Matrix Blog

Development, Construction, Architecture & Land

Just Can’t Stop: Surge In Housing Starts and Permits

October 22, 2005 | 1:57 pm |

Housing starts and permits surged despite forecasts of falling housing starts due to the impact of Katrina and Rita (I feel I am now on a first name basis with both of them). Permits are an indicator of the confidence of builders and the annual pace is at its highest level since February 1973.

Housing starts were strongest in the south and midwest and unchanged on the east and west coasts.

One possible misleading aspect of these stats is that builders generally only know how to build and have ignored negative economic signals in the past. Inventories are rising. [NY Sun]

Its not always a case of:

If you build it, they (homebuyers) will come.


Flipping (Is) Out, In The Big Apple

October 3, 2005 | 9:27 pm | |

The New York Times asked my appraisal firm, Miller Samuel to research the “flipping” phenomenon in Manhattan, which is noted for its high housing prices and dominance of co-ops. So much has been written about real estate speculation over the past several months in other markets like Florida but no one has quantified the phenomenon in Manhattan.

The idea here is that a real estate market with rampant flipping (we define a flip as re-selling a property within 18 months) as a danger sign for future price volatility. A market based on flips is ultimately doomed, like a fee simple ponzi scheme with a foggy end point. In fact, developers in Miami encourage flips and have sales agents in place (for a 2nd commission on the same property) to sell your unit for you. Easy money.

Our study, as noted in the New York Times article on October 2, 2005, determined that property flips, after controlling for typical moves like job transfers or changes in income, was about 3% of all sales activity, far less than the national average of 23% compiled by the NAR. [Matrix].

When electricians and health care workers are quitting solid secure jobs to flip real estate, then its time to get out. Fortunately, this is not happening in Manhattan.

So in some respects, one could consider that high housing prices and difficulties with co-ops in Manhattan, actually makes the housing market there less volatile.

Length x Width Is Negotiable

September 15, 2005 | 10:42 am | |

In most major commercial office markets, leasing is typically done on a monthly or annual “rent per square foot” basis. So, in order to calculate the total rent all you need to do is multiply the rental rate by the unit size, right? Not so fast. Unit size can change like the weather and tenants are well advised to negotiate not only the rental rate, but the unit size as well.

First, the tenant needs to recognize that there are different types of area measurements. Gross floor area refers to the size of the building envelope, from outside wall to outside wall. Useable area, sometimes known as carpetable area refers to the portion of the floorplate that will actually be used by the tenant. And, rentable area (which, as the name implies, is what the tenant’s rent is based on) refers to the size of the actual tenant suite, including all mechanical rooms, stairwells and elevator shafts, plus an add-on for common areas (for example, a pro-rate portion of the corridor for a multi-tenant floor, and the lobby). The spread between the tenant’s actual useable area and the rentable area can be as much as 30% or more, depending on the efficiency of the building.

Unless the tenant is going to retain his own architect to measure the spacce (unlikely for all the but the largest space users), the rentable area is, simply, whatever the landlord says it is. We saw this first-hand when leasing office space last year. For some strange reason, most of the 5,000 square foot suites we looked at measured 50′ x 90′.

See [Soapbox] Real Estate Taxes: The Size Of Homes Expand And Contract


Luxury Housing: I’ll Know It When I See It.

September 13, 2005 | 9:34 pm |

The term “luxury” is probably the most overused phrase in the real estate housing market today. The irony here is that there is no commonly accepted definition.

Its A Dollar Amount

RISMedia in an article posted yesterday defines “luxury property” as:

“While this might seem like an obvious question, it really depends on what part of the country you’re talking about. On the east or west coast, most real estate experts classify a luxury home as one priced at $2 million and over. In most other areas of the U.S., a home worth $1 million or even less can be considered in the luxury category.”

Its The Opposite Of Affordable Housing Often used to explain the other end of the housing spectrum.

Its A Lifestyle And Is Defined By The Accessories That Go With It

The Building Has An Attended Lobby In Manhattan, the term luxury entered the housing vernacular simply as a building, usually a rental, as having a doorman.

In The Eye Of The Beholder Luxury is very much in the eye of the beholder [Yale Daily News]

I guess I’ll just know it when I see it.

Urban Living On Steroids: 10,000 Sq Ft Boxes on Stilts for $29M to $50M

September 12, 2005 | 10:50 pm |

Its a (Rubik) Cubist’s ultimate fantasy. A project by architect Santiago Calatrava [NY Post], is planned on the East River, South of the Brooklyn Bridge that has received a lot of attention lately for both (high) price and (unusual) design.

Triplemint has a photo spread and Curbed has given the project a lot of attention.

As the housing market continues to rise and the acceptance of high end housing projects remains solid, it is expected that we will see more and more unusual development projects that will scream out for attention.

McMansions: All The Beef(s)

September 8, 2005 | 10:52 pm |

McMansions entered our vocabulary in the 1980’s. Wikipedia defines the housing term McMansion as:

both large like a mansion and as culturally ubiquitous as McDonald’s fast food restaurants

As seen in the Smithsonian!

A typical McMansion as depicted by the National Building Museum in Washington D.C.

Caption reads on image:
Coming into popular use in the 1980’s, the term “McMansion” refers to suburban homes that are almost, but not quite, mansions. They typically make a show of pretentious ornament and grandiose interior spaces. Windows are distinctly shaped and highly decorative creating historical allusions. The style’s name pokes fun at its reliance on mass produced components to achieve an architectural statement.”

It has the connotation of a large bland structure, generally found on a small lot.

MacMansion homes are increasing becoming an issue with many communities and is one of the reasons the average size of houses are increasing.

Average Home Size (NAHB) Is Growing:

1950: 963
1970: 1,500
2005: 2,400

Average Lot Size (NAHB) Is Shrinking

1980: 9,000
2005: 8,000

McMansions have become an issue with zoning due to excess lot coverage, the are often the only one of their kind on a street and are usually out of scale and inconsistent with the architecture of the existing housing stock.

See: [Supersized Housing With More Amenties]


Katrina Aftermath Is Expected To Cause Higher Building Costs

September 4, 2005 | 10:37 pm |

The National Association of Home Builders just released a study on the impact of Katrina in the housing market. More than 200,000 homes in New Orleans alone were wiped out.

The building industry is already experiencing the effects of Katrina due to the loss of a number of lumber mills in the south Building material costs were already rising due to the strong housing markets across the country. Real demand for materials hasn’t peaked yet since clean up has not yet occurred. Building supplies aren’t expected to see the same magnitude of price increases because the supplies are not shipped through the Gulf.

The prices of local building supplies in the Alabama are already increasing. Building labor is expected to rise as well.

“Ken Tennefoss, publisher of Crow Publications, which produces a number of lumber-product-related reports, said the industry is better prepared to provide materials than it has been in the past because of the bigger customer base created by stores such as Home Depot and Lowe’s.”

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Katrina Causes Surge In Demand For Rental Housing In Outlying Areas

September 4, 2005 | 9:54 pm |
Source: NCAR

On August 29th Hurricane Katrina brought devastation to the housing markets of New Orleans, Biloxi and the surrounding areas. Now the outlying areas are anticipating a housing boom. Mobile, Alabama is seeing a scarcity of rentals.

Housing developers are looking at what type of housing they can build quickly to meet demand.

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Rocking The Housing Boat With Too Much Median Income

September 4, 2005 | 10:03 am | |

WASHINGTON (MarketWatch) – For the second straight year, the income of the typical U.S. family was unchanged in 2004 after adjusting for inflation, the Census Bureau said Tuesday. [Note: Reg.].

“The median income masked widespread geographic and demographic differences:

The highest median incomes were in the Northeast at $47,994 and the West at $47,680; incomes in both regions was unchanged in 2004. The median income in the Midwest fell 2.8% to $44,657. The median income in the South was unchanged at $40,773.”

This was made more clear in New York, where the ratio of low to high median income by county was the largest gap on record. The disparity between the low (The Bronx) and high (Manhattan) median income was 52 times. The Bronx now has the lowest median income of any urban county in the country.

Shrinking Middle Class

However, the middle class is shrinking in New York City. Since the late 90’s, the upper tier of the real estate market has done well because much of the gains in personal income went to the top twenty percent…yet at the same time, the overall median income was flat.

We see statistics that show that the price of housing in many real estate markets is disproportionate to income. If you look in New York, for example, personal income growth has been seen at the top tier and, surprise, surprise that is where the new development has been targeted. Very limited new Manhattan development of middle class housing has occurred. The gains in new housing stock, when thrown into the mix, would tend to skew the overall median (yes, median) and average sales price numbers upward.

This all makes for the argument that it is not very reliable to lump all housing markets into one big bucket or compare overall housing stats to overall personal income stats since the specific market sectors are what tell the story. Otherwise, it paints a picture of rough seas and we better start bailing.

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Lumbering Giant Wants [2] Help [x 4]

September 1, 2005 | 10:47 pm | |

There has been a heated debate between the US and Canada over the tariffs being assigned to softwood imports into the US. In 2002, the US implemented these tariffs, which are reportedly contrary to the NAFTA agreement. [Note: Sub.] A 3-person arbitration board ruled that the US must refund over $5B in tariffs collected from imported Canadian softwood. The US lost the appeal on the ruling but still has refused to refund tariffs already levied.

There has been a lot of controversy surrounding the softwood tariff debate. Canada exports more than 50% of the lumber they produce to the US and the US will need more lumber as a result of Hurricane Katrina and the on-going housing boom. Look for rising prices for construction supplies as a result.
[Casper Star Tribune]
[National Post]

The housing boom has placed a significant pressure on the availability of lumber for construction. Wood exports from Canada are a significant source of lumber for the US and a major export of Canada.

In light of Hurricane Katrina’s extensive damages to the gulf area housing stock of Lousiana, Mississippi and Alabama, demand for construction supplies are expected to increase significantly and at least one advocate for affordable housing wants the tariffs removed.

Lets hope these two allies and neighbors can resolve their differences and get this crises resolved soon.

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Disaster Relief Aid After Hurricane Katrina

September 1, 2005 | 5:19 pm |

This has turned out to be a larger disaster than anyone imagined. Here are some ideas on how you can help in the relief effort.

Relief Organizations

[American Red Cross through Apple iTunes]

I used Apple iTunes (100% goes to the Red Cross) but all are great organizations.

[American Red Cross]

[Salvation Army]

[North American Mission Board Disaster Relief Fund]


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Urban Beats Suburban

August 25, 2005 | 10:46 am |

suburbs In certain pockets of the country, homebuyers are choosing the city over the suburbs as home buyers re-evaluate urban areas. This demographic shift is occuring as baby boomers get older and many urban areas have largely seen a cultural renaissance over the past 10 years.


Growing suburbs are now experiencing the problems of their neighboring urban areas and homebuyers are now considering moving farther out where land is cheaper but the commute is longer.

With oil prices rising, this makes for an interesting situation since commuting costs will rise making the feasability of a long distance commute less likely to be sustained.

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