US Land Breakdown – and you thought we have urban sprawl!

Developed Land- Despite all the hand wringing over sprawl and urbanization, only 66 million acres are considered developed lands. This amounts to 3 percent of the land area in the U.S., yet this small land base is home to 75 percent of the population. Furthermore, urbanized lands, once converted, usually do not shift to another use.

Rural Residential Land-This category comprises nearly all sprawl and subdivisions along with farmhouses scattered across the country. The total acreage for rural residential is 73 million acres. Of this total, 44 million acres are lots of 10 or more acres.
Developed and rural residential make up 139 million acres or 6.1 percent of total land area in the U.S. This amount of land is not insignificant until you consider that we planted more than 80 million acres of feeder corn and another 75 million acres of soybeans (95 percent of which are consumed by livestock) last year alone. These two crops affect more of the land area of the U.S. than all the urbanization, rural residential, highways, railroads, commercial centers, malls, industrial parks and golf courses combined. (Internet source)
The notion that we have “urban sprawl” is a misleading representation of development patterns. 

I will agree that there are instances were development will leap frog over land areas but there are many reasons:

            1. seller does not want to sell

            2. seller wants to sell but the price is too high

            3. no public water and sewer available

            4. site constraints limits the buildable area

            5. government zoning / political problems

            6. lack of infrastructure to support new development

            7. parcels of land are too small or strange property line configurations

            8. endangered species…………………. on and on!

I always thought that urban sprawl was due to below market land prices or the probability of rezoning for value. I am convinced now that “urban sprawl” is a misconception just as “global warming” is.

We are growing approximately 3,000,000 people a year and the American Dream of owning a single family home on your own land remains a priority for most Americans regardless of what the experts predict. We are not experiencing “sprawl” but reaching for the American dream.

Local zoning departments, regional agencies like the Pinelands in New Jersey and the USEPA regulate land on a daily basis. Have you ever thought that maybe regulations force development patterns rather than the market and it is then labeled as “sprawl”?

What is the intent --- for all of us to ride bicycles and live in an urban environment? If so, why not have another “Trail of Tears” to Detroit?

Updated - The Relationship between Housing Starts, Unemployment and Oil

Updated Relationship between Housing Starts, Unemployment and Oil:

Year                Housing Starts            Unemployment Rate (%)        Barrel of Oil Cost

1979                1,745,100                                5.9                               $74

1980                1,292,200                                6.3                               $99

1981                1,084,200                                7.5                               85

1982                1,062,200                                8.6                               71

1983                1,703,000                                10.4                             63

1988                1,488,100                                5.7                   $23 - $38

1989                1,376,100                                5.4                   from 1988 - 1994

1990                1,192,700                                5.4

1991                1,013,900                                6.4                   deep recession for housing

1992                1,199,700                                7.3

1993                1,287,600                                7.3

1994                1,457,000                                6.6

1999                1,640,900                                4.3                   $21 - $34

2000                1,568,700                                4.0                   from 1999 - 2002

2001                1,602,700                                4.2

2002                1,704,900                                5.7

2006                1,800,900                                4.7                               $63

2007                1,355,000                                4.6                               67       

2008                   905,500                                7.7                               $92     

2009                   554,000                                10.1                             54

2010                   587,600                                9.8                               70

I prepared this data stream back in 2010 due to the lack luster real estate market. I have provided the actual compared to the estimates by the “experts”

                       

Est. 2011                                                         9.4?                             $98??

Fannie Mae     710,000                      

NAHB              575,000

2011                587,000                                   9.6%                            $89

2012                781,000                                   8.1                               106.1 (high in March)

2013                925,000                                   7.4                               97.6

April 2014        1,000,000 est                          6.3%                          96.5 est

It is difficult to compare historical trends with current status of housing and especially difficult to forecast. However, it is clear to me that everything remains upside down.

Housing Starts – shows a methodical improvement since 2011 but new housing starts continue well below the annual needs of 1,200,000 starts per year.  

The great recession reset what we know to be true and the transformation of America has solidified a course toward uncharted waters – none of which is good for you and me!

Random Observations:

            Housing starts have increased due to pent-up demand and the lack of inventory

            Interest rates will rise and the Fed will not be able to control inflation

            Housing will again stall due to interest rates and sustained high oil prices

            Unemployment rate will continue to fall not due to job creation but by lack of participation

            Oil prices will stay high regardless of increased domestic oil supply

           

As housing goes so goes the economy…….our optimism will not overtake reality.

Starting Tuesday of next week, I will be posting about land, land inventory, and land prices. 

Has the “Great Recession” Really Ended?

It has been widely reported that the Great Recession officially ended in June 2009. If a recession is at the bottom of the cycle, it is only positive from that point in time – correct?

Regardless of your circumstance, let’s consider the nation as a whole and review some statistics. Obviously, I am not an economist but we must draw our own conclusions based on the reported stats and our own research.

                                                                        2010                         2012                         2014

Employment to population Ratio           58.5% (3/10)          58.5% (3/12)            58.9%(3/14)

Participation Rate                                      65.2%(4/10)            63.8%(3/12)             63.0%(1/14)

Median Income                                           $49,445                   $50,020          Estimated $52,000

Those making $23,492 a year for a family of four, or $11,720 for an individual were considered to be living in poverty.

This is the first time the poverty rate has remained at or above 15% three years running since 1965.

Source: CNNMONEY

National Debt as Percentage of GDP    86.4% (1/10)     101.7% (6/12)         Estimated 120%

           

Inflation Rate                                               1.24% (7/10)           1.41% (7/12)            1.5% (4/14)

Note: remember the inflation rate does not include food and energy costs          

Consumer Price                                         217.63(3/10)           229.39(3/12)           236.29(3/14)

The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Source: BLS

Median price of Ex. Homes                      $177,900                $171,250            $189,900(3/14)

Gas / gal                                                        $2.68 (9/10)           $3.78 (9/12)             $3.67 (4/14)

Ground Beef/ lbs                                        $2.49                          $3.08                          $3.61

2008

Bush signs stimulus package - Feb. 11, 2008. Bush to sign stimulus package Wednesday. President said he's looking forward to signing $170 billion economic stimulus package passed last week by Congress. Consumers could see tax rebate checks by May. CNN MONEY

$170,000,000,000

2009

Obama focused on the $787 billion stimulus plan, an ambitious package of federal spending and tax cuts designed to revive the economy and save millions of jobs. Most wage-earners will soon see the first paycheck evidence of tax breaks that will total $400 for individuals and $800 for couples. NBC News (Feb 2009)

$787,000,000,000

2010

QE1

After completing the purchase of $1.25 trillion in mortgage-backed securities, $300 billion in Treasury bonds and $175 billion in federal agency debt, the Fed ended QE1. Bankrate.com

2011

QE2

The Fed continued to reinvest payments on securities purchased during the QE1 program.

In addition, it began the purchase of $600 billion of longer-term Treasury securities.Bankrate.com

2013

QE3

The Fed is planning to buy another $40 billion in mortgage-backed investments each month until the economy improves. That's on top of the tens of billions of dollars in mortgages it already had been buying each month, making U.S. banks flush with cash.Bankrate.com

2014

QE Tapered - Dec. 18, 2013 to now

The Fed begins to reduce its asset purchases from $85 billion per month to $75 billion, then to $65 billion per month, but maintains the program as unemployment remains high and inflation, low.

The central bank continues to keep the federal funds rate at zero to 0.25 percent, and expects to keep it there at least as long as:

The unemployment rate remains above 6.5 percent and inflation remains contained, or

The inflation rate lags behind the committee's 2 percent goal if the unemployment rate dips beneath the 6.5 percent threshold.

NOTE:   April, 2014 the unemployment rate fell from 6.7 percent to 6.3 percent. Source: BLS,

NOTE:   April 2014 the latest annual inflation rate for the United States is 1.5% source:BLS

NOW WHAT?  We are between the sword and the wall.

1.  The Fed continues its practice regardless of their policy which would indicate a more dire economy

OR

2.  Russia invades Alaska and we all forget about the economy

OR

3.  The Fed adheres to their policy and gradually raises the prime rate which will raise interest rates. Please note the median price of homes --- raising interest rates to 6% would stop housing in its tracks which would lead to another recession.

Median price of Ex. Homes         

Year                Median Price          Interest Rate             with 3.5% down                  Monthly PI

                                                            Jan 1st                  Mortgage Amount                Payment

2010:              $177,900                   5.07%                         $171,700                               $929  

2012:              $171,250                   3.92%                         $165,300                               $782

2014               $189,900                   4.31%                         $183,300                               $908

                       

End of 2014

                        +3%                            1/1/15 (If the Fed does what they need to do)

                        $195,600                   6.00%                         $188,700                               $1,131

So to purchase this median priced home, you will need about $7,000 for a down payment and about $6,000 for closing costs and other expenses i.e. inspections, attorney, etc. 

Your salary would have to be $59,000 to qualify for this mortgage. Assuming of course your debt is not out of the ordinary!

Charlotte Rentals

	All Beds	1 Bed	2 Beds	3+ Beds
Median:	$1333	$1223	$1452	$1345

 Washington DC Rentals

	All Beds	1 Bed	2 Beds	3+ Beds
Median:	$2686	$2407	$3435	$3497

  Your alternative is the rent but the monthly rent in most cities continues to climb. 

The harsh reality is that the Fed has put us in a bind by pumping money into the economy which has not reached main street. The harsh reality that keeping interest rates low has not sustained a growing economy. The policies of the "inside the beltway" politicians has also failed to sustain a growing economy. 

We are between the sword and the wall. 

It is only a matter of when the next shoe will fall.