August 18, 2013

Around the Web: Useless Realty-Related Infographics

Maybe by 2014 everyone will be sick of these ubiquitous infographics, but for now they’re everywhere.  And not everyone is improved by the addition of spurious graphics. Realtards aren’t the only ones out there giving out self-serving information while suggesting they’re helping you.  Homebuilders also play many of the same games we know and love.  Here’s a fun infographic, if by “fun” we really mean “see how much fun you can have spotting all the misleading information in one image.”

Not only is “Myth One” a real hoot in the Bay Area (let alone the Real Bay Area), it isn’t even true without all the special pleading for tax exemptions and future streams of payments and other sneaky accounting tricks.  Remember, Richard Florida pointed out that in Opposite of the Real Bay Area, it’s actually cheaper to buy than rent, as in monthly payments there are lower than monthly rents.  Why?  Because everyone who wants a house has bought one, so there are few potential customers.  In the RBA, lots of people want to buy but can’t afford to, so prices stay high as they save up until they can.

We don’t even want to mention that unlike the Bay Area, there are many places in the US where it’s very difficult to rent a typical single family house, so comparative rent vs buy is almost impossible. Perhaps more people would rent if they could get a house instead of an apartment.

What’s your situation? Do you live in a SFH, a townhouse, or an apartment? Do you own or rent? What do you think if this silly poster?


Comments (6) -- Posted by: madhaus @ 7:04 am

March 31, 2013

We’re Number One! We’re Number One!

130329-disposable-successLast week Richard Florida found himself defending his research from an amusing little pissing match started by Joel Kotkin. The argument was over whether “creative class” metros drive the economic engines (Florida) or whether suburban sprawl has it all (Kotkin).  Florida himself dubbed this dustup Flo-Ko. So instead of looking at just which areas are the most “economically advantaged” (a PC way of saying loaded with rich bastards), he addressed X’s objection and decided to subtract out the cost of housing from the index.

What’s left is a disposable income advantage index of the 20 metros with the most money left over after paying the housing nut.  And, you guessed it. Silicon Valley, as represented by the MSA called San Jose-Sunnyvale-Santa Clara, is totally first on the list.  Let’s take a gander at the top five.

Rank Metro Name Income after Housing: Month Income after Housing: Year

San Jose-Sunnyvale-Santa Clara, CA




Durham, NC

$3,513 $42,156
3 Washington-Arlington-Alexandria, DC-VA $3,441 $41,292
4 San Francisco-Oakland-Fremont, CA $3,342 $40,104
5 Trenton-Ewing, NJ $3,270 $39,240

New York was Lucky #8, Seattle came in at Less Lucky #13 (right behind a couple of Connecticut metros), and Philly brought up the bottom at #20.  This scatter graph shows how the housing costs versus income data looks, and that’s Silicon Valley in the extreme upper right.  You should see datapoints labeled as you hover over them.

What makes a metro have so much disposable income?  There’s a high correlation between number of knowledge worker jobs (that creative class thing again), at 0.73, high incomes (0.60) and number of college grads (0.53).

Inotherwords, Florida 1, Kotkin 0.  x1000.

Comments (1) -- Posted by: madhaus @ 5:09 am

June 13, 2010

San Francisco: America’s Smartest City? At These Prices?

Blogger Economist Rob Pitingolo measured which metro area was the “smartest,” and used the density of higher education degrees as his metric.  His essay has gotten recent notice from USA Today, the San Francisco Chronicle, and my good buddy Greg Fielding.  Fielding asks if San Franciscans are so smart, then “why do they accept such painfully-high price-to-rent ratios?”  That’s pretty much the old “If you’re so smart, why ain’t you rich,” saw isn’t it?  I’m going to demonstrate that Fielding asked the wrong question.

On a per-large-city basis, San Francisco blew the rest away with a whopping 7,031 degrees per square mile.  San Jose, the supposed “Capital of Silicon Valley,” lags fifteen places behind with an unimpressive 1,259.

It’s becoming increasingly accepted that there is real economic value to bringing a lot of smart and entrepreneurial people together in the same place. This can be tough to measure, unfortunately.

Yup, Math class is hard.  Pitingolo wondered whether the surrounding areas benefit from a core city’s degree concentration, and repeated the same measurements on a county level.  But many of his comparison cities are either contiguous with their counties, or are strongly linked with unmentioned surrounding counties, resulting in a lovely display of apples and orangutans.  And for some reason, the City and County of San Francisco was merged with contiguous San Mateo in the county section, dropping to fifth place with an anemic 1,105.  San Jose’s results also collapsed when amalgamated with Santa Clara County (413).  Obviously counties with huge swaths of farmland will pull these numbers down no matter how many Ph.Ds are sipping lattes on University Avenue.  What the density metric implies, and whether the county data make anything clearer is still up for discussion in the blog’s comments.

Meanwhile, Research Triangle Park, North Carolina scored first on The Daily Beast’s completely arbitrary measure of Metro IQ.  This alternative intelligence ranking was based on each million plus metro area’s ratio of degrees, colleges in the region, nonfiction book sales, and percent of eligible voters voting.  San Francisco-Oakland-San Jose came in second, scoring first with education but losing out to Raleigh-Durham due to relative voter apathy.  I will leave it as an exercise to the Real Bay Area reader exactly how valuable a measure of regional IQ can be that equates Duke, UCNC, and Chapel Hill with Stanford, Cal, USF, SF, Hayward and SJ States, and (in your face, Tar Heels!) Foothill.

We can argue whether completing a college degree is any indication of intelligence.  We can debate whether Pitingolo’s study erred by emphasizing population density over percentage of degree-holders, thus boosting teeming multistory cities such as San Francisco over low-profile megaburbs such as San Jose.  We can present various ways to measure what is a city, what is a metro area, and what is a region.  We can ask to what degree “human capital sprawl” limits a city’s economic engine (as in Oklahoma City) as opposed to revving it in Silicon Valley.

But there is no escaping real estate.  And here’s a better article that also says we’re #1, by one of my favorite authors, Richard Florida.  Florida noticed Pitingolo’s study too, although he didn’t have much to add to it.

Florida began with the perennial question of whether to rent or buy.  He studied 133 metropolitan regions,  noted the places with high versus low housing price to rent ratios (HPRs), and found that areas with higher HPRs have higher housing prices and lower percentages of people who are homeowners.  As Florida put it, “the costs of owning are relatively lower in places where more people already own their own homes.”  When prices are relatively higher, fewer own because fewer can afford to.

Then Florida looked at economic data for the regions: output, income, and wages.  Those with higher HPRs tend to be more productive, have more wealth, and higher wages.  And he already showed earlier that week that high HPRs are correlated with lower unemployment rates.  Hmm, high housing cost, high wages, high income, high productivity… does that sound like anywhere you know?

Previously, we’ve seen how smart regions have higher levels of income, economic output, and overall well-being. It costs relatively more to own in smarter, more advanced regional economies. We measure smart regions in terms of the level of human capital; the percentage of the workforce in creative, knowledge-based, and professional occupations; and the level of technology-based industry. The HPR ratio is positively related to all three. The correlation between the HPR ratio and human capital (measured as the share of metro population with a bachelor’s degree or higher) is .4.

Ah, there’s that college degree metric again that made all the headlines, measured it in percentage instead of density.  Florida says San Francisco is a smart region, and therefore an expensive one.  So, San Franciscans don’t pay high rent ratios because they aren’t smart.  They pay high rent ratios because they are.  The smarter a region is, the higher those ratios should be.

Florida concludes that the conventional wisdom of buying at a low HPR (15 or even 20) isn’t that wise.  Instead, he suggests you buy where skilled people want to work, where there are good economic prospects, and where homeownership isn’t routine. Buy where there are plenty of people who want to buy but haven’t yet.  When it’s time to sell, you’ll have plenty of potential customers.

It’s counterintuitive, but rent in Pittsburgh, but buy in San Francisco.  That’s the smart thing to do.

Comments (50) -- Posted by: madhaus @ 5:03 am