In the past thirty years, the world economy has suffered several major bubbles. First came the Japanese stock market and property bubbles that peaked in 1989. Scandanavia suffered real estate and stock bubbles at about the same time. These were soon followed by stock market and real estate bubbles that peaked in southeast Asia in about 1997. High-tech and telecommunications bubbles (which some count as two different bubbles) peaked in 2001. Finally, we have the current housing bubble that peaked in 2006.
Are these bubbles more frequent than in the past? Are all of these bubbles somehow related? Why is real estate connected with most of these bubbles? What tools do central bankers and other government agencies have to prevent or minimize the bubbles?
The first major book on bubbles was Charles MacKay’s Extraordinary Popular Delusions and the Madness of Crowds. Published in 1841, the book addresses delusions like witchcraft and alchemy, but also reviews three economic bubbles: the tulip bubble of 1637 and the South Sea and Mississippi bubbles of 1720. However, recent research has discredited some of what MacKay wrote about the tulip bubble.
A more credible introduction to bubbles comes from two more recent books that address, if not fully answer, the above questions. Edward Chancellor’s Devil Take the Hindmost is the best introduction to the history of bubbles. Published in 2000, the book traces the history of financial speculation back to the seventeenth century, and discusses many bubbles in detail starting with the South Sea and Mississippi bubbles of 1720.
Charles Kindleberger’s Manias, Panics, and Crashes is a little more technical and harder to read. MIT economist Kindleberger presented each stage or aspect of a typical bubble in a different chapter, with references to numerous actual bubbles but without telling the full story of any real bubble in one place. This book makes sense only after you’ve read Devil Take the Hindmost, or have otherwise acquired a full knowledge of bubble history.
Kindleberger’s book was first published in 1978 and issued in revised editions in 1989, 1996, and 2000. Kindleberger himself died in 2003, but a fifth edition, reorganized and updated by University of Chicago economist Robert Aliber, was published in 2005.
Both of these books were written partly to refute the “efficient-market hypothesis,” which says that free markets are always efficient, and so there is no opportunity to make (or lose) large amounts of money in these markets. (Chancellor, for example, writes a column called Inefficient Market.”) The efficient-market hypothesis is often caricatured by the story of an economist and a student walking down the street when the student says, “We just passed a $20 bill lying on the ground,” and the economist responds, “Obviously not. If there were, someone would have picked it up!”
If all markets were completely efficient, there would be no bubbles without government interference in the market. So supporters of the efficient-market hypothesis go to great lengths to attribute bubbles, panics, and recessions to government policies.
Chancellor and Kindleberger offer good evidence that some markets are not efficient. I would say there are two kinds of markets: markets for “stuff” — ordinary goods and services such as food, clothing, transportation — and markets for things that synthetic representations of that stuff — stocks, bonds, options, derivatives, and so forth. While markets for stuff are efficient, markets for synthetics can easily go out of control. (Financial analysts usually don’t think of stocks as synthetics, but as one economist points out, if the idea of common stocks were proposed today, “No rational regulator concerned with substantive transparency would approve of” them.)
The main problems occur when markets develop a circularity. For example, in 1981 Japan gave Japanese companies permission to issue warrant bonds. These bonds gave purchasers the option to buy shares in the company at a fixed price anytime in the next five years. Since Japanese stock prices were rising, buyers of warrant bonds stood to make money on the stock so were willing to buy bonds that paid very low rates of interest.
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“The valuation of Japanese warrant bonds created an absurd circularity,” said Chancellor. “The faster Japanese shares rose, the more warrant bonds were worth — and the more warrants could be sold for, the faster shares rose” (p. 291). Soon, even large companies like Toyota and Matsushita were making more than half their profits from corporate speculation. In the long run, this was not supportable and the system crashed in 1989. (It appears the circularity in the mortgage market that is now collapsing has to do with synthetic collateralized debt obligations.)
These kinds of circularities don’t appear in ordinary stuff. You don’t see bubbles in cars, food, or clothing. What about the tulip bubble? It turns out that tulipmania was not a bubble in tulip bulbs but in options on tulip bulbs. Moreover, many of the horror stories of tulipmania were made up by aristocrats resentful of the economic mobility created by markets (which is why MacKay’s 1841 book turned out to be faulty).
The one tangible thing that does suffer bubbles is real estate. I suspect this is because real estate is such a long-term investment that it shares many of the traits of representative markets: a wide range of options, opportunities for rapid growth, and frankly numerous possibilities for swindling people.
In particular, many of the circularity problems with synthetic markets have to do with leverage. If you can buy stock with only 10 percent down, you stand to double your money if the stock price rises by 10 percent. Just as banks are required to keep a share of their deposits as cash, stock buyers were required after the Depression to pay at least 50 percent down on their purchases. In the same way, real estate bubbles are more likely when homebuyers are able to buy homes with zero down than when they are required to pay 10 percent or more down.
For this reason, many people blame bubbles on unregulated credit markets. But it is likely that the loosening of credit is a symptom, not a cause, of a bubble. People see prices rising so they create new credit systems that allow them to take advantage of those rising prices.
Kindleberger’s model of manias (which he attributes to another economist named Hyman Minsky) starts with a “displacement” that leads to an increase in the value of some good or service. As investors are attracted to representations of that good or service, an expansion of credit “fuels the flames” of the mania. This leads to a “euphoric” period in which people invest for short-term capital gains rather than rents or dividends. This is often followed by a period of frauds and swindles as people try to maintain the growth in asset prices. Finally comes the crash a the period of government regulation aimed at preventing the mania from ever happening again.
Despite this regulation, the manias seem to be increasingly frequent. Kindleberger and Aliber call the last four decades “the most tumultuous decades ever.” One reason for this is that there are more synthetic markets than ever: where once they were concentrated in London, Amsterdam, and Paris, followed by New York and Hamburg after about 1860, today you can find them throughout the developed and developing world.
Another reason for the increasing tumult, says Chancellor, is that speculators are so good at finding ways around the rules. “As an anarchic force, speculation demands continuing government restrictions, but inevitably it will break any chains and run amok” (p. 349).
A third reason, I suspect, is that there are new linkages between real estate and synthetic markets. Before 1980, almost none of the bubbles described by Chancellor or Kindleberger had anything to do with real estate — and none with any national implications. Since 1980, almost all if not all of the stock market bubbles have been associated with real estate bubbles, and they have all had national or international repercussions. One difference, of course, is that governments have increasingly regulated land uses since 1970, thus creating artificial shortages leading to increased real estate prices. This government regulation is the “displacement” that starts the bubble in Kindleberger’s model.
Real estate bubbles greatly magnify the effects of stock market bubbles. For most people, day-to-day swings in the stock market don’t matter. Even a large decline in the stock market is relatively unimportant. But when housing prices go up, people spend more, and when housing prices go down, people spend less. Thus, a shift in housing prices can cause a much bigger boom or recession than a similar shift in the stock market.
Economists call this the “wealth effect.” As a 2005 paper from UC Berkeley concluded, “changes in housing prices should be considered to have a larger and more important impact than changes in stock market prices in influencing household consumption in the U.S. and in other developed countries.” In other words, when urban planners use growth-management tools that drive up housing prices, they are playing with the financial equivalent of fire.
One way to regulate this is to reduce leverage by requiring higher down payments for housing, stocks, and derivatives. But that’s treating the symptoms. A better way is simply to avoid the initial displacements that result from government regulation of land use. That won’t stop stock market bubbles, but it will minimize if not end the associated real estate bubbles.
Transport policy aids and abets the direction of land use too.
the highwayman said:
Transport policy aids and abets the direction of land use too.
JK: Another good reason to get planners out of transport policy. They always seem to try to use LRT to dictate life style choices to an unsuspecting public.
Of course they use about anything as an excuse to dictate lifestyle choices to the unsuspecting public, so maybe planners should be removed from ALL government policies. (Some seem to do OK in the private sector where there is a boss to keep them in the real world and explain to them that their purpose is to plan for how people want to live, NOT how planners want people to live.)
Thanks
JK
Request for Antiplanners:
Please show us all the communities in which planners can dictate lifestyle choices to the unsuspecting public, in direct conflict with the will of elected officials, and with impunity.
I like this post. It’s great to see O’Toole recognize the inherent inefficiency of markets, in particular the “synthetic” markets. This observation of “synthetic” markets is interesting to me because it so closely coincides with one of Marx’s major criticism of capitalism. Marx used the terms “use value” and “exchange value” as opposed to “markets for stuff” and “markets for synthetic representations of stuff” but the idea is in the same ball park. In Marx’s communist utopia there would be no exchange value. People would only produce things that we need and use. I’m not an economist, and would never claim to fully understand the economic crisis we face today, but the idea of these complex traded synthetic representations, of synthetic representations, of synthetic representations, of synthetic representations of stuff is as ridiculous to me as zoning is to the antiplanner. To me the synthetic market is near the center of the problem and I don’t see how reducing or eliminating land use regulation is going to solve the root of the problem. That approach seems to be addressing a symptom just as much as making people put more money down for a house. To get rid of bubbles it’s going t take a colossal shift of epic proportions in the collective understanding of “VALUE.” I don’t really see this happening so I’m just going to strap in and ride this roller coaster. Up & down, up & down. Wheeeeeeeeee!
Financial manias are interesting and instructive. It used to be said that manias happened once in a generation because of the memory of market participants. Manias have become much more frequent than that. The moral hazzard created by government regulation and manipulation of the economy may be one of the causes of the more frequent manias.
I began my financial education by reading about the mania of the late 1960’s and early 1970’s in the books “Super Money” and “The Money Game” written by George Goodman, under the pen name Adam Smith. I believe both books still make timely reading. “Liars Poker”, by Michael Lewis is another book I recommend to help understand the workings of the sales organizations that fuel the bubbles.
Behavioral fianance is a growing field that seeks to understand the irrational behaviors that lead to bubbles and poor decision making in general. Most people extrapolate recent trends. If an investment has gone up, it is viewed as a good investment. Tulip mania had this characteristic. Few people spend time determining the relative intrinsic value of differnt investments. That is, what is the utility of the good or service, and how easily can it be substituted. Another human trait that fuels manias is that most people feel safer acting with the crowd, rather than against it. So people buy the same thing everyone else has bought. If mortgage backed securities that you don’t understand have been bought by several of your friends, then you are more likely to feel comfortable buying them, rather than shorting them.
As for understanding the irrational behavior of governments (and government planners), the book, “The Fatal Conceit” is a good place to start.
“Few people spend time determining the relative intrinsic value of differnt investments. That is, what is the utility of the good or service, and how easily can it be substituted.”
True. But what about those of us who do. This is the only way I’ve invested in the stock market (needless to say I didn’t own any mortgage backed securities or ENRON stock) but my IRA has still suffered. I’ve even been going against the grain and buying stock the last 2 months. So I feel like I’m winning the behavioral finance game even though I’m loosing money. Time will tell I suppose.
What I think is funny is that so many here (and elsewhere) have a grasp of the complexity of the problem but only blame the bewildered masses and the government that shepherds them. These two entities have no doubt contributed to the problem in an immense way but why ignore the other participants. The antiplanning libertarian group here will blame the feds, fanny and freddie (but only the public side), planners, people that got in over their head, but never the private sector leaders whose greed contributed just as much as anything else. People on this blog have blamed the ENRON clusterFu@% on the federal government for example. I’m not discounting the feds role, but it seems that so many are ignoring the role of the private sector. Can we not agree that both share some o the blame?
It would make my day if one Antiplanning libertarian would post a comment recognizing that the bewildered heard and the government are not the only people to blame, and that sleazy CEO’s, predatory lenders, credit card companies etc. had a roll in this mess.
Behavioral fianance is a growing field that seeks to understand the irrational behaviors that lead to bubbles and poor decision making [for larger scales, such as markets -D ]in general.
Tellingly, the journal of the BF discipline used to be called The Journal of Psychology and Financial Markets; the journal of the discipline is here [ 1. ].
The discipline that seeks to understand how our set behavioral patterns affect individual or household purchasing behavior is Behavioral Economics , journal here.
That is: people are only sometimes rational. Basing market decisions on the assumption that people are usually rational is a recipe for failure. One notes that certain ideologies present here depend on the primacy of rational behavior.
DS
The Antiplanner wrote: real estate bubbles are more likely when homebuyers are able to buy homes with zero down than when they are required to pay 10 percent or more down.
This makes neither logical sense nor is supported by the data.
House prices can not be driven beyond the buyer’s ability to pay. What limits the upper end of the majority of homebuyers’ ability to pay? The debt-to-income ratio of their possible mortgage. This is reality. Not economics modeling theory. Mortage payments (and thus the principal backed out of a 30 year loan) are set to typically 28% of monthly gross income.
Let’s see how this plays out:
Annual Income: $45,00
Gross Monthly Income: $3,750
Max Approvable Monthly Mortgage Payment: $1,050
Loan Principal at 6% and 30 years: $175,000
Now if you pay 0% down, you can only drive the price up to the maximum of the mortgage. But if you can pay, say 26% down, you drive the price up to $218,000.
If you look at your so called bubble cities, you see down payments as a percent of price increasing year to year. They are not spending their capital gains on a new car but reinvesting it in their next home. This is not the case in cities like Houston and Cleveland with declining down payments.
Which leads to another criticism of this post: houses are both tangible and synthetic. They are investments to many people.
.
Whatever drove these lenders to push for growth numbers rather than solid loans is beyond me.
Way back when I was in the banking industry, this sort of sh*t was unthinkable, let alone undoable, as the federal regulations did not allow us to pursue these sorts of loans. The elimination of many regulations, in my view, is the reason for this calamity.
DS
Dan wrote: Whatever drove these lenders to push for growth numbers rather than solid loans is beyond me.
What drove them? Likely the same thing that drove me to help engineer the subdivisions of Arizona in which to build homes to tie these mortages to: I have a kid to feed. And its not likely that even if I was willing to forgo the paycheck that any amount of my screaming would have given any homebuyer pause. It’s not like the Fed wasn’t cranking out papers in 2004 warning against this.
I had a family to feed as well, which was protected by regulations that ensured that safe loans were made, and someone dumb in the big office wouldn’t hijack our company for their dumb agenda. Those regs went away or enforcement was laxed.
DS
Dan,
From what I’ve read, and I haven’t researched this point too much, the regs (guidelines) were there for the front end DTI even for the ARMs, but it was based on the introductory rate. Anybody know if there were any regulations on ckecking the Debt-to-Income for ARMs on the worst case reset rate?
And Dan, did you work in the mortgage field? I thought you were in a planning department?
Bubbles exist in free markets, but in many cases it is government interventionism (ill advised in hindsight) that prevents them from popping earlier and thus grow to proportions where they do a lot of damage when they finally burst.
For example, our collective attempt (US government) to create something of a free lunch by forestalling the effects of the .com bubble burst, set the stage for the inflation of the real estate bubble. Yes, in short, the fed policy of artificially cheap money supply and other long standing policies designed to push home ownership beyond the limits of affordability had a lot to do not with the current bubble. Absent these interventions, a bubble may have still formed but most likely it would have popped much earlier without causing a lot of damage (much like the .com and oil price bubbles came and went, were painful, but hurt mostly the speculators who took risk and were the last suckers of the pyramid who bought just before the bubble burst).
…and when it comes to Behavioral Finance, I do not see why one needs to adopt a static view. As bubbles become more frequent (but hopefully absent progressivist intervention smaller and thus less damaging) and as people start experiencing a few bubbles in their lifetimes, the behavioral aspect of risk taking could very well change.
…and speaking of BV, when problems arise, people instinctively ask for government action, and government action they get…perhaps a strongman who has the will and power to push through Orwellian New Deal policies. But, unlike markets, this is not a self corrective mechanism. Countries that went down that path only came out of it in the face of the overwhelming failure of their systems compared to the freer economies….now, if the entire world falls in that trap then there will be little to compare to and recognize the magnitude of the failure…
tg:
My first career was as a Systems Analyst in banking (Planning is a similar career). Part of my job as was to provide mortgage/2nd mortgage loan numbers to ensure we were meeting our obligations & I was up before suits a lot presenting our performance/compliance numbers, and traveling to other cities to see whether a potential bank purchase was OK by looking at their numbers and systems to ensure that their bad loans didn’t screw up our numbers.
There were general regs and guidelines for D:I (our bank was more strict than, say, Countryside) and some ARM resets, but what has happened, basically, is that there was a push for paper numbers and the debt collateralization got hidden, then traded.
The slow decline came as laws were changed to allow insurance companies to do banking and finance, financial companies to do banking, etc. Then the regs to ensure adequate reserves and such were weakened, then the allowance to hide debt with these odd instruments…
My peers that I’m still in touch with are still astounded at how much things have changed. The oversight just fell away.
DS
Dan,
Do you think the decline of regs was intentional (that is were they purposefully removed/undermined) or merely that the finance world was changing faster than legislation could follow?
IMHO I think a good bit of it was intentional, some of it wishful/ideological. A factor too was the change in finance, brought on by the information revolution (not a bad thing in and of itself). Part of it in my view is how much paper money we create now, in place of things of real, tangible value; see Britain’s history on this, then back to Spain and Portugal – we are, of course, following a path already tread in history.
But I digress – the finance and banking world is generally quite conservative and doesn’t really move that fast overall. Regs are there to keep charlatans from stealing money, which is what is happening now – no accountability and no pay limits on CEOs disappearing money upward? Feh. A clue is how fast everything is moving and how much hand-waving is going on. A conservative, prudent approach would look much different. My opinion.
DS
In light of the turmoil in the financial sector, I wonder why investors will continue to be so foolish and keep investing in companies that pay their CEOs such exorbitant salaries. Don’t they understand that these companies must have lower returns, just by virtue of the simple fact that they squander their money on CEO pay?
Or is it that companies cannot find low pay CEOs? Perhaps the scab CEOs who accepted significantly lower pay in the past found a horse’s head on their doorstep from the CEO cartel…
D4P said: Request for Antiplanners:
Please show us all the communities in which planners can dictate lifestyle choices to the unsuspecting public, in direct conflict with the will of elected officials, and with impunity.
JK: You miss the point – the planners lie to politicians about how great their, untested, unproven, utopian world will be if we just do these things. Politicians then ask planners to do it and the planners say “great idea master”.
How many times have you heard of a planner telling a politician that:
High density will not reduce traffic congestion.
High density will not reduce pollution.
High density will cost more.
Mass transit costs more than roads.
High density DOES NOT reduce commute times.
Land use controls increase housing costs.
Light rail kills people at a higher rate than cars.
Most people DO NOT want to live in high density.
Light rail dose not cause development, the government incentives do.
No they tell the politicians just the opposite.
Does that help explain why I tend to disrespect the planning “profession”? (At least prostitutes deliver a useful service for their pay.)
Thanks
JK
the planners lie to politicians about how great their, untested, unproven, utopian world will be if we just do these things
In your world, what motivates planners to lie about these things?
As much as I love hyperbole from my four year old son, it’s just not the same from a grown man: your personal experience with the zoning commission is not evidence.
Historiography provides ample standards for you to establish your claim. Merely stating your claim though does not make it so.
Comment #21 is to karlock. my blasted explorer beta version 8 is killing me.
Gawd. Don’t give the hard-line ideologues an excuse to spew forth their turgid prose, D4P.
I just updated my Greasemonkey script and this site didn’t load, which means my eyeballs receive some input as I scroll downward.
DS
Call me a geek, but anyone who uses historiography is OK by me.
DS
JK: Another good reason to get planners out of transport policy. They always seem to try to use LRT to dictate life style choices to an unsuspecting public.
THWM: Do you wear hat made of aluminum foil while you type?
D4P, the distinction between planning and planners as a profession has been made many times.
It should be rather obvious that the debate is not against planners as a profession per se, but rather against the mindset that wants to impose top down dirigistic planning. In other words the mindset of “seek, by consensus, a solution and impose it on your targets willing and unwillingâ€Â. Furthermore, it is a debate amongst people who think that we already have too much of this top down dirigistic planning and those who think that we need even more.
While not an absolute rule, it is reasonable to expect that a profession whose primary endeavor is to provide input to politicians on how to control the lives of the citizenry, is likely to attract a high percentage of people with dirigistic/totalitarian ideology (left or right). This is clear from the small sample of planners who seem to comment on this site.
This applies primarily to public planners. There are probably many people doing planning work in the private sector who have less of a dirigistic attitude towards planning.
…it is unreasonable to hope that the military will have a tendency to attract pacifists.
…sorry messed up link on dirigisme.
JK:
To all of the above commenters on my last post:
I see all of you agree with my points, since the only response (save one) did not challenge the facts.
As to that one:
I didn’t say anything about zoning – that is your fabrication.
Thanks
JK
Karlock,
To reiterate: you did not present facts which one could challenge.
I fabricated nothing about zoning. I wrote “ your personal experience with the zoning commission is not evidence.” If this to you is a fabrication and not an evidential standard then I ask what your standard of proof is?
” Don’t they understand that these companies must have lower returns, just by virtue of the simple fact that they squander their money on CEO pay?”
Because those salaries, let alone stock and other compensation which is even less expensive, rarely if ever are even a blip on the financial radar. If a company has $15 or 20 billion a year in revenue paying a CEO $10 or $15 million a year isn’t going to make a difference in most any of their performance measurements. There’s always room for debate over how much companies give in compensation. But the claim that these sort of thing make much of an impact, let alone a meaningful difference, in most companies financial metrics is lacking in perspective.
“as the federal regulations did not allow us to pursue these sorts of loans.”
The sort of mortgages that appear to be the source of most all the issues – Arms, no-money down, no docs, et al. – have literally been around for decades. Plenty of other countries with plenty of regulations – Germany, Spain, South Korea, Ireland, England, Canada, et al. – have all encountered the same huge issues in the housing sector the US has. There may be some regulations that could’ve helped in some ways. It’s also likely that the type and level of regulations that would’ve prevented these issues would’ve have been at levels that would’ve smothered the housing market in order to over come other factors such as the billions and billions and billion and billions Fannie and Freddie were pouring into the market for these sort of mortgages or the tens of trillions is in cheap capital from the world being swamped with savers. And that’s just what happened in the US, let alone other countries which didn’t have the same sort of regulations in place that places like Germany, Belguim, England, South Korea, Spain and others.
.
.
[/bleedingly obvious to everyone except the hard-core comment]
Huh.
Colossal pent-up demand for walkable communities.
I wonder why that is…I wonder…I wonnnnnnder…**cough** boring autocentric McSuburb the only choice **cough**…I wonder…
Child-free couples will constitute 88% of household growth thru 2040.
I wonder if they’ll want to live in boring autocentric McSuburbs…I wonder…I wonnnnnnder…**cough cough** boring autocentric McSuburb as the only choice is a loser to base your ideology and self-identity on… **cough**…I wonder…
DS
[bleedingly obvious to everyone except the hard-core comment]
As I’ve been railing against subjective anectdotal evidence, might as well defer to my own humanity and commit the same:
I spent Thanksgiving weekend back home in Williamsburg, Virginia. A quiet, bedroom community with plenty o’land (0.2 RAC subdivision of 160 homes just went in behind the folks’ house and you can’t even tell). Despite all the land, where is the big development going? New Urbanism infill and tons of it. In a bedroom community. Crazy.
DS, I think the idea of aging people moving out of their current homes to smaller homes in more compact newer homes is interesting but not likely to have much impact. People don’t like to change and for a lot of people selling the house for another in a new community miles away from where they live now is a large change. Surely there will be some of the migration but in terms of condo, townhouses and such it’s unlikely to happen on a scale that will change things very much. For example, my parents have had a decade of empty nesting to move. They haven’t nor have they talked about it. Why would they? It would mean uprooting themselves, selling their home (probably worth @ $400k these days), and having to buy something like a townhouse in the city. That would mean having association fees, higher property taxes and possibly a new mortgage (it ain’t easy finding something newer in the city for $400k). Or it would mean buying a smaller, older SFH that is a lot less energy effecient (higher energy bills), probably doesn’t have central air, possibly doesn’t have natural gas for heating, washer and dryer and such, and a garage much smaller than the one they have now (Dad has a wood shop underneath the 3 car garage) and other things. They would have a new neighborhood with a whole new set of neighbors and have to find a new church. It’s a best a lot of social change and most likely either downgrade in where they live or, if not, likely would mean HOA fees on top of their property tax and possibly a small mortgage to make up the difference (new stuff in the city ain’t cheap). I can see it happening but to me it seems unlikely despite the large, aging population.
Having development from day one evolving around transit is also an interesting idea. But if anything that’s as much of a knock against most all transit projects around today since they almost always are built in areas that were long ago developed. I can see how it would make a difference in how people live. But politically it seems unlikely that transit projects would be built in newly developing areas.
prk,
There are several good points above. There are many threads to tease out. In my last place in WA, my justification for the zoning now emplaced was that it would be easier to age in place, & folks agreed with my assessment and approved the new zoning (see, I didn’t cram my ideas down people’s throats). Folks certainly don’t like to move away from memories, nor do they like to see big houses and yards decline as aging diminishes energy, so its not one size fits all.
But there is another prong to large-scale demographic change as well: the young. But this is a long, detailed discussion about demographics, projections from census data, etc., and I go to ~1-3 workshops-seminars/yr to get my hands around it. Instead, I refer you to one of the leaders in this topic.
Bottom line: rule of thirds for what folks will do (we aren’t a binary society, we generally fall 1/3 1/3 1/3). Society does not move or decide monolithically.
DS
Thanks. Looks like some stuff I’ve seen before. It seems to lean heavily on the assumption that children is what drives people to have bigger lots and bigger homes and that those who already have bigger lots and bigger homes will be trading them in for something else. IIRC over half the babyboomers are empty nesters now. If those premises were holding true, we should see more of this already, correct?
It seems to lean heavily on the assumption that children is what drives people to have bigger lots and bigger homes and that those who already have bigger lots and bigger homes will be trading them in for something else.
This is our understanding. ‘Our’ being the spectrum from sociologists to Realtors.
IIRC over half the babyboomers are empty nesters now. If those premises were holding true, we should see more of this already, correct?
Since we like subjective anecdote so much today, before the bubble popped, who was among the main group buying downtown Denver condos? Empty nesters from Ken Caryl.
But this is happening all over [1. , 2. ].
DS
Dan: developers will flutter to new light-rail stops in droves, because there’s colossal pent-up demand in this country for transit-oriented development.
JK: WONDERFUL, then they won’t need auto drivers to pay for the toy train or taxpayers to subsidize the condo towers.
PS: Why would more than a tiny percentage of people, afraid to drive, give up the freedom, convenience and low cost of driving for an inconvenient, costly, and dangerous toy train that seldom goes where one wants to go?
Thanks
JK
Dan: By his count, some 30 to 50 percent of residents in U.S. metropolitan areas want to live in a walkable urban environmentâ€â€
JK: Now tell us how many of those will drive 10 miles to save $50/week on groceries and have a larger selection compared to the “walkable†store. Same for entertainment. Same for the ball game.
Transit wastes time and money. Why do planners keep pushing waste?
BTW: People tend to answer surveys based on dreams not reality. Planners paint a dream world that sounds nice. People say that’s great. and suddenly planners are hyping their new utopia that is totally impractical. Fools, liars or a bit of both?
Thanks
JK
It seems to lean heavily on the assumption that children is what drives people to have bigger lots and bigger homes and that those who already have bigger lots and bigger homes will be trading them in for something else.
I imagine that once you retire (or semi-retire) that is when you find time to enjoy a garden and appreciate more a house on a big lot. Especially if you are in good health as future bionic seniors may be.
…but rather than resort to theoretical projections why not look at this supposedly future world of older people (which BTW has also been under growth management for 60+ years) right now? Its called Europe!
No demand for SFHs in Europe? Sorry folks but I got to laugh!
Take the average US suburbanite home, 2500 sqf on an 8000 sqf lot (232 M2 on a 743 M2 lot in metric) and put it in any Western European metropolitan area? How much is it worth now? Upwards of $1.5 million. Take that house and put it up for sale even at Silicon Valley prices and it’ll be gone in zero time.
Advice to dump SFHs and invest in condos? Thanks to the archival properties of the Internet, these comments will remain, so that we can read them again in 20-30 years.
Dan: By his count, some 30 to 50 percent of residents in U.S. metropolitan areas want to live in a walkable urban environment
JK:. Now tell us how many of those will drive 10 miles to save $50/week on groceries and have a larger selection compared to the “walkable†store. Same for entertainment. Same for the ball game.
Again, let’s take a look at Europe today…
…where most people nowadays shop the American way i.e. drive to supermarket, Wall mart (Carrefour, LIDL) and load up larger quantities.
They moved away from the wife stay home, spend an hour every day to walk around buying 4-5 Kg of groceries (how much can you possibly carry? Bottled water?). That was the European lifestyle of 40-20 years ago. It has become almost extinct, even in Europe, as people bought, you guessed it, cars!
So yes, US planners are as JK says “hyping their new utopia that is totally impractical.â€Â. Even in Europe people are moving in the opposite direction (to the great disappointment of their draconian planners who keep screaming “smaller, denser!â€Â).
But what planning HAS accomplished is for Europeans to line up to pay upwards of $500,000 to buy gardenless/yardless 1200 square foot apartments and settle for living at an approximation of the American way..
Poor Americans who have not lived/worked in Europe seem to have little clue of what expects them under Growth Management. But they will not be the first ones who shoot themselves in the foot. Has been happening throughout history.
I like to think of the following experiment: I imagine that immigration barriers between the US and Europe are removed, and then I try to imagine how many Europeans move to the US, vs. Americans to Europe.
Let’s be frank!… At best, what planners are telling you American people is: “For the good of the planet, Americans must reduce their standard of living to European levelsâ€Â. They cannot say that directly, so they dress it up and add some technical jargon in it to confuse the issue by making it sound technical.
CE
Ettinger said: Let’s be frank!… At best, what planners are telling you American people is: “For the good of the planet, Americans must reduce their standard of living to European levelsâ€Â. They cannot say that directly, so they dress it up and add some technical jargon in it to confuse the issue by making it sound technical.
JK: Well said. I can only add that the planners essentially lie to us.
Thanks
JK
WTF, Europeans have a reduced standard of living?
Guys next time you see some one driving a VW, Audi, Bentley, BMW, Ferrari, Porsche, Lamborghini, Volvo, Maybach, Rolls Royce, Maserati or a Mercedes Benz product.
Just remember that those are European automobiles!
HWM: “Guys next time you see some one driving a VW, Audi, Bentley, BMW, Ferrari, Porsche, Lamborghini, Volvo, Maybach, Rolls Royce, Maserati or a Mercedes Benz product.
Just remember that those are European automobiles!
Indeed. And remember that most of the models of these brands that you see on American roads, sell primarily in the American market. In the typical European standard of living, average people drive 1300 cc Peugeots, because of the exorbitant taxes that their autos are laden with.
In the typical European standard of living, average people drive 1300 cc Peugeots, because of the exorbitant taxes that their autos are laden with.
*snork*:
compared to
So European cars have, on average, comparable engines to Murrican cars.
Shocking, surely, how some around here rarely get it right.
DS
Dan: So European cars have, on average, comparable engines to Murrican cars. Shocking, surely, how some around here rarely get it right.
Indeed they rarely get it right!
…Judging from the fact that apparently there’s at least one planner who does not seem to be able to do simple volumetric unit conversions.
…So he claims that an engine displacement of 1,740 cc is about the same as an engine displacement of 166 cubic inches !!?
One cubic inch is 16.38cc (But hey wait!, I’m not posting any evidence so how can I, a non planner, possibly be able to calculate 2.54^3 on my own!)
So the 166 cubic inch average displacement of American cars computes to 2720 cc – vs. 1740 cc for the European average.
â€â€
But it is not simply a matter of Dan’s arithmetic error – that can be overlooked – anybody can get carried away with simple arithmetic errors once in a while.
…it’s more a matter of intent. Otherwise how can one explain a planner who says has lived in Europe, but sells the story that Americans and Europeans drive the same size and/or power and/or engine displacement cars? How could an American planner in Europe not notice that cars are smaller in Europe? Inability to notice gross differences, or intent to mislead?
How could an American planner in Europe not notice that cars are smaller in Europe? Inability to notice gross differences, or intent to mislead?
Ahhh! – the age old question: are planners lairs or idiots (or both)?
Thanks
JK
Ettinger:
you are correct with respect to my comparative. My bad for not noticing in vs cc.
You are incorrect with your characterization of EU cars being cr*ppy little Peugeots.
Otherwise how can one explain a planner who says has lived in Europe, … How could an American planner in Europe not notice that cars are smaller in Europe?
They are indeed smaller and lighter, but are made better than American cars and go faster. Once in a while you’d see a Corvette pass you, but very few other Murrican cars. And at that time, the Merkur XR4ti came out and the European model had at least ~20hp more in Yurp than the model in US, with IIRC maybe a 2.0 or 2.2 engine.
Again, there are little economy models. But there are plenty of non-1.3 engines, as my link above showed.
DS
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