Calling everyone...Biggest 2018 Takeway

What has been the biggest lesson you learned this year in your RE career? Has anything surprising occurred or any interesting moments/events/trends you've come across at work and witnessed in the estate field? How other players are reacting to the market? 1st year at your current job or industry that stood out to you that you wouldn't have realized before?

Any insight/advice that we can all chime in on for everyone in the industry? Whether in acquisitions (REPE), development, AM, debt, leasing, brokerage etc. Thanks.

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Comments (90)

Dec 27, 2018

Hoping to hear what everyone has to say.

Funniest
Dec 27, 2018

2018 = Development Spreads Compressing, Construction Costs Increasing, Interest Rates Rising.
2019 = Clench your butt holes.

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Dec 28, 2018

Wooo! Perfect time to be graduating from UG

Dec 28, 2018

Same boat as you. But if manage to ride it out, you get better experience. A lot of people I meet with started around or in the wake of 2008 and they talk about how it shaped their careers.

Dec 28, 2018

Yeah I've heard that too actually. There's surprisingly a decent amount of jobs out in the market right now for real estate roles so I'm quite happy

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Dec 27, 2018

2018 onward = Lawyers continue to suck.

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Dec 30, 2018
MonkeyWrench:

2018 onward = Lawyers continue to suck.

Hah, the more things change...

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Dec 27, 2018

2018 = A lot of people realizing their market rent growth models for core assets are complete bullshit (NYC specifically)

    • 2
Dec 27, 2018

You mean rents won't grow 3% - 5% year over year into infinity? Blasphemy.

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Dec 27, 2018

Most interesting topic i've followed this year: lenders absorbed treasury rate moves from early 18, but did not absorb the august rate hike, but now rates are back to pre-august levels. it'll be interesting to see what happens when rates move up again. it's worth being aware that if lenders aren't absorbing the next round of rate increases, then property valuations will be impacted.

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Dec 30, 2018

As a lender, I can tell you we can absorb some treasury moves, then the lenders decide it isn't profitable and our spreads move up accordingly, then things get competitive again and borrowers get back to squeezing our spreads.

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Dec 30, 2018
yayaa:

What has been the biggest lesson you learned this year in your RE career?

2018: Construction pricing is hilariously expensive. Garden deals cost as much as 5 story wrap deals should.
2019: Hope you don't have expensive floating debt!

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Dec 31, 2018

Developers are getting overly-aggressive in their rent / expense assumptions. Construction pricing has compressed spreads a ton. Suburban MF still good. Urban, not so much.

Biggest takeaway though is that office acquisitions are so absurdly over-priced it's ridiculous. Tons of people buying new deals at 25%+ over replacement cost. 1980s deals trading at replacement cost. Silliness.

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Jan 2, 2019
larry david:

1980s deals trading at replacement cost. Silliness.

It's amusing how people just completely ignore deferred maintenance. So much selective ignorance.

Jan 4, 2019

What do you mean my deal doesn't work unless I have a 22% expense margin on MF????

Jan 2, 2019

Desperate liquidity

Jan 2, 2019

Get into what you are most interested in and stay there. Pivoting from development to the financial intermediary space to get to REPE was a very tough road. Brokerage is much more about salesmanship and grinding than intellectual prowess. It was a wake up call to watch Marcus and Millichap experienced brokers with little understanding of JV's, structured finance, and development agreements leap over an ivy league educated coworker because they knew the game of building and maintaining a network.

On another note, way too much dumb money piling into the crowd-sourced equity space. Also, (re)development yield spreads got pinched hard due to unrealistic construction budgeting and realizable rent premiums. You might as well just add 20% construction cost contingency to every pro forma and keep this scenario as a conservative benchmark. Wayyy too many Chiefs and too few Indians in the construction space. Experienced skilled tradesmen and superintendents are in too short supply. Many don't want to admit it, but most of the development yield spread in growth markets is created on the back of cheap imported labor from Latin America.

Too much new housing has been built to unrealistic prices. Home absorption in the $400-600K range has slowed dramatically. Middle class families in America are unable (or unwilling) to afford homes in the $400K+ range; rising interest rates further exacerbates this issue.

A large bid-ask spread is developing in the land market. The big urban wrap multifamily development wave is over - the suburbs are back in vogue due to lower land costs. Millennials who wish to start a family are beginning a large migration to the suburbs. The live/work/play wet dream of Marxist urban planners is unsustainable and dangerous.

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Jan 3, 2019
InVinoVeritas:

The live/work/play wet dream of Marxist urban planners is unsustainable and dangerous.

Great response, but what specifically are you referring to by this? Those mixed retail/residential areas popping between urban and suburban areas?

Jan 3, 2019

Urban planners are prioritizing mixed-use development with small unit sizes at high rent $/PSF instead of affordable residential development (think $200-300K home prices). Municipal design demands on single-family residential at this price range is far too restrictive, therefore we have a national shortage of homes at this price point in rapidly growing areas. American home ownership is a large part of what made this country exceptional because home ownership is the primary way families build wealth. Municipal planners hubris and smug surety in their commie-block live/work/play high density development is a major hindrance to suburban growth in America (the areas which used to have the highest upward mobility before commute times to the skilled employment centers become ridiculously unreasonable).

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Jan 3, 2019

Thanks for the clarification, +1

Jan 3, 2019

Sure, happy to give my two cents. The TLDR version is that smug out-of-touch urban planners, like central bankers, are destroying home affordability in the US and other countries by promoting crowded density which raises prices.

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Most Helpful
Jan 3, 2019
InVinoVeritas:

Sure, happy to give my two cents. The TLDR version is that smug out-of-touch urban planners, like central bankers, are destroying home affordability in the US and other countries by promoting crowded density which raises prices.

Really odd hard on for urban planners there.

Developers are delivering on density and mixed-use because the market, aka people, have a high demand for it. Mixed use development isn't some leftist conspiracy driven by someone making $40k a year out of a cube in the city government office and density doesn't inherently raise the price of anything except for land basis.

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Jan 3, 2019

Let's back up to a very high level overview of what we are discussing. Land ownership can either be centralized or decentralized. Mixed-use (and multifamily) development causes centralized ownership of land. Land in proximity to major skilled employment centers is scarce. Municipal planners prioritize mixed-use development over traditional single-family development because many do not understand how private property ownership is a foundation of what America was founded on. This is why you are seeing the home ownership rate plummet in America.

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Jan 3, 2019
InVinoVeritas:

Let's back up to a very high level overview of what we re discussing. Land ownership can either be centralized or decentralized. Mixed-use (and multifamily) development causes centralized ownership of land. Land in proximity to major skilled employment centers is scarce. This is why you are seeing the home ownership rate plummet in America.

First of all, the home ownership rate has not and is not plummeting. In 1994 it was 64%. It had a high of 69% in 2004 when people were buying homes they shouldn't have been. In 2016, it was at 63.4%. Decreasing, or even just regressing to the mean, is a better way to look at it.

Here's a graph

Even if you don't buy that premise though, attributing the decrease to mixed use development and apartments is confusing cause and effect. Apartments are a solution to the difficulty of millennials buying a home, due to factors such as outrageous student loan loads and underemployment not allowing millennials to save up for a down payment. Millennials are also buying cars at reduced rates. They are not a cause.

A plot of land has a specific and inherent highest and best use. Just like you wouldn't build a high rise out in the country, you wouldn't build a suburban-type single family home in an urban area. It doesn't make sense from a land use perspective, it doesn't make sense from a city planning perspective, and most importantly, it doesn't make sense from an investment/development perspective. Land in proximity to major skilled employment centers is scarce, which only further supports higher density housing options.

I get that some people inherently don't like city living, don't want to see their neighbors from their window, want to drive their big pick up trucks on their land, etc. I don't see too many people advocating for 50's style sprawl that killed American downtowns and led them to increased crime, reduced property values, etc. Cities have just recently experienced a renaissance over the past two decades (some within only the past 5-7 years). It's incredibly weird to be arguing with someone about why this is a good thing.

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Jan 3, 2019

A ~5% drop at the national level is substantial. Home ownership is critical for middle class net worth because a sunk cost (rent) becomes accumulated equity in a liquid non-depreciating (or at minimum very slowly depreciating) real asset.

Millenials are not buying new cars and new homes due to cost % of income and lack of proximity to employment centers. No one chooses to live in a 600 sf studio apartment...

I drive a big pick up truck and live in Texas where the American dream is real and thriving. Living in shoebox while owning no real assets sounds like a terrible existence to me...

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Jan 3, 2019
InVinoVeritas:

A ~5% drop at the national level is substantial. Home ownership is critical for middle class net worth because a sunk cost (rent) becomes accumulated equity in a liquid non-depreciating (or at minimum very slowly depreciating) real asset.

Millenials are not buying new cars and new homes due to cost % of income and lack of proximity to employment centers. No one chooses to live in a 600 sf studio apartment...

I drive a big pick up truck and live in Texas where the American dream is real and thriving. Living in shoebox while owning no real assets sounds like a terrible existence to me...

Lack of proximity to employment centers would make them more likely to buy cars, not less. And of course people choose to live in a 600 SF apartment. People choose to live in a 250 SF tiny home for Christ's sake.

Your last paragraph really drives home your argument though and is a good sign this back and forth is over. You are letting your personal, and frankly antiquated, views on what the "American dream" is cloud your view of the market. "Living in a shoebox while owning no real assets" sounds like a terrible existence to you, but that's irrelevant because it either sounds like a good existence to some or a necessary one to due factors that are not the fault of city planners.

I can post article after article about why density is good and why urbanism is good - both for society and for investors' pockets. I can post article after article about why sprawl ruined cities, why it's bad design, why it is bad for the economy, why it is bad for the environment, etc. I can even explain to you about how this has nothing to do with Marxism vs. capitalism, or liberal vs. conservatives, and show you examples of how blue states get it horribly wrong (the NIMBYism in California) and how red states get it right (Georgia, Arizona, and, yes, Texas) but you have to be willing to step outside of your "big pick up truck" to listen.

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Jan 3, 2019

Urbanism results in concentrated land ownership which results in concentrated wealth. Wealth inequality leads to populism, violence, and eventual revolution. See what is occurring in France as a preview to where we are headed.

Are you seriously arguing that people "choose" to live in a 600 sf studio or 250 sf home? If monthly cost was equal, you think these individuals would "choose" 1/3 the dwelling space? Wrong. People are "choosing" to responsibly live below their means so they can save, and this is the only way how due to a shortage of reasonably priced housing.

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Jan 3, 2019
InVinoVeritas:

Urbanism results in concentrated land ownership which results in concentrated wealth. Wealth inequality leads to populism, violence, and eventual revolution. See what is occurring in France as a preview to where we are headed.

Talk about Marxism...

People don't have the right to buy a house for $200k and expect that house to be the best located house in the city. That fundamentally does not exist.

People buy what they can afford and have the choice between something smaller in a nicer area or something larger further out. It's a choice.

InVinoVeritas:

Are you serious arguing that people "choose" to live in a 600 sf studio or 250 sf home? If monthly cost was equal, you think these individuals would "choose" 1/3 the dwelling space? Wrong. People are "choosing" to responsibly live below their means so they can save, and this is the only way how due to a shortage of reasonably priced housing.

Yes, I am, and I did. I literally choose to live in a 700 SF 1 bedroom apartment with my fiancee and dog because the building was gorgeous, well-located near work, various golf clubs, good restaurants, and a nice gym, and my commute in a city famous for traffic is 5-10 minutes. Monthly cost was LITERALLY equal to 4 story homes built in 2006 or so an hour from work. But you know what? The commute wasn't worth it, the boring life of suburbia wasn't worth it in my late 20's/early 30's, and when you factor all of that into the decision, for me, it made more sense to live in an apartment. The hell would I do with 3 more bedrooms anyhow? Even now, far more financially secure, I'm at most looking for a townhouse. The hell do I want to mow an acre lawn for?

Point is, you are dramatically and consistently confusing your personal views on the world with how everyone in the world thinks. Part of being in real estate, especially residential real estate, is understanding that your personal views on real estate may not match the market's mindset at all.

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Jan 7, 2019
InVinoVeritas:

. Land in proximity to major skilled employment centers is scarce. Municipal planners prioritize mixed-use development over traditional single-family development because many do not understand how private property ownership is a foundation of what America was founded on. This is why you are seeing the home ownership rate plummet in America.

@CRE has done a much better job breaking down how ridiculous your entire post is, but I wanted to focus on this portion, which has been ignored. The strong implication, which is nearly stated outright (given your later diatribes about building home equity vs the sunk cost of renting) is that home ownership, specifically single family home ownership, is some kind of cornerstone of the American dream, and that is obvious bullshit. Homeownership in this country, especially in its modern sense and in modern levels, is entirely the result of the GI Bill and its provisions not only for low cost mortgages, but also the ability to attend institutions of higher education on the cheap and low cost small business loans to capitalize on those learned skills. The previous half century or more had been characterized by a growth in cities and dense urban centers full of renters, and the abandonment of rural life.

All I'm saying is, don't come on here making up shit about history when you don't know your facts. Homeownership is also an artificially inflated subsidy to the middle class, and while I don't know how you feel about that in general, I know that most folks I've met who live in and describe Texas as "the place where the American dream is real and thriving" are also generally against government handouts, so... take that as you will.

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Jan 8, 2019

There is a 0% chance we could ever find any common ground. I am extremely against handouts of any kind because competition/natural selection is what drives humanity's growth. Also, real property ownership is one of the few things that distinguishes our current economic system from an outright plutocracy. If you do not understand the importance of accumulating equity throughout life to build generational net worth, then you are destined to be a modern day serf and should reevaluate this industry.

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Jan 8, 2019
InVinoVeritas:

There is a 0% chance we could ever find any common ground. I am extremely against handouts of any kind because competition/natural selection is what drives humanity's growth.

Ah, another Social Darwinist. Lovely. They seem to breed like rabbits on this site. You don't understand natural selection and you don't understand the relevant history, so just stop. One of the lovely things that separates humanity from other species is that we DO cooperate; it isn't natural selection, it's communal efforts to advance the human condition. We put a man on the f**king moon; that wasn't "natural selection", it was a group effort explicitly funded and backed by taxpayer dollars. Otherwise known as handouts.

TL;DR - you're not educated enough to speak to this; you seem intelligent enough to be dangerous without actually understanding what it is you're nominally discussing.

Also, real property ownership is one of the few things that distinguishes our current economic system from an outright plutocracy. If you do not understand the importance of accumulating equity throughout life to build generational net worth, then you are destined to be a modern day serf and should reevaluate this industry.

I'm not disagreeing that home-ownership is a good way to build wealth. Of course, your nice 30 yr chart is meaningless, because I was disputing your understanding of the history of the American housing market, not just the last several decades since the GI Bill artificially boosted the benefit to being a homeowner. If I handed out a couple thousand bucks a year in stocks to renters, they'd have more wealth than their homeowner counterparts. Taxpayer-funded wealth isn't real wealth gain. Moreover, the chart you've posted above is worthless even beyond it's short, cherry-picked scope, because it ignores the obvious fact that people with wealth buy, and those without rent. Your chart isn't showing that home owners accumulate more wealth, it shows that people who have already accumulated wealth become homeowners. So lets add statistics to another field you have nothing more than a nominal understanding of.

But more importantly, you're assertion that home ownership is the foundation of the American Dream is prima facie nonsense. Home ownership was well under 50% until 1945 (guess what happened right around then!), which blows your entire assertion out of the water.

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Jan 8, 2019
  1. There is a difference between free cooperation and coerced cooperation. Individual freedom will always be the bedrock of modern civilization.
  2. Ad hominem attacks show the weakness of your position.
  3. Home ownership is the bulk majority of middle class net worth in America. A strong upwardly mobile middle class which thrives on meritocratic competition is absolutely critical to developed nations. We are on a fast road towards enormous wealth inequality that cannot be reversed. This will meet some sort of violent end (history repeats itself).
  4. The rest of your argument is pilpul conjecture making no valid points. The analysis period is clearly post WWII as this is what catapulted America to global hegemony. America had everything we needed to ensure global dominance for centuries, but a massive creeping leftist societal/political shit is causing severe regression to developing world standards for much of the country, which you and your elitist ilk have zero understanding of. This resulted in the election of Donald Trump and the rise of populism, which will have severe ramifications here and across the globe.
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Jan 8, 2019
InVinoVeritas:

1. There is a difference between free cooperation and coerced cooperation. Individual freedom will always be the bedrock of modern civilization.

So what funded the moon landing if not "coerced cooperation" in the form of taxation? You throw these pseudo-intellectual terms around to convince me or someone else that you have the slightest clue what you're talking about. You clearly don't. Presumably, "free cooperation" is/are things you agree with, while "forced cooperation" is the opposite. Government is defined, in part, by the possession of a monopoly of force in a given society. So anyone living under a government is under the thumb of "forced cooperation," quite literally. Individual freedom is a lovely thing and I won't disagree with you on that. Nor even on the idea that individual genius can advance the human race. But it's always predicated on what has come before, the knowledge of which overwhelmingly tends to be transmitted through government funded institutions.

2. Ad hominem attacks show the weakness of your position.

What? Where in the world did I descend into the ad hominem? In calling you a Social Darwinist? If I were to call you a person of French descent, that wouldn't be ad hominem, would it? No, because it's factual. Your position is the one that is commonly referred to as Social Darwinism. If you don't like being associated with that ideology, then you are welcome to revise your beliefs.

3. Home ownership is the bulk majority of middle class net worth in America. A strong upwardly mobile middle class which thrives on meritocratic competition is absolutely critical to developed nations. We are on a fast road towards enormous wealth inequality that cannot be reversed. This will meet some sort of violent end (history repeats itself).

I agree with the last bit entirely, a point I have made myself in other contexts on these boards. What that has to do with home ownership is beyond me. Home ownership rates sat at about 61% in 1960, a time when wealth inequality was unquestionably lower that it is today. In 2010 it was about 67%.

Wealth inequality has FAR more to do with the consistent lowering of the marginal tax rate on the upper earners and the ongoing destruction of barriers to passing down wealth.

4. The rest of your argument is pilpul conjecture making no valid points. The analysis period is clearly post WWII as this is what catapulted America to global hegemony. America had everything we needed to ensure global dominance for centuries, but a massive creeping leftist societal/political shit is causing severe regression to developing world standards for much of the country, which you and your elitist ilk have zero understanding of. This resulted in the election of Donald Trump and the rise of populism, which will have severe ramifications here and across the globe.

Excuse me sir, but you were the one who posited that "home ownership is a large part of what made this country exceptional," to take the verbatim quote. My point about the history of American home ownership is not "conjecture" just because you disagree with what it says about your argument. I'm sure the men and women who helped storm the beaches on D-Day, who discovered how to split the atom, and who ushered in and maintained the Pax Americana would be just delighted to know that America wasn't exceptional in their times.

The belief that home ownership is a crucial part of "the American Dream" is a relatively new phenomenon. Whatever it is that made this country exceptional existed before the GI Bill and it's resultant massive bump in home ownership rates. To assert that a declining home ownership rate is somehow inimical to the nation's character is to insult every American who lived prior to 1944. I am not, you'll note, disputing the idea that home ownership is a good way to build wealth, or anything other than a positive, and one that should be encouraged.

What I dislike and will continue to strive to dispute, is your obvious lack of understanding of any possible fact which isn't hand-selected to fit into the narrative you've built for yourself.

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Jan 8, 2019
Ozymandia:

Wealth inequality has FAR more to do with the consistent lowering of the marginal tax rate on the upper earners and the ongoing destruction of barriers to passing down wealth.

Wealth inequality is primarily the result of three things
1. Subsidized low interest rates by the privately held Federal Reserve that allows existing capital to arbitrage yield without adding any value. This creates real estate asset bubbles that harm the middle class due to home affordability crises.
2. Technological advancement combined with technological concentration, where certain groups of people have substantially higher efficiency and ability to compete in the now global marketplace. This is the trickiest and most complex issue - see the automation of Uber vehicles creating a big unemployment shockwave. Would these individuals be absorbed by other jobs?
3. Out of control immigration policies which lower wages, both blue and white collar. This solely benefits capital, and does not benefit the American worker. See Indian H1B1 workers to tech or Hispanic immigration effects on food service/construction. Worker supply grows faster than demand, equilibrium wage goes down.

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Jan 8, 2019
InVinoVeritas:
Ozymandia:

Wealth inequality has FAR more to do with the consistent lowering of the marginal tax rate on the upper earners and the ongoing destruction of barriers to passing down wealth.

Wealth inequality is primarily the result of three things
1. Subsidized low interest rates by the privately held Federal Reserve that allows existing capital to arbitrage yield without adding any value. This creates real estate asset bubbles that harm the middle class due to home affordability crises.
2. Technological advancement combined with technological concentration, where certain groups of people have substantially higher efficiency and ability to compete in the now global marketplace. This is the trickiest and most complex issue - see the automation of Uber vehicles creating a big unemployment shockwave. Would these individuals be absorbed by other jobs?
3. Out of control immigration policies which lower wages, both blue and white collar. This solely benefits capital, and does not benefit the American worker. See Indian H1B1 workers to tech or Hispanic immigration effects on food service/construction. Worker supply grows faster than demand, equilibrium wage goes down.

So far home ownership has not featured into your arguments, even nominally, except for your point about the fed funds rate. I'll make no argument about whether the Fed is doing it's job well, but your point about whether it has any effect on income inequality is easily refuted by the most cursory look at the facts. The fed funds rate has been exceptionally low over the last ten years, but historically (again, you seem allergic to looking beyond the last few decades) it's bounced around quite a bit. During the late 70s and early 80s it was quite high, and despite being cut saw occasional spikes through the end of the 80s. Income inequality was increasing consistently during those years. You know what correlates much better? The fact that the top federal tax rate was slashed from 70% to under 30% between 1980 and 1988 and never really rose again.

You're welcome to believe what you want. But even when home owners saw their nominal net worth spike in the run up to the Great Recession, income/wealth inequality was still increasing. I'm not sure how you can possibly justify the concept that allowing more Americans to build home equity (which I agree is a good thing, mind you) is going to have any impact on ameliorating income inequality, when it never has in the past? We have data from the last 20 years which shows that even an astronomical increase in home values does nothing to close the wealth gap.

Jan 10, 2019

I just want to point out that you should look into, I'm not sure the dates specifically, but that while the marginal rates were decreased so where the nominal income brackets to which those rates were applied to. So as tax dollars as % of GDP, they kind of netted out.

Jan 10, 2019
C.R.E. Shervin:

I just want to point out that you should look into, I'm not sure the dates specifically, but that while the marginal rates were decreased so where the nominal income brackets to which those rates were applied to. So as tax dollars as % of GDP, they kind of netted out.

Decent point. That being said, I think as a broad correlation what matters is that taxation on the wealthy decreased in both absolute and relative terms. Obviously there are factors beyond just taxation that lead to increasing wealth inequality. My point to @InVinoVeritas s was that declining home ownership is a symptom of it, at best, and not a cause.

Jan 3, 2019

American middle class families have a very high demand to own moderately affordable homes proximate to large skilled employment centers. This is why we cannot build enough new homes in America in the $200-300K range. I just spoke to a Lennar VP - they cannot find enough land to meet the absorption rate. Now we have a growing glut of supply at the $400-600K range because this is ~10x the national median HH income.

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Jan 3, 2019
InVinoVeritas:

American middle class families have a very high demand to own moderately affordable homes proximate to large skilled employment centers. Well, most of America. Let me guess - you live in CA or NY?

No, I don't.

Middle class people are being priced out of major urban areas, but that is because these urban areas are not dense enough aka there is not enough housing to support the amount of people so prices are high due to high demand and low supply. Making a plot of land 3 single family homes instead of 600 apartments isn't going to make supply higher or demand lower, and you better believe no one is building those urban single family homes to sell them for $250k after paying $10MM for the plot...

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Jan 3, 2019

Suburbs need to grow and development decentralized skilled employment centers. This would solve many of America's problems, especially traffic congestion.

Jan 3, 2019
InVinoVeritas:

Suburbs need to grow and development decentralized skilled employment centers. This would solve many of America's problems, especially traffic congestion.

...now you are arguing for my side. Suburbs attract business in one way through population density - aka mixed use centers.

Jan 3, 2019

Yes, I think the key here is suburban. Hyperdensification of downtown centers is what I am staunchly against. Due to traffic, this forces the American middle class forgo home ownership due to insane commute times.

Also, when urban development pushed the "culturally vibrant" urban residents out, Obama decided to develop Section 8 housing in the heart of thriving suburbs. Just another example of Democrats disdain for the "deplorable" white American middle class.

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Jan 3, 2019
InVinoVeritas:

Yes, I think the key here is suburban. Hyperdensification of downtown centers is what I am staunchly against. Due to traffic, this forces the American middle class forgo home ownership due to insane commute times.

"Hyperdensification" of downtown centers is literally the best place for it and the only place where it is appropriate. Do you work in real estate?

InVinoVeritas:

Also, when urban development pushed the "culturally vibrant" urban residents out, Obama decided to develop Section 8 housing in the heart of thriving suburbs. Just another example of Democrats disdain for the "deplorable" white American middle class.

Ah - so here's another strong motivation for your arguments. Can't be having black people in your suburbs, am-i-rite?

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Jan 3, 2019

Yes, I clearly work in RE. I will continue refraining from ad hominem insults.

Under Obama, America had 8 years of Urbanism. Track his presidency with your home ownership chart and median American net worth. These policies have been a disaster for this country. Urbanism results in wealth inequality, plain and simple. Wealth inequality leads to social upheaval.

How would you feel if you emptied your savings account to buy a new home and a 500 unit Section 8 housing complex was built blocks away? Do you believe Americans should have a right to choose who they live around? Are communities important, or should government enforce "vibrant diversity" at all costs?

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Jan 3, 2019
InVinoVeritas:

Yes, I clearly work in RE. I will continue refraining from ad hominem insults.

Under Obama, America had 8 years of Urbanism. Track his presidency with your home ownership chart and median American net worth. These policies have been a disaster for this country. Urbanism results in wealth inequality, plain and simple. Wealth inequality leads to social upheaval.

How would you feel if you emptied your savings account to buy a new home and a 500 unit Section 8 housing complex was built blocks away? Do you believe Americans should have a right to choose who they live around? Are communities important, or should government enforce "vibrant diversity" at all costs?

"Under Obama, America had 8 years of Urbanism"

What does this even mean? "Urbanism" is a real thing, not a euphemism for black people.

Urbanism and mixed-use communities have absolutely nothing to do with Obama, Section 8 housing being build next to single family homes, "vibrant diversity", or anything else you care about politically. Urbanism in its proper form literally decreases wealth inequality.

This is beginning to be become too surreal to have any value, even on a historically slow day in the office after New Years, so if you want to talk about land use from an investment perspective, or even a "how to make modern cities better" perspective, then fine. If you want to talk about how Obama ruined the country or whatever, go to the off topic forum.

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Jan 3, 2019

2009 Median Household Net Worth - $68,900
2014 (latest data from Census) - $81,850

Source: Census Bureau

Hmm.. maybe I don't know math, but those numbers don't look like a "disaster for this country".

Jan 7, 2019
InVinoVeritas:

Yes, I clearly work in RE. I will continue refraining from ad hominem insults.

Under Obama, America had 8 years of Urbanism. Track his presidency with your home ownership chart and median American net worth. These policies have been a disaster for this country. Urbanism results in wealth inequality, plain and simple. Wealth inequality leads to social upheaval.

Not sure how you blame Mr Obama for an economic situation that unquestionably began before he took office. Moreover, there is no question that any increase in wealth inequality has been driven far more by the American right wing, with it's single-minded focus on slashing taxes for top earners and corporate interests (read: people wealthy enough to own stock) than by our "socialist" Democrats. I make no value judgement on that, but no one in their right mind can argue otherwise.

Additionally, what the hell is "Urbanism"? Obviously, this country has spent essentially it's entire existence moving towards agglomerating in more and more dense urban areas. To say that this has occurred to an exceptional degree under Mr Obama is both factually incorrect and intellectually dishonest. If, as I suspect, this is a veiled reference to the fact that Mr. Obama was and is less disdainful of the minority population(s) of this country, who tend to congregate in urban areas, than his conservative counterparts, then I'll do you the service of cutting myself off.

How would you feel if you emptied your savings account to buy a new home and a 500 unit Section 8 housing complex was built blocks away? Do you believe Americans should have a right to choose who they live around? Are communities important, or should government enforce "vibrant diversity" at all costs?

I also literally don't understand this argument? So you buy a home. Good for you, you've achieved the American dream. You don't have a right to tell your neighbors who they can and cannot sell to, which is literally what you're arguing. This isn't even dog whistle politics, its straight up racism. First, the equation of Section 8 with minorities is absurd, as plenty of white people take advantage of the non-discriminatory federal housing program, as well they should. Secondly, why does the government, or a private developer, not have the right to buy that parcel of land? Why do you get rights that no one else does?

You get the right to choose who you live next to because there is a free market in land and labor in this country, and you can move where you want, whenever you want, subject only to what you can afford and your personal preferences. You don't get to set up shop in a neighborhood and then tell others they can't join you. If you don't understand that, then there is no point in further discussion. Communities are important, but they aren't static, and you don't get to decide what they look like. We understand that you find minorities and poor people repulsive, and while prejudice is ugly, no one can stop you from being a bigot. But it's on you to leave, not them. And if you take a bath on the home sale, then guess what big guy? That's capitalism. If someone has that kind of terrible instinct for bad investments, then maybe they'll be happy about that Section 8 building one day when they're forced to go on the government dole.

This is the kind of shit NIMBY argument that both liberals and conservatives are fond of employing, because people suck and are greedy and hypocrites, regardless of political affiliation. Shame on you

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Jan 8, 2019

The words "racism" and "bigot" have no meaning anymore; pointing the finger and crying these out is not a valid strategy to win arguments.

People have a right to pick where they want to live and who they sell property to. However, the government is not a person. They do not (and should not) have carte blanche authority to dictate who lives where. This would be Communism, which killed $100mm+ people and sank the USSR region behind Western Europe 50+ years.

Intelligent individuals will always move into communities (and take large financial risk doing so) that echo their personal virtues, culture, education, etc... See booming ethnic enclaves in HOU or DFW, for example, that have 1.5-2.0x the median HH income of the MSA. They are choosing to segregate themselves, but it's not "racist" or "bigoted" because they aren't pale in skin.

See if I was a "racist", based on my preferred societal ideals, we live in an Asian supremacy. Lowest crime rates, highest education levels, highest life span, highest net wealth and earnings. We should all strive for these ideals because they would make our society better. What can we deduce from this? Could there be a direct correlation universally true across the planet between nation's average IQ and GDP per capita? Let me guess, IQ is a "social construct" right?

The truth is that people like you are racist against white people. You disdain white heritage, customs, and culture. My ancestors hailed from many nations including England, Germany, France, and Sweden and I am proud of my heritage. Everyone should be no matter where they came from - it's an important part of a healthy self-identity.

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Jan 8, 2019
InVinoVeritas:

The words "racism" and "bigot" have no meaning anymore; pointing the finger and crying these out is not a valid strategy to win arguments.

I'm sorry, but no. When you tell me that "diversity" is a negative in considering a place you want to live, well... that's pretty much the definition of prejudice (I don't like the term racism and regret using it in the earlier post). You're straight up telling us that you find the presence of people of a differing ethnic background to be a bad thing. And I'm not trying to use that to win this argument, which is pretty self-evident to anyone reading it. I am making the incidental point that you, like many people, are trying to use a bogus "free market" argument to cover up a dislike of people that don't think and look like you. Breaking down the argument is easy; it's merely that I like to investigate people's motivations for shitty, obviously-wrong statements.

People have a right to pick where they want to live and who they sell property to. However, the government is not a person. They do not (and should not) have carte blanche authority to dictate who lives where. This would be Communism, which killed $100mm+ people and sank the USSR region behind Western Europe 50+ years.

Awesome! I agree! Point out where in your example, or where in American society, you have the government "forcing" you to live somewhere? Your example, as you'll well remember, is that the government was helping poor people live somewhere that only happened to be in proximity to your home. In no part of that example was the government forcing you to live anywhere; the free market still applies. You are more than welcome to move somewhere else. Your complaint, according to the above, is that you put all this money into a home and now an external factor has caused you to have to move, or maybe even have the value decline. Guess what? That's capitalism! Like many free market advocates, you seem to only be for it when it's putting dollars in your pocket. The moment the free market starts hurting you, well... then we need more control over who can move or build where.

Intelligent individuals will always move into communities (and take large financial risk doing so) that echo their personal virtues, culture, education, etc... See booming ethnic enclaves in HOU or DFW, for example, that have 1.5-2.0x the median HH income of the MSA. They are choosing to segregate themselves, but it's not "racist" or "bigoted" because they aren't pale in skin.

Ah, another straw man argument. There is nothing wrong with wanting to live in a community which reflects your values, and if that means living with people who look like you and come from your ethnic or religious background, so be it. No where did I, or anyone else to my knowledge, say anything otherwise. What is bigoted or "racist" (to use the common parlance) is when you become upset and complain that someone else is moving into that neighborhood and find that to be an infringement on your "rights" or some other nativist bullshit. You and all your similar looking and thinking neighbors are welcome to move again.

See if I was a "racist", based on my preferred societal ideals, we live in an Asian supremacy. Lowest crime rates, highest education levels, highest life span, highest net wealth and earnings. We should all strive for these ideals because they would make our society better. What can we deduce from this? Could there be a direct correlation universally true across the planet between nation's average IQ and GDP per capita? Let me guess, IQ is a "social construct" right?

I mean, in a literal sense... yes. Intelligence is a real thing. IQ is a social construct created to measure it. The idea that IQ tests can accurately measure intelligence has been pretty widely doubted and even discredited. I can provide more, if you want, though I doubt you're interested in reading it. Even the concept of what constitutes superior cognitive ability is up for debate. Obviously some people are smarter than others, but you can have individuals who perform vastly different in various fields; if I'm great at spatial reasoning but have a terrible working memory, and you're the reverse, who is smarter? We're better at different things.

The truth is that people like you are racist against white people. You disdain white heritage, customs, and culture. My ancestors hailed from many nations including England, Germany, France, and Sweden and I am proud of my heritage. Everyone should be no matter where they came from - it's an important part of a healthy self-identity.

Well here you go with the old saying, give someone enough rope...

At no point did I imply people of Caucasian descent are inferior to anyone else, or that you shouldn't be proud of your heritage. An even barely-competent reader should be able to tell I believe the exact opposite. I think "white people" have contributed plenty of important things to American history and society (and yeah, you seem real proud of your individual heritages to give them the blanket designation of "white"). All those things are and have been celebrated in popular culture for decades. It's no insult to acknowledge the bad with the good, or to recognize the benign influences from other cultures or ethnic groups.

The problem, which I pointed out earlier, is that you want to live in a nice comfortable bubble of familiarity (fine) and then put up an artificial constraint to keep others from joining (not fine). It's the old Nat Hentoff "Freedom for Me but not for Thee" paradigm.

All of that is putting aside your laughably poor understand of history, statistical analysis, and history in general.

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Jan 8, 2019
Ozymandia:

Your complaint, according to the above, is that you put all this money into a home and now an external factor has caused you to have to move, or maybe even have the value decline. Guess what? That's capitalism! Like many free market advocates, you seem to only be for it when it's putting dollars in your pocket. The moment the free market starts hurting you, well... then we need more control over who can move or build where.

Federal government subsidized housing projects dictated by an elite group of bureaucrats with a hyper Marxist agenda is capitalism? An external factor? The free market?

You make no sense and your arrogance does little to mask your insecurity.

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Jan 8, 2019
InVinoVeritas:
Ozymandia:

Your complaint, according to the above, is that you put all this money into a home and now an external factor has caused you to have to move, or maybe even have the value decline. Guess what? That's capitalism! Like many free market advocates, you seem to only be for it when it's putting dollars in your pocket. The moment the free market starts hurting you, well... then we need more control over who can move or build where.

Federal government subsidized housing projects dictated by an elite group of bureaucrats with a hyper Marxist agenda is capitalism? An external factor? The free market?

You make no sense and your arrogance does little to mask your insecurity.

My arrogance is because my position is inherently more tenable than yours.

Take your entire little screed of an example. Substitute out "the government" for "a private developer". Do you suddenly not care? You're only objection to the Section 8 housing is that the government chose the location? Somehow, I don't think that is your point, and if it is, then it's the dumbest thing I've ever heard.

You are free not to read what I write. Perhaps someone else will. The only way to prevent pseudo-science from being confused with the real thing is to call it out when you see it. Ditto prejudice and bigotry. Sunlight is the best disinfectant, and all that. When I see someone hiding a fundamentally bigoted argument behind the veneer of "free market capitalism" especially when it's as hypocritical as your example, I feel compelled to point it out.

Mind you, at no point have you refuted or even addressed a point I've made, in contrast to the courtesy I've done you in at least engaging the points your making. You've only sidestepped every issue for which you don't have a reasonable justification - in other words, all of them. I mean, where has anyone except you been discussing an "elite group of bureaucrats with a hyper Marxist agenda"? All we were discussing was that the government is subsidizing a housing project, a policy which you may disagree with in general principal, but not one in their right mind would call "hyper Marxist". Your only complaint was that it was diversity near you, which again, speaks far more to a concern about the skin color of the people living there than the policies behind supportive or subsidized housing. Moreover, I again ask what your opinion would be if, to use your understanding of capitalism (and bigotry, I might add) I personally decide to build and finance that property and only put alcoholics and felons in there.

Jan 8, 2019

This is far too long and laborious to read without having any clear point or takeaway. In summary, certain cultures are objectively superior to others when accounting for prosperity, health, education, moral values etc... If you do not believe this, feel free to move to Honduras or Nicaragua.

I do not believe in moral subjectivity, but also endorse no culture as supremely superior. That said, people have a right to live where they want among those they want to live with without bureaucrats who do not share their belief system and values purposefully trying to destroy their communities in spite or to gerrymander voting districts.

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Jan 3, 2019
InVinoVeritas:

Urban planners are prioritizing mixed-use development with small unit sizes at high rent $/PSF instead of affordable residential development (think $200-300K home prices).

Building single family homes in urban areas is poor land use. Also, small unit sizes at high rent $/SF are still affordable for the average consumer on a sticker price basis. Renters don't rent on a PSF basis. Finally, homes in the $200k-$300k price point exist - so I'm not sure what you're on about there.

InVinoVeritas:

Municipal design demands on single-family residential at this price range is far too restrictive, therefore we have a national shortage of homes at this price point in rapidly growing areas.

Municipal design demands vary wildly from municipality to municipality, so you can't make blanket statements like that. Also, if an area is rapidly growing, that means it is desirable, which means housing costs will go up. Desirability and the laws of scarcity are driving up home prices in "rapidly growing areas" - not design demands.

InVinoVeritas:

American home ownership is a large part of what made this country exceptional because home ownership is the primary way families build wealth.

How did that work out in 2006-2008?

InVinoVeritas:

Municipal planners hubris and smug surety in their commie-block live/work/play high density development is a major hindrance to suburban growth in America (the areas which used to have the highest upward mobility before commute times to the skilled employment centers become ridiculously unreasonable).

Again, there is nothing "communist" about developers creating mixed-use assets that are highly desirable, highly profitable, and better for the fabric of a city (aka long term investment and job growth due to desirability) than sprawl, misplaced single family homes, highways, and big box stores with acres of surface parking.

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Jan 3, 2019
CRE:

How did that work out in 2006-2008?

2006-2008 occurred primarily due to irresponsible mortgage lending largely driven by Clinton's rewriting of the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods. He also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation. This has nothing to do with lowering design standards and entitlement governance.

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Jan 3, 2019
InVinoVeritas:

This has nothing to do with lowering design standards and entitlement governance.

Just like the presence of mixed use urban development has nothing to do with home prices?

Jan 3, 2019

When planners prioritize mixed-use development over horizontal sprawl, it creates traffic congestion and drives land prices up (which make housing development affordable to the middle class impractical). Then, only commie-block style ugly wrap multifamily development becomes economically feasible (all subsidized by Fannie/Freddie bureaucrats) which centralizes land ownership and kills the American dream.

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Jan 3, 2019
InVinoVeritas:

When planners prioritize mixed-use development over horizontal sprawl, it creates traffic congestion and drives land prices up (which make housing development affordable to the middle class impractical). Then, only commie-block style ugly wrap multifamily development becomes economically feasible (all subsidized by Fannie/Freddie bureaucrats) which centralizes land ownership and kills the American dream.

No it doesn't.

  1. The land prices are high either way.
  2. Traffic congestion is because American cities are still too car-centric because of sprawl.
  3. Mixed use development isn't "commie-style block housing" and doesn't "kill the American dream"
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Jan 3, 2019
  1. Land prices are not high either way. Entitlements and building code have a profound effect on land prices.
  2. Traffic congestion is due to geographic hyper-concentration of skilled employment opportunities.
  3. America has an enormous land bank. Most people do not want to live stacked on top of one another in tiny apartments when, if at the same monthly cost, they can own a residence 2-3x the size.
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Jan 3, 2019
InVinoVeritas:

1. Land prices are not high either way. Entitlements and building code have a profound effect on land prices.

Highest and best use has a profound effect on land prices. That highest and best use in urban areas is not single family housing. Full stop. End of discussion unless you are advocating city planners ban density and only allow single family housing. Again, do you work in real estate?

InVinoVeritas:

2. Traffic congestion is due to geographic hyper-concentration of skilled employment opportunities.

Skilled employment opportunities "hyper-concentrate" themselves. It's a basic economic principal, right after supply & demand. It's common knowledge to anyone with a business degree and there are large benefits to that concentration. This site is literally called "Wall Street Oasis" - why do you think Wall Street exists as the financial center of the country?

InVinoVeritas:

3. America has an enormous land bank. Most people do not want to live stacked on top of one another in tiny apartments when, if at the same monthly cost, they can own a residence 2-3x the size.

That's your opinion. Some people don't want to live in cities, just like some people don't want to live in the country, and others don't want to live in suburbs. The brilliance of America is that the country is so large that people can literally choose.

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Jan 3, 2019
InVinoVeritas:

The live/work/play wet dream of Marxist urban planners is unsustainable and dangerous.

...what in the world?

Jan 3, 2019

There is a direct correlation between bureaucrats and Marxism, because Marxism is how they justify being paid ridiculous pensions and rising salaries without having to compete in the marketplace.

Have you ever had to listen to a planner pontificate for an hour on what they demand developed on your land/capital? I see you are in development...

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Jan 3, 2019
InVinoVeritas:

There is a direct correlation between bureaucrats and Marxism, because Marxism is how they justify being paid ridiculous pensions and rising salaries without having to compete in the marketplace.

I still don't know where you're getting this stuff. City Planners make like $40k-$60k a year. First year real estate analysts make more than that. Not sure what being a city planner has to do with seizing the means of production either.

InVinoVeritas:

Have you ever had to listen to a planner pontificate for an hour on what they demand developed on your land/capital? I see you are in development...

Of course, and some municipalities are stupid and misguided, but that's neither here nor there. It's not like developers go to city government and say "man, I'd really like to pay too much for this plot of land and then build something that won't give me optimal returns on it" and the evil government makes them build mixed use properties and get rich off of it...

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Jan 3, 2019
CRE:

Of course, and some municipalities are stupid and misguided, but that's neither here nor there. It's not like developers go to city government and say "man, I'd really like to pay too much for this plot of land and then build something that won't give me optimal returns on it" and the evil government makes them build mixed use properties and get rich off of it...

No, but developers are forced to build mixed-use to (a) legally conform to zoning standards and (b) achieve a development spread. Bureaucrats are dictating where and what developers build, which distorts the free market despite the fact that it is not their capital or labor.

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Jan 3, 2019
InVinoVeritas:

No, but developers are forced to build mixed-use to (a) legally conform to zoning standards and (b) achieve a development spread. Bureaucrats are dictating where and what developers build, which distorts the free market despite the fact that it is not their capital or labor.

Developers are forced to build mixed-use as to conform to building standards as opposed to single use MULTI-FAMILY. Communities do this by making you tack on 8,000 SF of retail to your multifamily project, not by telling someone who comes to them to build houses that they need to build apartments instead. The city planners don't give a shit about developer spreads either. Again, do you work in real estate?

Zoning codes exist to prevent shit developers from doing stupid things, like building single family homes in what should be dense urban areas. Do certain municipalities, like San Francisco, CA or Charleston, SC take it too far? Yes. Should zoning shift from use to form-based, probably. Either way, oversight is literally the point of government - right up there with protection. Unless you're an anarchist, it's high time to recognize that government does exist.

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Jan 3, 2019

Ah, now your elitist views are coming out. "Shit" developers. "Stupid" things. The State knows best correct?

Restrictive zoning prevents Adam Smith's "invisible hand" of constantly guiding markets toward equilibrium. Forced urbanism is very similar to central bank policies like quantitative easing. How is the unwinding of the Federal Reserve balance sheet going? Let me guess, the stock market chaos is evil orange man's (and his evil wall) fault right?

None of this is off-topic because economics and politics walk hand-in-hand. Our discussion further confirms my hypothesis that America is splitting apart based on political and philosophical differences. Very pessimistic about the future of a *United *States of America.

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Jan 3, 2019
InVinoVeritas:

Ah, now your elitist views are coming out. "Shit" developers. "Stupid" things. The State knows best correct?

My eyes cannot possibly roll any harder right now. Some developers are shit and do stupid things. That's neither controversial or politically motivated. Has absolutely nothing to do with "the state knowing best," which it doesn't. I'm not even a liberal - yet another reason why this argument is so odd.

InVinoVeritas:

Restrictive zoning prevents Adam Smith's "invisible hand" of constantly guiding markets toward equilibrium. Forced urbanism is very similar to central bank policies like quantitative easing. How is the unwinding of the Federal Reserve balance sheet going? Let me guess, the stock market chaos is evil orange man's (and his evil wall) fault right?

"Forced urbanism" does not exist and has nothing to do with central bank policies. Now you're just talking out of your ass.

InVinoVeritas:

None of this is off-topic because economics and politics walk hand-in-hand. Our discussion further confirms my hypothesis that America is splitting apart based on political and philosophical differences. Very pessimistic about the future of a *United *States of America.

Because somehow you are confusing proper land use with conservative vs. liberal political debate.

Imagine you're a real estate developer. There is an urban plot of land that someone is selling for $4MM. Somehow you lucked out and the zoning allows for any land use you want - it's a complete free for all. The free market, if you will.

Now I go to my equity partners and say "This is a great piece of land. I could build a mixed-use apartment building over retail with a great restaurant in the corner for $40MM and sell it 36 months later for $65MM."

"Nice," my equity partners say, "That's a great return."

"Hold on," @InVinoVeritas interjects. "Mixed-use development is a liberal conspiracy that only increases traffic and ruins the American middle class."

"That doesn't make any sense whatsoever," I reply, but you're persistent.

"People don't want to live in apartments anyhow," @InVinoVeritas shouts.

"I have a market study right here which shows demand for them," I try to argue, but to no avail.

"Your elitism is showing, relying on nonsense like data," @InVinoVeritas snaps back. "Instead, I have another idea. I'm going to built two single family homes for $150k a piece, and sell them for $250k a piece."

"But it's right next to a gas station, a parking garage, and a 30 story office tower?" the equity asks, confused.

"Who cares? Restrictive zoning prevents Adam Smith's "invisible hand" of constantly guiding markets toward equilibrium. No forced urbanism!" @InVinoVeritas responds.

"But @CRE 's project will make $25 million dollars...while yours will make $200,000" equity continued, immediately deciding to invest with me instead.

America isn't "splitting apart" and there is no reason to be pessimistic about it unless you spent all your time listening to InfoWars. Mixed-use development is not something to take a liberal or a conservative stance on. It is a result of cultural trends and developers giving the public and investors what the public and investors want because it makes the most money.

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Jan 3, 2019

Nothing with wrong developing mixed-use projects if the free market demands it. Big problem with the municipality zoning tracts of land with a density above its highest and best use. This has happened on numerous developments I have worked on, where row/townhomes are proposed and highly economically feasible but the Master's in Art History cat lady demands urban-style lofts made of 100% brick above a yoga studio, culinary school, and craft coffee shop.

My old development firm I worked at is currently suing a municipality because they rejected a design plan because it didn't meet "the spirit of the code" even though the plan needed zero variances.

Maybe we have had serious differences in interactions with planners... I did chuckle at your monologue though - my Texas accent plays nicely with the story-line.

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Jan 3, 2019
InVinoVeritas:

Nothing with wrong developing mixed-use projects if the free market demands it. Big problem with the municipality zoning tracts of land with a density above its highest and best use. This has happened on numerous developments I have worked on, where row/townhomes are proposed and highly economically feasible but the Master's in Art History cat lady demands urban-style lofts made of 100% brick above a yoga studio, culinary school, and craft coffee shop.

My old development firm I worked at is currently suing a municipality because they rejected a design plan because it didn't meet "the spirit of the code" even though the plan needed zero variances.

Maybe we have had serious differences in interactions with planners... I did chuckle at your monologue though - my Texas accent plays nicely with the story-line.

This is a very different example. I agree that this is too far and that cities tend to overreach, like when Board of Architectural reviews try and redesign your entire building that you already paid an architect to do

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Jan 4, 2019
InVinoVeritas:

The live/work/play wet dream of Marxist urban planners is unsustainable and dangerous.

Because densified real estate development isn't damn near pure capitalism right?

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Jan 4, 2019

Not when it is mandated and/or funded by municipal money through tax increment financing or infrastructure cost rebates. I do not believe municipalities should be able to pontificate what is built where on private property - the market will naturally sort this out.

For example, municipalities require retail all the time on the ground floor of multifamily where the storefronts will have limited visibility, access, parking, and signage. This stupidity just drags down the economics of the project and can actually result in a loan default. Many of the loans are made by GSE entities (Fannie/Freddie) which the taxpayers (you and I) have to backstop.

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Jan 4, 2019

;)

InVinoVeritas:

For example, municipalities require retail all the time on the ground floor of multifamily where the storefronts will have limited visibility, access, parking, and signage.

Meh - I'm sure you can find an example of this, but for the most part the storefronts are fine, access is fine, parking is fine, etc. You have to remember that the multifamily building itself has a storefront - the leasing office - that needs signage, access, parking, etc. A good developer isn't going to hamstring him or herself by putting the success of his or her retail, or more importantly, his or her apartments, in jeopardy.

InVinoVeritas:

This stupidity just drags down the economics of the project and can actually result in a loan default. Many of the loans are made by GSE entities (Fannie/Freddie) which the taxpayers (you and I) have to backstop.

Nah. The economics of the ground floor retail are underwritten into deals as essentially a bonus on most multifamily deals. Unless we're doing a large mixed-use deal that is master planned, my bosses barely even care about <10,000 SF retail. It doesn't move the needle enough to matter. If it leases, cool - it's a benefit to the tenants. If it doesn't, oh well. Someone will still pay for it at disposition.

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Jan 4, 2019

It would be better if the municipality let you guys do whatever the fuck you want with your land. Ground floor retail only works in MF is there is substantial pull-in front parking or there is very high walkability/pedestrian traffic factor. I worked as a development associate for 3 years in shopping center development at one of the best grocery anchored center developers in the country. We would routinely hit 300bp+ development spreads on our projects because we knew how to site plan and not violate any of the rules of good retail. This stuff is bad retail unless truly in the urban core or there is room for a ton of surface parking (usually not because land is too expensive).

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Jan 4, 2019
InVinoVeritas:

This stuff is bad retail unless truly in the urban core or there is room for a ton of surface parking (usually not because land is too expensive).

Good point. You could also argue that in suburban areas there is rarely ground floor retail since the yield per unit of MF typically beats that of retail on a psf basis when dealing with market rent in suburban markets.

Jan 11, 2019

The Lennar VP you spoke to is building 400K+ homes because land and construction costs don't support 200-300k homes. If land and construction costs supported 200-300k homes, homebuilders would flood the market with them and make piles more money, based on volume, than they do selling 400k+ homes. I live in a city that experienced rapid growth over the past decade and homes are that cost less than 400k are either shanty homes or nonexistent. Land costs are high because there is a pack of supply (go read a metrostudy or John burns report) and construction costs are so high because of a lack of labor supply (lol even if the Wall would actually curb immigration, the labor shortage it would cause would be unreal and construction costs would soar even higher).

We build up rather than out because we are trying get fucking paid man. Not because of Marxism, but the complete opposite - capitalism. CRE spelled it out for you above. Why use an expensive, centrally located parcel of land to build a few single family residences that will yield little return when you can build a massive MF complex that will sell for a huge multiple? Or build a condo tower where people can purchase their own unit and build equity like you want, and the developer can still get paid a huge multiple when the project sells out?

Sprawl creates traffic, it does not solve it. Urbanism and public transportation reduce the need for cars, which reduces the amount of cars on the road, which reduces traffic.

Not everyone wants a quarter acre lawn to mow, and a 2,500 SF house to clean, insure, and maintain. I fucking hate traffic and would rather live in a 1,000 SF townhome or condo than waste and hour and a half of my life each day sitting in traffic.

Just because you developed Walmarts out in Rockwall doesn't make you an expert on planning and everyone's desires.

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Jan 11, 2019

The end result is centralized land ownership, which results in wealth inequality and is against what our founding fathers envisioned after we achieved freedom from British tyranny.

Nice try bud, we've developed 500,000+ sf centers with nearly all of the major grocers as tenants, each one on a lease. Some of our deals (all institutional with an average asset valuation of over $75mm) have achieved 500bps+ development spreads. Our partners have included BlackRock, major pension funds, and JP Morgan. I got out of the space because retail became over-saturated when Walmart/Kroger lowered their minimum radius requirements to 3 miles (or less in some cases). I'm with a series of discretionary funds now seeking opportunistic returns - our partners (fund sponsor) hit a 40%+ annual ROI on the last 5 year fund we closed a year ago. Your bank gets an 5-15% ROE and you don't get a piece of anything (maybe some bonus money from fees).

You are in commercial banking? You don't know dick about real estate other than being risk averse and following all the other lemmings whenever the tide shifts. Your product and service are a commodity.

Clearly not everyone wants a McMansion. I do not argue this point. My argument is that home ownership is the primary wealth creator for middle class America. Middle class America must be healthy and prosper so our country remains a top developed nation.

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Jan 2, 2019

Something that I've known for a long time became really crystallized for me in 2018--genius is 1% inspiration and 99% perspiration. I've got endless great entrepreneurial ideas (mostly but not solely surrounding real estate), but in terms of implementing those ideas I'm paralyzed. My 9-5 job is too cushy and well compensated, which makes the risk of entrepreneurship high for me; I don't know how to get from zero to one even though I know what one looks like; and I lack the confidence.

In other words, I'm like 95% of Americans. Ideas are cheap. Show me a person confident enough to fail and a shitty salaried job--that's the person who has a future so bright he's got to wear shades.

Jan 3, 2019
real_Skankhunt42:

My 9-5 job is too cushy and well compensated, which makes the risk of entrepreneurship high for me; I don't know how to get from zero to one even though I know what one looks like; and I lack the confidence.

This plus preexisting financial responsibilities. Entrepreneurs talk about not taking a salary for a year or more. Well, when your student loan payments are X, you're putting Y away every month for retirement, your mortgage is Z, and you want to have kids in the next 5 years...

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Jan 3, 2019

This thread took an interesting turn.... lol

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Jan 3, 2019

My post became a land use forum...

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Jan 4, 2019
yayaa:

My post became a land use forum...

You have plenty of 2019 takeaways now

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Jan 7, 2019

I had to go smoke a cig after this thread, completely exhausted...

And yes @The Duke of Wall Street my butthole is thoroughly clinched after reading this digital opera

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Jan 3, 2019

You never know enough. Spreads are thin. Returns are low.

Jan 4, 2019

This thread is telling me returns may be too low, the mental masturbation occurring here tells me people are not excited to buy assets.
Back on topic:
Biggest takeaways from 2018 is the future continues to be unpredictable and deals that we bought in 2017 that I thought were on the cusp of too expensive I would now murder my first born to be able to buy more of. So I think there is always money to be made you might just have to work harder for it and stick to real estate instead of socioeconomic political analysis.

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Jan 4, 2019

come back in a year or two and read this, too much money paying too much money creates the appearance of success, until dumb money runs out and smart money comes in when the dumb money cant take it anymore.

Also, I doubt you have a first born, otherwise you might not say something so crass

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Jan 4, 2019

well there goes my lunch break... nice screen play though: "Battle of the Builder's"

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Jan 8, 2019
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Jan 8, 2019
Jan 8, 2019
Jan 9, 2019