necessarily a focus of the bubble. Even excluding Japan (which has suffered a 17 year housing price decline) the average is over 5 years.
Equity prices fall 55% over three and a half years.
GDP fall an average of 9% (read that twice)
Unemployment increases 7% over previous norms.
Government debt "explodes", increasing an average of 86%, but the cause is typically not a banking industry recapitalization, but maintaining services in the face of collapsing tax revenues and countercyclical measure ex financial system measures."""
wally writes: Might be similar to the decline of major city centers during the 1950s, which was the growth period of suburbanism. Major cities all tried clear-it-out 'urban renewal'. This met with intense social criticism years later, but it is hard to really get an objective conclusion because you can never get the emotionalism out of it. wally | 01.02.09 - 2:47 pm | # ----- However, isn't the growth of "suburbanism" the problem we are facing now? We have suburban areas dying/being foreclosed, and in places like Detroit, there is little urban activity that would equate to mid-term/long-term growth. If your suburban areas are underwater and trending up in crime and down in jobs, and the city in which you surround is already there or worse, it really does make me wonder how it all plays out.
States are already burdened with their state-wide problems, and as resources get less and less, would the Michigan legislature abandon Detroit to save the rest of the state or save Detroit and foresake the rest of the state? Is it an Either/Or question? What would be the state's priorities and obligations to these failing civic monstrousities?
Ah, someone beat me to it. Actually Detroit does have a couple good universities nearby - Wayne State and even better, The University of Michigan. But like I said, the state loses graduates (like myself) to other locations.
RE: Yeah, we did because we lived not far from Strausbourg. Had many memorable meals there. Friends took us to what they called the Nike factory canteen. Got a big surprise. It WAS the employee eatery, but a starred restaurant, too. Workers ate there during the day. Customers in the evening ate the leftovers. My kinda leftovers. Had Auberge in the name. This was in the early '80s. Don't know if it's still there.
Anyway, DC will always have the federal government, vendors and international institutions, think tanks and lobbyists, museums, libraries, foreign missions, tourism - unfortunately much of which does not produce tax revenue.
It is amazing what is concentrated here in what is really a smallish city.
That is commercial. I was referring to residential.
I realize that. Some on this board had said DC CRE would be ok in this downturn. I've argued the other side of that which seems to be what is happening based on that article. Filling in your excavation work is a pretty clear sign.
Monument Realty, building on the east side of Half Street SE, will deliver an office building, but there have been no announcements of retail tenants. And work on the residential project and hotel — long thought to be an Aloft hotel — has ceased. The developer was forced to fill in parts of the excavated hole to allow nearby utility work.
However, isn't the growth of "suburbanism" the problem we are facing now? We have suburban areas dying/being foreclosed, and in places like Detroit, there is little urban activity that would equate to mid-term/long-term growth. If your suburban areas are underwater and trending up in crime and down in jobs, and the city in which you surround is already there or worse, it really does make me wonder how it all plays out.
I was wondering if there was a name for the formerly urban areas in rust belts that are being depopulated and abandon? Maybe post-urban or neo-rural or something like that.
I said previously, I <a href="http://www.haloscan.com/comments/calculatedrisk/7279170197389673269/#798580>posted the entry live:
I went long (half positions) QQQQ, SPY, & EEM a moment ago (don't work w/ a computer - arbitrary entry). Stop day's low.
Persecuted Comrade Anonymouse | Homepage | 12.29.08 - 3:30 pm
ac writes: I was wondering if there was a name for the formerly urban areas in rust belts that are being depopulated and abandon? Maybe post-urban or neo-rural or something like that. ac | 01.02.09 - 3:01 pm | # ----- I second this inquiry. What would you call it? Do we have any US examples of this phenomenon?
"I realize that. Some on this board had said DC CRE would be ok in this downturn. I've argued the other side of that which seems to be what is happening based on that article. Filling in your excavation work is a pretty clear sign."
The Maryland governor has just announced a one day unpaid furlough for those earning under 40K, two days for those earning over that amount. Facilities like the motor vehicle bureau will be closed.
yagij writes:
As places like Detroit gets worse, do we just let it go feral and try to contain its problems?
We wall it off and turn it into a giant prison, "Escape from New York" style. We need to keep all the non-violent pot smokers in jail so we can employ more prison guards. /snark
"I was wondering if there was a name for the formerly urban areas in rust belts that are being depopulated and abandon? Maybe post-urban or neo-rural or something like that.
ac | 01.02.09 - 3:01 pm | # "
"Decaying" is the adjective I hear most.
But otherwise, no, there is not name. Because then the culture would have to admit that cities die. And that would be a bit scary in an economy that's still real-estate-centric. Even though the Old West is full of ghost towns.
I second this inquiry. What would you call it? Do we have any US examples of this phenomenon?
I recall reading an article about places in Ohio have trouble dealing with depopulated areas and donut shaped cities as people leave urban areas for the suburbs without an increasing population to balance the outflow.
The specific problem was that the existing buildings and infrastructure become a liability when there's nobody there and it's quite expensive to get rid of and turn concrete back in to grassy green fields.
One more thing also about Michigan and its school system. During the 1980s and early 90s it had a formidable K-12 education program and solid backing for its state universities. One hand (the grade school system) fed the other (state colleges.)
When I graduated, the big programs were all tech, semi-conductor and software related. Business too. Automotive, not so big despite being an important program you'd imagine for a university just an hour's drive from Detroit.
So where do you think most of the tech graduates went? And the business grads?
I think that at least for the first quarter we are likely to see a near frenzy in mortgage and real estate activity. The pump is primed...
Steve Higgins
Boulder CO Mortgage and Real Estate www.boulderloanranger.com
The gist is that the longer the commute from a city the worse the drop in housing prices. (In addition to living where homes are affordable, there's not nearly the same kind of urban sprawl here as there is in other bubble-cities, and I live close-in, anyway. Location, location, location.)
I came across it the other day in the comments section on this entry from Econbrowser about how high gasoline/oil prices have an oversized impact (reduction) on consumer spending:
It would appear as though CR was big-time right about one thing and big-time wrong about another in his recession forecast. Big-time right about it being a consumer-led recession, but big-time wrong about it having anything to do with housing, MEW, etc. The real culprit was high gasoline/oil prices, which explains why there were some cross-currents in the economic data we were seeing in 2008.
Although housing prices and MEW may have peaked a couple of years ago it wasn't until the past couple of quarters that the economy simply fell off a cliff from a normal expansion into a contraction, and it was triggered by the massive, sharp spike in energy prices.
Also, as recently as June, 2008 the ISM data still indicated that both manufacturing and the economy in general were expanding.
And when did the really big net job-losses come? Not until this past September, long, long, long after housing peaked, and not from a sudden, massive loss of construction jobs.
It's still a recession, though, and I still missed it.
Sebastian
p.s. Makes one wonder if the government used the wrong tool to fight the recession. What might have happened if the Strategic Oil Reserve had been released to bring down oil prices, instead of the Fed and the Treasury acting as lenders of last resort? S.
The problem with Detroit is they've been insolvent for decades and refuse to sell off assets, instead it's ineffective bailout after ineffective bailout. Detroit now offers practically zero services and yet has high taxes. They'd be better off jettisoning several square miles and let a new political entity rise from the remains. Or maybe they're waiting for Ford Heights, Illinois to go first.
Dear Self-Persecuted,
I'm embarrassed to say that I don't have an external measure. I do clock it all, but in the end - I listen to my "sense of the market".
Perhaps Detroit could be ground zero for a resurgence of American industry.
and:
The most likely candidate IMO is alternative energies, and Detroit does not look energy rich to me..
There's actually a fairly significant amount of work being done around Detroit on alternative energy technologies, particularly ones that have the potential of being relevant to cars. Despite the vastly oversimplified conventional wisdom that the Big 3 are technology laggards, they actually have done quite a bit of R&D on alternative power sources for cars, they just have been slow in deployment. GM has been funding advanced battery research for years, and they seem to think that they'll have the batteries they need (at the cost they need) to start selling Chevy Volts in about a year. Those batteries are not being developed in Japan or Europe, but in Michigan. There is also a mundane but very real issue that the 'Rust Belt' is full of idle industrial facilities that are likely to be cheaper to re-tool for building things like wind turbines, advanced rail vehicles, and so on than to build new factories and infrastructure elsewhere. As a purely political matter, putting a new industry into an urban or inner-suburban site that was used to build cars for 50 years and is now surrounded by abandoned neighborhoods is likely to be a lot faster and easier than building a new plant on a new site, even if the physical facilities are not very reusable.
I call BS on the Washington -25% number. That must be the average for the MSA -- Woodbridge down 50% but Arlington, VA (or places people want to live) down 0%.
Nope. Arlington is down around 17% for 2008 alone (look at the No. Va. Realtor website statistics page for exact figures).
@Bill C,
Good insights -- thanks! I suppose you're right that the industrial capacity and engineering is more important than a local energy source.
It will be very interesting to see if that scenario plays out -- with automotive output repurposed. For Detroit's sake I hope so. The labor and cost of living is certainly going to be attractive relative to elsewhere.
Interesting ideas from Youngstown. Maybe that will help with CA cities currently in financial crisis? I had always thought some of the unfinished developments would not ever recover, especially for the few early buyers. Now, there is additional incentive to bulldoze - city, county infrastructure and service costs.
There seem to be discrepancies between price and location. For example areas like Silver Spring (DC suburb) are still very highly priced and are only barely coming down. On the surface this doesn't make sense when compared to areas where there has been price erosion (Dupont Circle, U St, Alexandria).
Real estate is highly localized, but when comparing across desirable neighborhoods some of the prices in the overall DC region still seem far too high.
In addition, I wonder what comparative pricing was like before the bubble (say 2002 and before)? If you look at Southern California, there are now areas 20 minutes from the beach that are close to prices in the DC region - does this make sense and was it like this before the recent run up?
yagij- not only Detroit but all the Great Lake Cities could become really fashionable if the drought in the SW continues for a few more years. Couple that with slightly shorter winters because of global. Water Water Water
Sebastian - I think you are partly right about oil. I actually think the precipitating factor was the Federal Reserve easing interest rates in 2007. It precipitated a run on the dollar and in turn a rise in commodity prices specially oil. That finally broke the back of the consumer and laid everything bare. The story of the Emperor has no clothes comes to mind.
I hope Detroit and the rust belt cities see some kind of resurgence. If water is the big concern, I imagine a lot of SoCal types with money will attempt to move north, to NoCal (the SF Bay Area) or more likely Oregon/Washington first though.
unfortunately after that they will move to Vermont!
I don't think that we can afford to have cities like Detroit become a wasteland. One of the big problems in New Orleans is that it is impossible to rebuild the housing stock at the price points prior to the flood. This is true of cities like Detroit.As has been observed prices are below replacement values. People living in those areas can't afford to move (even if they are renters).
Detroit may not stage a comeback, but I think the notion that cities will contract in general is kind of silly. People can live a lot more efficiently in urban areas. Suburbs and exurbs will be the eventual ghost-towns.
I hope Detroit and the rust belt cities see some kind of resurgence. If water is the big concern, I imagine a lot of SoCal types with money will attempt to move north, to NoCal (the SF Bay Area) or more likely Oregon/Washington first though. samsin | 01.02.09 - 4:24 pm | #
When Californians leave, they tend to leapfrog all over the place; geographic proximity isn't the only factor. Back in the 90s, when we had the last outflux, indeed a lot of emigrants went on to Oregon and Washington, and Nevada, and Arizona. But also to Idaho, Colorado, Utah, even Texas. And Hawaii, if they could find a way .
The great northern industrial cities, Detroit, Cleveland, Buffalo, Pittsburg, etc, all grew up around easy access to water transportation. Before the railroads, waterways were the cheapest and easiest way to move raw materials and goods. Also benefited from nearby extensive raw materials (coal, iron ore, can you say Edmund Fitzgerald?). Once the railroads and the Interstate made inland areas competitive, people and industry opted for better weather (i.e. snow-free). Ironically, it was cheap water transport in the form of the standard cargo container, that started the decline of the industrial Northeast, as cheap goods arrived by water first from Japan, and later other Asian countries. So as long as overland transportation is competitive with waterways, I don't see the Northeast returning to prominence.
"I was wondering if there was a name for the formerly urban areas in rust belts that are being depopulated and abandon?"
In planning the term brownfields was first applied to abandoned urban industrial properties but I've seen it popping up to describe large abandoned areas of urban residential land too, e.g in Flint MI
001 writes:
On the ground video of Detroit
001 | 01.02.09 - 6:37 pm | #
That's pure genius video...absolutely what people need to see. You could make an equally shocking video in Buffalo, NY as well.
You show the result of exporting millions of US jobs to China. They should shackle and chain up all CEOs and management fucks (including Stanford business graduates) who promoted, facilitated, and executed this traitorous unconscionable will upon the American people. Lock them in those empty factories and throw away the keys.
Interesting takes here on the DC market...here's some more data:
Capitol Hill townhouses, best areas on the Hill, 2-4 BRs, 1500-2100 square feet, good to excellent condition. Using all available CMAs from 2005-present, these homes peaked at $580 psf by mid-2006 and remained there until late summer 2007, after which they have declined to $390 psf. That's more than a 30% decline.
Market Square condos, 701-801 PA Ave. These are the most expensive downtown DC condos. Using CMAs on 1BRs and 2BRs from 2003-2008, these peaked at around $930 psf and are presently selling in the mid-600s, again a 30%+ decline.
Clara Barton condos, the next most desireable condo complex in downtown DC. 3BR penthouses sold for high 800s before the peak (zillow thinks they peaked around 1MM)and are now listing in the lower 700s.
We've been tracking these as well as Friendship Heights and Dupont since mid-2006, saving money while we watch the prices decline in premium DC markets.
Anecdotally, prices did stabilize from early 2008 until September, but have since continued their decline. We think there will be continued decliens through June or July this year at least. In DC's favor are a well-regarded mayor, suburban flight into the city due to tough commuting, and (so far) a solid federal govt. employment base.
We live in Silver Spring and there are a number of new condos that look pretty empty from our vantage point.
Man, Arlington looks like a dump. Granted, the cheapest places are taking the largest hits, but even the >$700k places are listing for less than they sold several years ago.
Arlington will tank just like everything else around it. What shot up must fall down. PW county tripled, they will fall (or have in many cases) by just as much. Arlington at least doubled, so they'll fall by just as much. Might take much longer though.
But do they know about shrinkage !?
Hi all, answering 100s of emails this morning - sorry for the slow (or no) response.
best to all.
Charlotte down 6%? Where's Sebastian to tell us otherwise?
CR, take your time. You earned it. Looking forward to the Canyon de Chelly and Whitehouse Ruins pictures. Heehee. That last one is just too ripe for snark. Sorry.
It's almost as if houses were overpriced.
welcome back C.R., were you the economist being chased by a bear in T.Meadows? Couldnt have been too good-looking and the feet of hop-along casady....
When CS does the quarter end prices - what exactly is that? How does it differ from just the last month in the quarter?
welcome back C.R., were you the economist being chased...
It's not nice to come to a site and call the host horrible names.
Still catching up on the threads.
Several threads back there was a story about the rare Bugatti turning up....for those who love Bugattis & other grand old cars: If you are in France, visit the Bugatti museum in Mulhouse. It's magnificent.
So, 2009 is here. Gentlemen/Ladies: Start your engines (if you still have one)!
Not to be too confrontational but consider the possibilty that Detriot is not an exception. No one has yet to prove to me that stable prices in Flyover America wasn't their bubble. Interestingly the cities that have declined most are Sun Belt America. Maybe energy dependence isn't as important as some assert. There's also the issue of "the 20." Cities like Worcester, Springfield, Hartford, Buffalo are absent. Maybe the Sunbelters are only over represented because they tend to be bigger.
A.C. its a reference to Ohio State Football fame and a team-mate of my Dad's.
BTW welcome back as well.
Rob Dawg writes:
Charlotte down 6%? Where's Sebastian to tell us otherwise?
I am sure condo's are more than 6% off. There were several projects that went TA. I know one realty company which was heavy into flipping houses and they went bustt!
Good baller knowledge Zirp, wasnt he native american?
Academic Question: Since Detroit did not enjoy a housing bubble to get its housing bust, what exactly could happen to turn that market around? Anything? Hypothetically, more/better jobs and lower taxes, but realistically, what?
OT: ...but yes, you'd have to be insane to think you'd get away with it.
Madoff Working It Right Up To Eleventh Hour - Dealbreaker - A Wall Street Tabloid - Business News Headlines and Financial Gossip
Looking at those charts, i'm pretty convinced that the bottom has been reached. Our economy is set up for a long term bull run.
There are many profitable sectors of our economy, which will serve as a major engine of growth moving forward. Refer to the following list: money supply manipulation, government spending, warmongering, population control, asset trading/swapping.
My optimism is reaching all term highs. It is a great time to buy or sell assets.
oh, and BTW, the market is getting in rally mode for O. Oil up, dollar up, t-bonds off big.....
Reminds me of a 5th dimension song I heard one time....
I dont believe so Dennis atleast not from the pics I have seen, however my first game as a young-boy at Stanford Stadium in 1970 featured TWO Native American quarterbacks (i.e. Jim Plunkett for SU and Sonny "Six-Killer" for Washington).
Thanks CR, missed your charts. They're something my picture-based right-brained self can understand. Hope you had great hikes, but welcome back!
yagij writes:
Academic Question: Since Detroit did not enjoy a housing bubble to get its housing bust, what exactly could happen to turn that market around? Anything? Hypothetically, more/better jobs and lower taxes, but realistically, what?
Detroit will not recover without the emergence of a new, growth industry. Same as the rest of the country. Period.
I do not see it happening soon. The most likely candidate IMO is alternative energies, and Detroit does not look energy rich to me...
Apparently I woke up on the wrong side of the bed today, and I'm staring into the pit of despair.
Seattle is also in the "zoned zone" and only down about 11%. But one of our local news stations assured me this morning it was a great time to buy a condo downtown.
One of the few interesting points in the segment was that no new projects have broken ground in over a year (which seems wrong to me, as I'm sure I've seen a few new sites in the past two months). Anyway, one of the benefits to being late to the party is, perhaps...perhaps ... we won't have quite the gruesome oversupply of some areas.
But the idea that it's a great time to buy a Seattle condo made me laugh.
TBT here is the poster child for "dead-cat bounce," gives trading around a core position a whole new meaning...
OT:
Welfare Requests Up In NH - Money News Story - WMUR Manchester
Welfare Requests Up In NH
"These challenging economic times have brought 20 percent increases in the numbers of people applying for assistance,"
I can only imagine what the really affected states are seeing.
A.C. its a reference to Ohio State Football fame and a team-mate of my Dad's.
BTW welcome back as well.
zirpy the pinhead
I was referring to associating CR with the disreputable and unsavory lot is the economics profession.
Looking at those charts, i'm pretty convinced that the bottom has been reached. Our economy is set up for a long term bull run.
There are many profitable sectors of our economy, which will serve as a major engine of growth moving forward. Refer to the following list: money supply manipulation, government spending, warmongering, population control, asset trading/swapping.
You had me there for a moment. Almost had an aneurysm.
From where I sit - small coastal town in San Diego county - banks seem to be forcing a bottom. No change in the foreclosure and 2 short sales on my street in almost a year. IF prices were to sink back to the beginning of the bubble - say 2000 - it would mean total meltdown in San Diego. So, the empty foreclosures sit and the 'tenants?' stay in the short sales.
But the idea that it's a great time to buy a Seattle condo made me laugh.
\t tranches of lint | \t \t \t \t01.02.09 - 2:07 pm | #
The new big downtown "luxury" condo complex down the road from me (Central California) still has no more than four or five units (out of 70) lit up on any evening. The other day I drove by in the evening and saw a group of six or eight seniors sitting in a circle in the lobby, and I realized it was probably an owner's meeting. They're in deep sht. But if you like deep sht, it's a great time to buy!
One of the few interesting points in the segment was that no new projects have broken ground in over a year (which seems wrong to me, as I'm sure I've seen a few new sites in the past two months). Anyway, one of the benefits to being late to the party is, perhaps...perhaps ... we won't have quite the gruesome oversupply of some areas.
tranches of lint | 01.02.09 - 2:07 pm | #
That no new projects claim is BS. I was there at the end of June and there were several recent starts in plain view. Seattle and ummm... WaMU? Supply/demand is a ratio. That bottom number. demand can be a killer. Late to the party? Maybe left to drink the dregs while all the best dates have gone home.
I call BS on the Washington -25% number. That must be the average for the MSA -- Woodbridge down 50% but Arlington, VA (or places people want to live) down 0%.
If you are in France, visit the Bugatti museum in Mulhouse. It's magnificent.
Paradigm Lost | 01.02.09 - 1:56 pm | #
I agree. One if not the greatest automotive museum.
http://www.collection-schlumpf.com/en/schlumpf/
This probably means New York house prices will decline by a larger percentage over the next year or two than other bubble areas
I would say the same about Boston. The Great Recession started later in some areas--homebuilding and autos tanked earlier, and the North Atlantic cities didn't have much of either. Which means they escaped the first wave of distressed sales that drove prices down. Look for several cities to experience precipitous drops this year.
Stock market whistling past the graveyard. Lots of companies (or better "investors") will be soon buried.
RE: My hub did a photo shoot of the museum. We still have the pictures to remind us.
Paulson told the Financial Times that imbalances between fast-growing nations which save, such as China, and those who spent were at the root of the problem.
Wow. Well that solves all the problems.
Just a shout-out to all the Bugatti fans out there. Those cars are perfection on wheels.
Somehow I have cars on my mind right now. LOL!
What I have learned from 15 + years of Mitsubishi ownership: every piece of electronics in that car was, at one point or other, replaced, including the wiring harness. The door fell off once. At just over 100,000 miles, the engine blew up.
Yes, I was religious about servicing the car.
I guess US carmakers are not the only ones making POS cars.
RE(Unrated) writes:
\tIf you are in France, visit the Bugatti museum in Mulhouse. It's magnificent.
Paradigm Lost | 01.02.09 - 1:56 pm | #
I agree. One if not the greatest automotive museum.
RE | 01.02.09 - 2:14 pm | #
In its heydey, Harrah's auto museum in Reno was quite a place. But I'm sure it's much diminished since Harrah died, if it's still there at all.
Gavshire Hathaway writes:
I do not see it happening soon. The most likely candidate IMO is alternative energies, and Detroit does not look energy rich to me...
Apparently I woke up on the wrong side of the bed today, and I'm staring into the pit of despair.
Gavshire Hathaway | 01.02.09 - 2:06 pm | #
-----
Not to invoke Mad Max scenarios, but what do you do with the husks of these former great (Size; Pop. Density, etc) cities? Is there any risk them trending more feral ala Mogudishu? If you have no job creation/growth and are sitting on empty properties that run the risk of increasing the size of the ghettos of a given city, what keeps it all together?
Maybe more to the point, what do you do with the former "boundaries" of a city as it shrinks? Have we ever had a city in this country give up land to the county or state?
I call BS on the Washington -25% number. That must be the average for the MSA -- Woodbridge down 50% but Arlington, VA (or places people want to live) down 0%.
badger boy | 01.02.09 - 2:14 pm | #
25% pretty much describes Alexandria.
blonderengel:
I thought Mitsubishi made good air conditioners.
You can also see mine here which are updated regularly
case-shiller.blogspot.com
RE: My hub did a photo shoot of the museum. We still have the pictures to remind us.
Paradigm Lost | 01.02.09 - 2:18 pm | #
I hope you also enjoyed Mulhouse itself. Also, the Alsace is famous for its great restaurants in the countryside.
@Yagij,
That's a very good question. Frankly if I were a government official looking out for the best interest of the nation -- I wouldn't even try to resurrect detroit. Instead I would focus on other parts of the country which still might be salvaged. In which case detroit will just see a long term exodus.
IMO it makes more sense to create new jobs in cities which have a healthy base of industry -- that way they can build off each other and reinforce whatever service industry remains.
Detroit is so far into atrophy that it is now beyond the point of no return.
Mortgage rates are blowing up...30 yr fixed no point now 5.44 (same loan a few weeks ago was 4.375 no points)
Sinomania!,
There are still 2 foreclosure moratoria in place. The Fannie-Freddie moratorium comes off January 9. The California wildfire moratorium ends in February. I also think the banks, while maybe not having a moratorium of there own, are really dragging their feet.
Rob Dawg said: "Charlotte down 6%? Where's Sebastian to tell us otherwise?"
I don't live in Charlotte. You know how California has different cities? Same here.
Sebastia
I was referring to associating CR with the disreputable and unsavory lot is the economics profession.
ac | 01.02.09 - 2:11 pm |
I stand corrected AC!
dark levity:
The market may be bad, but I slept like a baby last night. I woke up every hour and cried.
Areas such as Northwood Point in Irvine also down maybe 10% and still up 14% annualized since 2001. Methinks the mortgage stimulus plan is a bit premature when houses are still inflated. Welcome back, CR, hopefully you are recharged for another eventful year.
But it would be an interesting study to watch what happens to a major city in its death throes. I'm of the opinion that rising crime levels and a dearth of white collar jobs would become a self-reinforcing death spiral. Anyone smart/affluent enough to leave will do so. And those that remain would be increasingly poor and government dependent. Which in turn creates an unstainable burden on businesses which remain.
Could detroit turn into one huge hooverville? The only reason to stay is if the cost of living is so remarkably low that a government check goes a long ways.
Ugh, such a terrible thing to think about...
IMO it makes more sense to create new jobs in cities which have a healthy base of industry -- that way they can build off each other and reinforce whatever service industry remains.
Detroit is so far into atrophy that it is now beyond the point of no return.
Gavshire Hathaway | 01.02.09 - 2:26 pm | #
We thought about this once before with the mill towns of New England. We collectively and correctly accepted the inevitable. The problems are that 40 years later we are a far more centralized goverment and Detriot is not Worcester from a demographic perspective.
Rob Dawg said: "Charlotte down 6%? Where's Sebastian to tell us otherwise?"
I don't live in Charlotte. You know how California has different cities? Same here.
Sebastian | 01.02.09 - 2:28 pm | #
Where do you see that you live in Charlotte? Tell us how the Triangle is prospering again.
Another possibility is that through the ashes of the failing city, labor costs get so low that industrial companies return. Perhaps Detroit could be ground zero for a resurgence of American industry.
Gavshire Hathaway writes:
Detroit is so far into atrophy that it is now beyond the point of no return.
Gavshire Hathaway | 01.02.09 - 2:26 pm | #
-----
The reason that I use Detroit is that I can imagine other cities following close in its footsteps, and I'm not sure who is spending the brain power wondering what you do with all of the square milage of increasingly unproductive--if it was ever productive?--land. As places like Detroit gets worse, do we just let it go feral and try to contain its problems?
Most--if not all--of our limited history has dealt with growth or at least boom & busts. However, when you are facing metropolis-sized cities facing sustained declines, what else are you facing but growing regionalism? What does history show?
Great information and great blog. You need to make your line graphs on a logarithmic scale, not arithmetic, to get a truer picture.
In its heydey, Harrah's auto museum in Reno was quite a place. But I'm sure it's much diminished since Harrah died, if it's still there at all.
Bob Dobbs | Homepage | 01.02.09 - 2:19 pm | #
Bob,
Here is the link. It has an incredible collection.
DOW BREAKS ABOVE 9000 !
It will probably go all the way down into local barter economy, garage sales, little services here and there. Just like it is already in many downtown areas of major cities among the poor folks...except now the middle class suburbia will join the crowd.
DOW BREAKS ABOVE 9000 !
bearly | 01.02.09 - 2:37 pm | #
Short stop here on the way to 10,000 by the close.
When will poepl begin looking to derivative indicators. Dow/prices will cease to mean anything. People will be lining up to be a turkish millionare.
OT - Sold half of SPY, Q's, EEM I bought Monday for 7-8%. This faux rally will puke violently, just not yet.
bearly, that seemed like a foregone conclusion to me since about 10:30 EST. Got a ring in the new year right! Back below 8500 by next Friday.
Re Seattle condos, I may have misheard -- perhaps they said no new projects green lighted(not broken ground) in 2008...which is a bit more believable.
Rob Dawg writes:
The problems are that 40 years later we are a far more centralized goverment and Detriot is not Worcester from a demographic perspective.
Rob Dawg | Homepage | 01.02.09 - 2:31 pm | #
------
Rob Dawg is thinking more along the lines that I am. When you are dealing with multi-generational poverty--in this case, "demographic" differences--left at the core of a declining city, I would imagine that you could consider other cities such as Memphis that may follow in the footsteps of Detroit. As I stated earlier, it was just a purely academic question, but if you have problems with roaming bands of thieves playing with political boundries to escape one jurisdiction for the protection of another, you can find yourself in a world that is very much unnerving to say the least.
I would think ghettos of unowned/unoccupied (officially) housing will cause much troubles in the days ahead.
Persecuted Comrade Anonymouse writes:
OT - Sold half of SPY, Q's, EEM I bought Monday for 7-8%. This faux rally will puke violently, just not yet.
Persecuted Comrade Anonymouse | Homepage | 01.02.09 - 2:41 pm | #
ZZZZZZZZZZZZZZZZZZZ
DC maintaining housing prices - anecdotal.
crispy&cole,
You have cajones to make real time market calls w/ profits?
Re: shrinking cities
Youngstown Ohio
The incredible shrinking city - Apr. 14, 2008
"Now Youngstown wants to close entire streets and bulldoze abandoned properties so it can shut down city services like street lighting, police patrols and garbage pick-ups that it can no longer afford to maintain."
offering 50K to move.
Few takers.
City's plan to relocate residents meets resistance - Apr. 24, 2008
"DOW BREAKS ABOVE 9000 !"
--bearly
When does the market open today?
The charts of the PMs look like a bad case of PMS, or maybe the business end of a saw blade.
I'm going to close my eyes and wait for next week.
You have cajones to make real time market calls w/ profits?
Persecuted Comrade Anonymouse | Homepage | 01.02.09 - 2:44 pm | #
LOL!
Please post all of your losing recommendations also...thanks.
"However, when you are facing metropolis-sized cities facing sustained declines..."
Might be similar to the decline of major city centers during the 1950s, which was the growth period of suburbanism. Major cities all tried clear-it-out 'urban renewal'. This met with intense social criticism years later, but it is hard to really get an objective conclusion because you can never get the emotionalism out of it.
Dead on about NYC. 2009 will be a bloodbath here.
When you are dealing with multi-generational poverty--in this case, "demographic" differences--left at the core of a declining city, I would imagine that you could consider other cities such as Memphis that may follow in the footsteps of Detroit.
yagij | 01.02.09 - 2:42 pm | #
Yes, we even have an early example albeit less severe; Buffalo. It pains me to have to speak in politically correct code because it isn't about racism. It unfortunately sometimes manifests as appearing racist. Were Detroit nothing but of Northern European extraction it would still be beyond saving. IMO the kind thing to do is provide housing vouchers and bus tickets even though that didn't work so well in Katrina.
"I call BS on the Washington -25% number. That must be the average for the MSA -- Woodbridge down 50% but Arlington, VA (or places people want to live) down 0%."
It is for the entire MSA. But Arlington is down more than zero percent, and will eventually fall like the outer regions. If houses in Prince William county tripled in short time, then fell back to their old values, what do you think will inevitably happen to Arlington which doubled in the same short time? Back down!
This article on CRE in DC is pretty gloomy.
Re: shrinking cities
Youngstown Ohio
YouTube - Bruce Springsteen "Youngstown" Subtitulado
sidd writes:
"Now Youngstown wants to close entire streets and bulldoze abandoned properties so it can shut down city services like street lighting, police patrols and garbage pick-ups that it can no longer afford to maintain."
offering 50K to move.
sidd | 01.02.09 - 2:45 pm | #
-----
Thanks for the link. I figured that it had to have been tried before now, but I hadn't found any news articles.
I'd imagine that providing services to lightly populated areas within a city would be cost prohibitative, and I wonder if/when cities get the ability or idea to start offering the "dead" land to some other entity. Think divorcing spouses trying to dump the underwater house on each other but in this case, cities & munis trying to dump 'em onto counties, other munis, or even the state. Heck, it may get to a point that states would try to dump parts of states for either protecting a 'healthy' core or bartering with other states for resources (e.g. GA & TN fight over TN River access).
The reason that I use Detroit is that I can imagine other cities following close in its footsteps, and I'm not sure who is spending the brain power wondering what you do with all of the square milage of increasingly unproductive--if it was ever productive?--land. As places like Detroit gets worse, do we just let it go feral and try to contain its problems?
yagij | 01.02.09 - 2:34 pm | #
Detroit is going back to nature. The city is growing new trees in streets, parking lots and even on top of buildings. It's also a haven for wild pheasants I believe.
Check out:
The Fabulous Ruins of Detroit
For what happens when a city is abandoned.
"This article on CRE in DC is pretty gloomy.
12th Percentile | 01.02.09 - 2:51 pm | # "
That is commercial. I was referring to residential.
"yagij writes:
Academic Question: Since Detroit did not enjoy a housing bubble to get its housing bust, what exactly could happen to turn that market around? Anything? Hypothetically, more/better jobs and lower taxes, but realistically, what?"
I've looked at this in some depth. There are several things which could help.
I am disappointed to say that Detroit doesn't seem well suited to wind farms or big solar arrays.
The Auto und Technikmuseum_Sinsheim (
Sinsheim Auto & Technik Museum - Wikipedia, the free encyclopedia ) has Bugattis, and what stuck me the most, after noticing that the oil was being collected by a drain pan, as the vehicles are still in complete operating condition, was the paint. I still believe that the car was truly an original, without any 'restoration' at all, apart from necessities such as new tires. Amazing to see something from the past like that - and to recognize that even today, many vehicles are still inferior in diverse ways to a true masterpiece. Of which essentially every component was manufactured by hand.
Of course, around Bruchsal and Baden-Baden, you do have the chance to see some truly unique vehicles, including non-reproduction 3 wheelers from this model series -
' The newest model from Mercedes-Benz comes complete without doors, seat belts, a windshield and one less wheel than other cars, all for about $50,000.
After a 116-year hiatus, Mercedes has resumed production of the original three-wheeled vehicle recognized as the world's first automobile. Resembling a large tricycle and armed with a 0.75 horsepower, single-cylinder engine, the No. 1 Patent Motor Car can reach a top speed of 10 mph, just like the original.'
Sometimes, in historical intervals, Mercedes likes to recreate the world's first car trip, including a stopover in the Bruchsal Schloss, in large part, due to this -
''Although the patent motor car – the great invention of her husband, Karl Benz – was already two years old, sales were sluggish. So in order to demonstrate the possibilities and reliability of this new mode of transportation, Bertha Benz and her two sons, Eugen and Richard, drove the 106 kilometers from Mannheim to the town of her birth, Pforzheim. Unbeknown to her husband, she set off early that morning, and on reaching Wiesloch the three adventurers stopped off at a chemist’s shop to fill up with “ligroin” – as gasoline was still known at the time. In Bruchsal the services of a blacksmith were required to repair the drive chain; in Bauschlott a shoe smith fitted new leather to the brake shoes – and an interim report was sent by telegram to Carl Benz. At regular intervals Bertha Benz also had to unblock the fuel line using a hat pin. And she sacrificed one of her stocking garters to insulate the ignition. But these were mere minor inconveniences – they arrived safe and sound in Pforzheim that evening without experiencing any major difficulties, and Carl Benz received a second telegram informing him of the success. Three days after this pioneering achievement, the three of them drove safely back to Mannheim.'
That's right, Bruchsal is arguably where the world's first true auto repair was made. And these days, when they wheel one of those out, it is surrounded by a team of mechanics. It is not easy finding a good blacksmith these days, after all.
Born and raised in the Detroit area myself until moving in 2000. My observations about the area:
Dirt cheap housing prices won't be enough to revitalize the city and suburbs. First, they have to stop the bleeding of graduates from the state's relatively solid colleges to warmer, brighter climes. Otherwise they move to Chicago or Columbus.
They need one auto company (F?) to shine/compete with Toyota/Honda while the other (GM?) either merges with auto company one, or fades away.
They need responsible civil governments. They need cohesion between the "Detroit - Don't need 'em" counties (Oakland, Macomb, Washtenaw) surrounding Wayne.
Will this ever happen? At least they have a decent port/cargo location (Windsor, Canada) to keep them going. Otherwise there's nothing to stop the city from declining even further.
For those of you who haven't seen it a very important and sobering article at Naked Capitalist ... a new study by Economists Carmen Reinhart and Kenneth Rogoff ...
Past Financial Crises Suggest Pain Far From Over « naked capitalism
Their latest piece looks at how crises generally progress and resolve themselves. The usual outcomes are worse than most commentators forecast for the US (save the fall in average real estate prices):
1. Real housing price declines average over 35% over a six year period. Note in other crises, residential real estate was not necessarily a focus of the bubble. Even excluding Japan (which has suffered a 17 year housing price decline) the average is over 5 years.
I suggest you take a look ...
You have cajones to make real time market calls w/ profits?
Persecuted Comrade Anonymouse | Homepage | 01.02.09 - 2:44 pm | #
LOL!
Please post all of your losing recommendations also...thanks.
crispy&cole | Homepage | 01.02.09 - 2:46 pm |
This is why I only talk about my trades after I've gotten out of them.
That way they're all profitable, if you know what I mean.
wally writes:
Might be similar to the decline of major city centers during the 1950s, which was the growth period of suburbanism. Major cities all tried clear-it-out 'urban renewal'. This met with intense social criticism years later, but it is hard to really get an objective conclusion because you can never get the emotionalism out of it.
wally | 01.02.09 - 2:47 pm | #
-----
However, isn't the growth of "suburbanism" the problem we are facing now? We have suburban areas dying/being foreclosed, and in places like Detroit, there is little urban activity that would equate to mid-term/long-term growth. If your suburban areas are underwater and trending up in crime and down in jobs, and the city in which you surround is already there or worse, it really does make me wonder how it all plays out.
States are already burdened with their state-wide problems, and as resources get less and less, would the Michigan legislature abandon Detroit to save the rest of the state or save Detroit and foresake the rest of the state? Is it an Either/Or question? What would be the state's priorities and obligations to these failing civic monstrousities?
some investor guy:
Ah, someone beat me to it. Actually Detroit does have a couple good universities nearby - Wayne State and even better, The University of Michigan. But like I said, the state loses graduates (like myself) to other locations.
RE: Yeah, we did because we lived not far from Strausbourg. Had many memorable meals there. Friends took us to what they called the Nike factory canteen. Got a big surprise. It WAS the employee eatery, but a starred restaurant, too. Workers ate there during the day. Customers in the evening ate the leftovers. My kinda leftovers. Had Auberge in the name. This was in the early '80s. Don't know if it's still there.
Anyway, DC will always have the federal government, vendors and international institutions, think tanks and lobbyists, museums, libraries, foreign missions, tourism - unfortunately much of which does not produce tax revenue.
It is amazing what is concentrated here in what is really a smallish city.
That is commercial. I was referring to residential.
I realize that. Some on this board had said DC CRE would be ok in this downturn. I've argued the other side of that which seems to be what is happening based on that article. Filling in your excavation work is a pretty clear sign.
Monument Realty, building on the east side of Half Street SE, will deliver an office building, but there have been no announcements of retail tenants. And work on the residential project and hotel — long thought to be an Aloft hotel — has ceased. The developer was forced to fill in parts of the excavated hole to allow nearby utility work.
However, isn't the growth of "suburbanism" the problem we are facing now? We have suburban areas dying/being foreclosed, and in places like Detroit, there is little urban activity that would equate to mid-term/long-term growth. If your suburban areas are underwater and trending up in crime and down in jobs, and the city in which you surround is already there or worse, it really does make me wonder how it all plays out.
I was wondering if there was a name for the formerly urban areas in rust belts that are being depopulated and abandon? Maybe post-urban or neo-rural or something like that.
ac, c&c,
I said previously, I <a href="http://www.haloscan.com/comments/calculatedrisk/7279170197389673269/#798580>posted the entry live:
I went long (half positions) QQQQ, SPY, & EEM a moment ago (don't work w/ a computer - arbitrary entry). Stop day's low.
Persecuted Comrade Anonymouse | Homepage | 12.29.08 - 3:30 pm
ac writes:
I was wondering if there was a name for the formerly urban areas in rust belts that are being depopulated and abandon? Maybe post-urban or neo-rural or something like that.
ac | 01.02.09 - 3:01 pm | #
-----
I second this inquiry. What would you call it? Do we have any US examples of this phenomenon?
I was wondering if there was a name for the formerly urban areas in rust belts that are being depopulated and abandon?
Cincinnati
"I realize that. Some on this board had said DC CRE would be ok in this downturn. I've argued the other side of that which seems to be what is happening based on that article. Filling in your excavation work is a pretty clear sign."
The Maryland governor has just announced a one day unpaid furlough for those earning under 40K, two days for those earning over that amount. Facilities like the motor vehicle bureau will be closed.
yagij writes:
As places like Detroit gets worse, do we just let it go feral and try to contain its problems?
We wall it off and turn it into a giant prison, "Escape from New York" style. We need to keep all the non-violent pot smokers in jail so we can employ more prison guards. /snark
market is now open!
"I was wondering if there was a name for the formerly urban areas in rust belts that are being depopulated and abandon? Maybe post-urban or neo-rural or something like that.
ac | 01.02.09 - 3:01 pm | # "
"Decaying" is the adjective I hear most.
But otherwise, no, there is not name. Because then the culture would have to admit that cities die. And that would be a bit scary in an economy that's still real-estate-centric. Even though the Old West is full of ghost towns.
I second this inquiry. What would you call it? Do we have any US examples of this phenomenon?
I recall reading an article about places in Ohio have trouble dealing with depopulated areas and donut shaped cities as people leave urban areas for the suburbs without an increasing population to balance the outflow.
The specific problem was that the existing buildings and infrastructure become a liability when there's nobody there and it's quite expensive to get rid of and turn concrete back in to grassy green fields.
One more thing also about Michigan and its school system. During the 1980s and early 90s it had a formidable K-12 education program and solid backing for its state universities. One hand (the grade school system) fed the other (state colleges.)
When I graduated, the big programs were all tech, semi-conductor and software related. Business too. Automotive, not so big despite being an important program you'd imagine for a university just an hour's drive from Detroit.
So where do you think most of the tech graduates went? And the business grads?
My experience suggests it would be wise to cover your shorts; your intelligence may suggest otherwise.
The market goes up - the market goes down. Thems the facts.
I think that at least for the first quarter we are likely to see a near frenzy in mortgage and real estate activity. The pump is primed...
Steve Higgins
Boulder CO Mortgage and Real Estate
www.boulderloanranger.com
Home Loans Boulder and Beyond
"Because then the culture would have to admit that cities die."
Not all futures are utopian.
Slightly (OT): Interesting story (although dated) about commute distances from cities and home prices.
Gas Prices Impact Suburban Housing Markets
The gist is that the longer the commute from a city the worse the drop in housing prices. (In addition to living where homes are affordable, there's not nearly the same kind of urban sprawl here as there is in other bubble-cities, and I live close-in, anyway. Location, location, location.)
I came across it the other day in the comments section on this entry from Econbrowser about how high gasoline/oil prices have an oversized impact (reduction) on consumer spending:
Econbrowser: The oil shock and recession of 2008: Part 1
It would appear as though CR was big-time right about one thing and big-time wrong about another in his recession forecast. Big-time right about it being a consumer-led recession, but big-time wrong about it having anything to do with housing, MEW, etc. The real culprit was high gasoline/oil prices, which explains why there were some cross-currents in the economic data we were seeing in 2008.
Although housing prices and MEW may have peaked a couple of years ago it wasn't until the past couple of quarters that the economy simply fell off a cliff from a normal expansion into a contraction, and it was triggered by the massive, sharp spike in energy prices.
Also, as recently as June, 2008 the ISM data still indicated that both manufacturing and the economy in general were expanding.
And when did the really big net job-losses come? Not until this past September, long, long, long after housing peaked, and not from a sudden, massive loss of construction jobs.
It's still a recession, though, and I still missed it.
Sebastian
p.s. Makes one wonder if the government used the wrong tool to fight the recession. What might have happened if the Strategic Oil Reserve had been released to bring down oil prices, instead of the Fed and the Treasury acting as lenders of last resort? S.
Here are the corresponding FDIC Graphs:
FDIC Graphs Show the Extent of Financial Crisis « Your Mortgage or Your Life…
2009 is going to be a tough one...
Popeye,
You ever use $TICK? A high of 1366 today indicates "panic buying" and not far time wise from a retrace/reversal.
The problem with Detroit is they've been insolvent for decades and refuse to sell off assets, instead it's ineffective bailout after ineffective bailout. Detroit now offers practically zero services and yet has high taxes. They'd be better off jettisoning several square miles and let a new political entity rise from the remains. Or maybe they're waiting for Ford Heights, Illinois to go first.
I ran some preliminary numbers last night for Ventura County. 70% of closed sales for December were either short sales or foreclosures:
Effective Demand: Ventura County short sales & foreclosures 70% of closed sales - December 2008
Banks are staying motivated.
I'll post the preliminary San Fernando Valley numbers later this weekend.
If you go back and look throughout history the worst January selloffs are preceded by lower volume holiday rallies.
Dear Self-Persecuted,
I'm embarrassed to say that I don't have an external measure. I do clock it all, but in the end - I listen to my "sense of the market".
Anon - My 'sense of the market' says you may be right. Unless you're wrong.
Nice. I typically flip a coin.
"this town needs an enema.."
S&P up almost 3%.. oh please.
New Thread.
Regarding:
and:
There's actually a fairly significant amount of work being done around Detroit on alternative energy technologies, particularly ones that have the potential of being relevant to cars. Despite the vastly oversimplified conventional wisdom that the Big 3 are technology laggards, they actually have done quite a bit of R&D on alternative power sources for cars, they just have been slow in deployment. GM has been funding advanced battery research for years, and they seem to think that they'll have the batteries they need (at the cost they need) to start selling Chevy Volts in about a year. Those batteries are not being developed in Japan or Europe, but in Michigan. There is also a mundane but very real issue that the 'Rust Belt' is full of idle industrial facilities that are likely to be cheaper to re-tool for building things like wind turbines, advanced rail vehicles, and so on than to build new factories and infrastructure elsewhere. As a purely political matter, putting a new industry into an urban or inner-suburban site that was used to build cars for 50 years and is now surrounded by abandoned neighborhoods is likely to be a lot faster and easier than building a new plant on a new site, even if the physical facilities are not very reusable.
Breaking:
Hidden cam footage from Broward's NYE party:
LiveLeak.com - Guy Works Out to 'Sweatin to the Oldies' in a Onesy
Nope. Arlington is down around 17% for 2008 alone (look at the No. Va. Realtor website statistics page for exact figures).
@Bill C,
Good insights -- thanks! I suppose you're right that the industrial capacity and engineering is more important than a local energy source.
It will be very interesting to see if that scenario plays out -- with automotive output repurposed. For Detroit's sake I hope so. The labor and cost of living is certainly going to be attractive relative to elsewhere.
Sebastian,
You think that banks tightened lending because oil prices rose?
You think the investment banks deleveraged because oil prices rose?
You think manufacturers cut production because oil prices rose?
You think retailers are having sales because oil prices rose?
Interesting ideas from Youngstown. Maybe that will help with CA cities currently in financial crisis? I had always thought some of the unfinished developments would not ever recover, especially for the few early buyers. Now, there is additional incentive to bulldoze - city, county infrastructure and service costs.
Today's trading is about as close to a linear upmove as I've ever seen. Very interesting.
There seem to be discrepancies between price and location. For example areas like Silver Spring (DC suburb) are still very highly priced and are only barely coming down. On the surface this doesn't make sense when compared to areas where there has been price erosion (Dupont Circle, U St, Alexandria).
Real estate is highly localized, but when comparing across desirable neighborhoods some of the prices in the overall DC region still seem far too high.
In addition, I wonder what comparative pricing was like before the bubble (say 2002 and before)? If you look at Southern California, there are now areas 20 minutes from the beach that are close to prices in the DC region - does this make sense and was it like this before the recent run up?
Again I see no evidence that zoned areas are down more--quite the contrary!
yagij- not only Detroit but all the Great Lake Cities could become really fashionable if the drought in the SW continues for a few more years. Couple that with slightly shorter winters because of global. Water Water Water
Sebastian - I think you are partly right about oil. I actually think the precipitating factor was the Federal Reserve easing interest rates in 2007. It precipitated a run on the dollar and in turn a rise in commodity prices specially oil. That finally broke the back of the consumer and laid everything bare. The story of the Emperor has no clothes comes to mind.
crazyvermonter,
I hope Detroit and the rust belt cities see some kind of resurgence. If water is the big concern, I imagine a lot of SoCal types with money will attempt to move north, to NoCal (the SF Bay Area) or more likely Oregon/Washington first though.
unfortunately after that they will move to Vermont!
I don't think that we can afford to have cities like Detroit become a wasteland. One of the big problems in New Orleans is that it is impossible to rebuild the housing stock at the price points prior to the flood. This is true of cities like Detroit.As has been observed prices are below replacement values. People living in those areas can't afford to move (even if they are renters).
In its heydey, Harrah's auto museum in Reno was quite a place. But I'm sure it's much diminished since Harrah died, if it's still there at all.
It's still here, but haven't been there myself since a field trip for my son's elementary school a dozen or so years back.
Detroit may not stage a comeback, but I think the notion that cities will contract in general is kind of silly. People can live a lot more efficiently in urban areas. Suburbs and exurbs will be the eventual ghost-towns.
I hope Detroit and the rust belt cities see some kind of resurgence. If water is the big concern, I imagine a lot of SoCal types with money will attempt to move north, to NoCal (the SF Bay Area) or more likely Oregon/Washington first though.
samsin | 01.02.09 - 4:24 pm | #
When Californians leave, they tend to leapfrog all over the place; geographic proximity isn't the only factor. Back in the 90s, when we had the last outflux, indeed a lot of emigrants went on to Oregon and Washington, and Nevada, and Arizona. But also to Idaho, Colorado, Utah, even Texas. And Hawaii, if they could find a way
.
The great northern industrial cities, Detroit, Cleveland, Buffalo, Pittsburg, etc, all grew up around easy access to water transportation. Before the railroads, waterways were the cheapest and easiest way to move raw materials and goods. Also benefited from nearby extensive raw materials (coal, iron ore, can you say Edmund Fitzgerald?). Once the railroads and the Interstate made inland areas competitive, people and industry opted for better weather (i.e. snow-free). Ironically, it was cheap water transport in the form of the standard cargo container, that started the decline of the industrial Northeast, as cheap goods arrived by water first from Japan, and later other Asian countries. So as long as overland transportation is competitive with waterways, I don't see the Northeast returning to prominence.
Can you tell us what to expect for housing prices in the rest of the world in 2009?
House prices seem to be holding up in Melbourne and Sydney in Australia so far. Is this expected to continue?
Can you also tell us about house prices in the UK and continental Europe?
check out this Bugatti Veyron
And yet even as Americans see their assets dissolve, the stock market waddles on.
"I was wondering if there was a name for the formerly urban areas in rust belts that are being depopulated and abandon?"
In planning the term brownfields was first applied to abandoned urban industrial properties but I've seen it popping up to describe large abandoned areas of urban residential land too, e.g in Flint MI
On the ground video of Detroit
CrazyVermonter.... you're delusional.
We need it to be 1987-1997 again!
001 writes:
On the ground video of Detroit
001 | 01.02.09 - 6:37 pm | #
That's pure genius video...absolutely what people need to see. You could make an equally shocking video in Buffalo, NY as well.
You show the result of exporting millions of US jobs to China. They should shackle and chain up all CEOs and management fucks (including Stanford business graduates) who promoted, facilitated, and executed this traitorous unconscionable will upon the American people. Lock them in those empty factories and throw away the keys.
Another relevant video:
YouTube - Ruins of an Empire
Interesting takes here on the DC market...here's some more data:
Capitol Hill townhouses, best areas on the Hill, 2-4 BRs, 1500-2100 square feet, good to excellent condition. Using all available CMAs from 2005-present, these homes peaked at $580 psf by mid-2006 and remained there until late summer 2007, after which they have declined to $390 psf. That's more than a 30% decline.
Market Square condos, 701-801 PA Ave. These are the most expensive downtown DC condos. Using CMAs on 1BRs and 2BRs from 2003-2008, these peaked at around $930 psf and are presently selling in the mid-600s, again a 30%+ decline.
Clara Barton condos, the next most desireable condo complex in downtown DC. 3BR penthouses sold for high 800s before the peak (zillow thinks they peaked around 1MM)and are now listing in the lower 700s.
We've been tracking these as well as Friendship Heights and Dupont since mid-2006, saving money while we watch the prices decline in premium DC markets.
Anecdotally, prices did stabilize from early 2008 until September, but have since continued their decline. We think there will be continued decliens through June or July this year at least. In DC's favor are a well-regarded mayor, suburban flight into the city due to tough commuting, and (so far) a solid federal govt. employment base.
We live in Silver Spring and there are a number of new condos that look pretty empty from our vantage point.
badger boy: I call BS on you! From MRIS:
YOY declines of median sales price (Oct-Nov '07 vs. oct-nov 08)
Loudoun\t-25%
Fairfax\t-21%
Prince William\t-43%
Alexandria\t-13%
Arlington\t-5%
And those declines are YOY, not from peak. Now, let's compare oct/nov '08 to July/Aug '06:
Loudoun\t-42%
Fairfax(Co)\t-30%
Prince William\t-52%
Alexandria\t-12%
Arlington\t-8%
Monthy Real Estate Trend Indicator
badger boy: Here's your current Arlingoton VA listings sorted by their ratio of current price to last sold price (2004-2007).
FranklyMLS.com Virginia & DC MLS via Keyword Search & Wiki. Homes for Sale
or, incase haloscan bothces the url:
TinyURL.com - shorten that long URL into a tiny URL
Man, Arlington looks like a dump. Granted, the cheapest places are taking the largest hits, but even the >$700k places are listing for less than they sold several years ago.
Northern Virginia Housing Bubble Fallout: A Decade of November Sales
Arlington will tank just like everything else around it. What shot up must fall down. PW county tripled, they will fall (or have in many cases) by just as much. Arlington at least doubled, so they'll fall by just as much. Might take much longer though.