Harvard Guys...Tell Us Something We Didn't Know: State of the Nation's Housing Report 2008

Harvard has just laid the proverbial wet blanket upon the real estate industry with last week’s release of the 2008 “State of the Nation’s Housing Report”. The author of this scholarly tome could have been a collective Grim Reaper spreading the apocalyptic prognosis for the near-term housing market.

The always much anticipated Harvard Housing Report was anticlimactic this year. We already knew the outcome. No new news here?

The housing market is dismal and is a challenge to everybody connected to it. There is no light at the end of the tunnel – yet. No one can predict where the bottom might be but we’re not there yet. And the current economic climate is an added challenge, at least in the minds of the consumer, as rising fuel and food costs cut at the purse strings of mainstream America.

If anyone needs yet another analysis, albeit a reliable, scholarly source, of how we got to the current miserable state of real estate you can refer to Harvard’s report and lose yourself in the data, charts, graphs that back up the report’s findings. Stellar research.


Do we really need Harvard to tell us there is no good news on the housing front for the foreseeable future? They have been producing this report for 20 years and although it seems much to do about nothing new, we need to read closely for those pearls of wisdom hidden away in the telling of dire news.

If you want a really fascinating read check out Harvard’s 2004, 2005, and 2006 Housing Reports. In hindsight you will find the red flags portending the approaching housing bubble explosion. In almost every case those smart guys at Harvard were right-on. If we had only listened and seen past the mounting bank deposits.

Harvard…you have my attention.

Harvard serves up a glimmer of optimism…

“Nevertheless, demographic fundamentals still point to increased housing demand over the next decade. But the excess inventory must be worked off before the demand for new homes rebounds. This in turn requires a return to stable-to-rising home prices, sustained job growth, and accessible credit. When that happens, and assuming immigration remains strong, the inventory overhang will start to thin, prices will firm even more, and average annual production, including manufactured housing, will likely head back toward 1.9 million units.”

I usually love this academic attention to our industry issues, but this time I feel a little worn out by the efforts behind old news. Wait a minute; I think that is once again really unfair. It is not old news….it’s just that the news on the real estate front has not changed much, except to get slightly worse.

But one day, things will be different and the intelligentsia will once again view with hope and promise, a real estate industry with sound economic foundations.

…But not today, and probably not tomorrow…

Worthy Nods

This week's Worthy Nods in the news and on the blogs:

The Ground Floor: OK That's It, We're All Done. In an effort to live up to their own initiatives, an ULI exec travels on Amtrak for a family vacation- but never again..

Rollins Financial Blog: Where are the Tech Innovators? A new generation of innovators surfacing as Bill Gates bids farewell.

Wired Magazine: The Many (Geeky) Faces of Bill Gates - A Capsule Biography.

Realty Check Blog/MSNBC: Gas Prices Hitting Home: I Don't Think So (Do the math) - Diane Olick does the math and says that the burbs are still a value for families.

WSJ: Renovators in Limbo - Banks freeze homeowners' credit lines; fancy finishes are out, cheaper appliances in.

Real Central VA Blog: Green Financing Reaches Possible Mainstreaming -Check out this finance company that has developed a program for rating and funding green-certified real estate.

Inman News: Site Posts Foreclosure Addresses For Free - ForeclosurePoint provides data on filings in 35 states.

WSJ: New Home Sales Continue Decline - New home sales retreated 2.5% during May, the fifth decline in six months, while the median price for a home dropped 5.7% to $231,000.

On the Beijing Olympic Front:

MSNBC/AP: Beijing Hotels Hurting Ahead of Olympic Games - Tourist officials say travelers put off by visa rules, pollution, other factors...See Slide Show.

IHT/ Globespotters Blog: Waiting For the Olympics: What's Ready, What's Not

CNN: China's Tourism Lags as Olympics Approach

Mega Mixed-Use Developments Go Into Hiding

Poster child for urban living on the Smart side...San Francisco...

if you can afford it...


Through our years of real estate prosperity we convinced ourselves that the mixed-use, town center concept of developing new communities was the way of the future. Utopia, in that these mythical communities would waggle a magic wand and create walkable, 24-hour, sustainable living centers, giving us all a new reason for being. We called this smart growth.

That sounds a little sarcastic. And I’m not. I buy into all this, big time. I believe in the notion of a synergistic living community and have long since left behind my urban sprawl development roots in support of an alternative.

Smart growth policies graced real estate headlines prior to 2006 and real progress was marching toward mainstream development. Smart growth meant higher density, urban-type centers, with mass transit (sometimes) reducing automobile dependence. A greener way of thinking and living. The policies haven't gone away and they have wide spread support, but in most cases the current market will not support their ambitions.

But here’s the rub; here’s the problem. In order to do a sizable mixed-use, town or village center you have to have all the planets in the solar system perfectly aligned. While we were theorizing on land planning policy and the overwhelming advantages of centralized living, we failed to consider the eventuality of the current real estate market. Or never mind the current market debacle facing us, how about, we failed to consider how these mammoth projects would fare in a normal old run-of-the-mill mid-1990s-type real estate market – not off the charts but just OK.

High-density, mixed-use projects are gas-guzzling real estate developments hungry for massive demand from several sectors including all, or a combination of, retail, residential, commercial, and office. And there has to be plenty, and I mean plenty of credit available.

Large mixed-use projects are real estate vampires that will suck the cash from developers and builders if their massive demands are not met. The absence of thriving market conditions for any one market component is enough to leave a gaping black hole and black eye for a burgeoning development.

The entire mixed-use 24-hour neighborhood concept does not work without the residential component and that, as we all know too well, is gone. Vamoose. Dead as the proverbial doorknob, for most markets.

With the residential market in the tank and condos at the top of the trash heap, at least in most markets, it is a mighty task to make a 24-hour happening scene with an overly stressed housing component. The lack of integrated customers from the high-density residential sector, coupled with a challenged economy, means the retail will definitely suffer if it even gets off the ground initially.

These days most markets are stressed in several of the components that comprise mixed-use developments, or at least are showing signs of future weakness in the case of retail. It may be a while before the planets are once again properly aligned signaling that it is OK to come out of the woods.

In the meantime I think we will see more of the smaller, but expensive, infill projects where city infrastructure will take the place of the web of a large development.

But then there are always the developer stories that defy the market. Maybe it’s just a matter of guts and cash.

Take a look at Ben Carter Properties and their mega luxury project, Streets of Buckhead, underway in Atlanta with the likes of Hermès, Bottega Veneta, Borrelli, Oscar de la Renta, and Loro Plana already committed to the retail marquis. A pretty stellar show for the likes of Atlanta.

Maybe it’s a matter of getting beyond the pay scale of the market?

Worthy Nods

This week's Worthy Nods in the news and on the blogs:


New York Times: At Oil Conference, Saudis Offer Slight Rise in Oil Production - Sunday's Emergency energy meeting in Saudi Arabia underscored how few options the world has to push oil prices down from their record levels.

WSJ: Suburbs a Mile Too Far For Some - Demographic Changes, High Gasoline Prices May Hasten Demand for Urban Living.

MSNBC/AP: Cost of Gas Is Influencing Housing Purchases - Urban, homes near commute options holding value better than suburbs.

Forbes: America's Shrinking Beach Communities - What's hurting them today is a slow sales market fueled by economic uncertainty.

WSJ: Guarantee Gamble: Developers Dread the Return of Recourse - After a decade of easy lending, the dreaded personal guarantee is making a comeback in the real-estate industry.

The Ground Floor: A Wake-Up Call for Land Use - Rising gas prices and demographic shifts have created a "wake-up call" for the land use industry...

MSNBC: Real Estate Mess Hurts Those In Field Twice - Real Estate Agents find themselves foreclosure victims as business dries up.

The Ground Floor: The Greening of Land Planning - "How does this community work?"

WSJ: Russian Billionaire Part of Record Deal for Trump Mansion - If the deal closes in the next few weeks, as planned, it is likely to be the most expensive sale of a U.S. single-family home.

Business Week: Are Downtowns in Danger of Going Downhill Again? - Many ambitious programs to revitalize downtowns of cities across the U.S. could stall as the economy slows.

The Economist: Boom to Bust - China's property bubble is about to burst.

Matrix Blog: Inflation, Be Paranoid or Deal With It - The Fed’s opted to deal with the housing market first, and then inflation.

New York Times: How Green Is Your Brand? - Sustainable brands. A term soon to join the lexicon of perfect oxymorons.

Seth's Blog: Is It Worthy? - Very good question.

Seth's Blog: No Such Thing As Price Pressure

Wharton Business School Weighs In On Home Values

The University of Pennsylvania's Wharton Business School has embarked on a series of interviews with seven Wharton professors on the credit crisis.

The first in the series is "Credit Crisis Interview: Todd Sinai on Home Values" and it's definitely a must read or view the video below. Give a nod to the smart guys at Wharton. What I appreciated about it was the objective and academic view of the issues which we are often too close to to view with crystal clarity.

I have included below a few short excerpts from the transcript for a flavor for the interview although the questions and answers are very interrelated and much more meaningful experienced in its entirety.



"The difference between housing and the stock market is that when you sell the share of stock and it's doubled in value or tripled in value, you can buy more stuff. If your house doubles or triples in value, you can buy the same amount of housing -- unless you're going to move somewhere else where houses' prices didn't rise quite as much. So it's a very different thing to think about in terms of an investment. And I think when people say that people are using it as an investment, what they mean is they're using it as a line of credit. "

Now, we saw prices just soaring in the early and mid part of this decade. What was behind that?

"The rest of it is due to a couple of factors. About two-thirds of the run-up, on average, for the country appears to be due to, essentially, it's cheaper to finance your house. And the way to think of that is that if you were to invest in stocks, by the time you went from 2000 to 2005, the kind of return or yield you would have gotten on the stocks would have gone down a lot. It's the same with bonds. Houses actually end up being priced a lot like bonds. When required yields are lower, bond prices go up. With houses, if the cost of your money, in terms of where else you could have invested it or the cost of borrowing for housing, goes way down, then the prices go up to compensate. Now, that's about two-thirds of it. A third of it just seems to be what we call momentum -- looking backwards and saying, 'Hey, prices have gone up.' It's going to go up in the future. And that's sort of a behavioral or psychological, kind of bubble story."

And on subprime...

"I think, in large part, the subprime problem came from the lending sector, banks and finance companies that were in a hunt for yield. They had capital they needed to put to work, and they needed to get yield. And you could take an abnormally low yield in traditional bonds, or you could put it into housing, and you could do it knowing that you were taking on risk. You might not have known exactly what the parameters of that risk were, but you knew that you were taking on risk, and it was still worth it, because then you could actually make a bit more money, or the same amount of money. I think whatever regulation the government had done, Wall Street would have found a way to circumvent it."


The second in the series, "Credit Crisis Interview: Susan Wachter on Securitizations and Deregulation" discusses the drive to securitize mortgages combined with deregulation that were key triggers of the credit crisis.

Syncronizing Infrastructure with Land Use Policy

Infrastructure 2008 - Part III

" Chronic traffic problems and airport delays represent early signs of underinvestment in infrastructure - many issues can take decades to materialize and decades more to fix. 'Infrastructure does not turn on a dime and the choices we are making today will have a greater impact on the next generation than they will have on us. America runs the risk of losing its seat at the head of the table over the next 50 years.' " Infrastructure 2008: A Competitive Advantage

The Urban Land Institute in its Infrastructure 2008 report pulls no punches when it comes to reading the tea leaves of the U.S. economic future if we do not focus and act on infrastructure deficiencies. A federal framework is needed for a uniform approach to regional planning that is synchronized with national priorities. No roads to nowhere. And at the core of the solution lies land use policy.

I'll use Atlanta as an example since we are the poster child for urban sprawl and horrible traffic congestion. There are 10 counties under the Atlanta Regional Commission (ARC, "intergovernmental coordinating agency") all with their own ideas of smart land use (some of which are not so smart), their own budgets (all insufficient) and their own resident NIMBYS (all in favor of low density). Thirty-some years ago one of Atlanta's core counties, Cobb County, voted to keep MARTA, Atlanta's mass transit system, out of their county. Infinite wisdom still prevails. Well, I'm sure you can see that we have a uphill battle to realign land use policy.

Fifty years ago Atlanta's proud slogan was "A City With No Boundaries." The metro area crawls toward the South Carolina, Tennessee, and Alabama state lines, without a plan as to how to move them around the city or if water will be available (that's for another day). The ARC is trying.

The Downtown Atlanta Connector (I-75/I-85) at its widest is 16 lanes. The Atlanta Regional Commission prepared a study on traffic and part of the findings suggested it would take a total of 26 lanes to accommodate the current traffic load (metro area population is now about 5 million), never mind the one million additional people who are expected to move to Atlanta within the next 20 years.

At the Atlanta ULI Infrastructure session, Dan Reuter, Land Use Chief of the Atlanta Regional Commission warned that the 26-lane scenario is not the answer to Atlanta's traffic congestion and an absurdity in its scope. "We can't solve our problems with existing rules. It's like playing ball with one hand tied behind your back. Land use rules have to change." There is simply no way to build enough highways to accommodate a continued growth rate and pattern that Atlanta has experienced over the last three decades. It can't be done with our current driving habits.

ULI did a study of 23 major metropolitan planning organizations (MPOs) that must produce long-and short-range plans for transport networks (mandated by the 1962 Highway Act for sizable metropolitan areas) in order to receive federal funding for local projects. ULI's review of the plans filed by these 23 MPOs found that the majority anticipated continued growth to the fringe suburbs and insufficient infrastructure to handle an average of 50% increase in traffic.


The price tag for the 23 plans on the books is $1.3 trillion but a leading consultant predicts there will not be "significant improvements in congestion, safety, and condition with the most present plans." It sounds like these plans will prove just another poor value for the taxpayer.

Continued growth patterns toward the suburban edge are at cross purposes with reducing car use and increasing mass transit ridership. Traffic problems can't by solved by more highways and more lanes.

"If regions fail to modify land use models to integrate with infrastructure plans, people will remain car bound." Only two of the MPO plans even discussed integrating land use models with infrastructure. Atlanta was not one of them.

At the end of the day..."it still comes back to money - finding enough of it to pay for all needs. And the equation doesn't change. Ultimately, the public must pay for infrastructure maintenance and improvements through sales, property, and income taxes, and various types of tolls and user fees. Governments can delay or string out payments by funding projects through bond issues, but those bills ultimately come due for future generations of taxpayers. Private operators may pay the government for concessions and take on project risk, but they charge users to make their appropriate profit. You can't get something for nothing."

U.S. Infrastructure - Just How Bad Is It?

Infrastructure 2008 - Part II

If more Americans traveled abroad (only 20 percent have passports) they would realize how lacking the U.S. airports, rails, and roads are in comparison to many parts of Europe and Asia. Americans “assume they have the best, but that’s no longer true.” Case in point...check out the very sleek ride from Milan - to your left.

"Riding the rails" for most Americans would only be slightly preferable to eating bugs. "Me get on that Amtrak train? Never in a million years!" But just try the hassle-free high-speed trains of Europe and Asia and you would never want to travel any other way. I'm beginning to disparage of being able to ride a high-speed train (actually traveling at high speeds) in this country before I die. But enough about me...

The following is an excerpt from Infrastructure 2008 that explains the four stages of the life cycle of infrastructure and where leading nations fall in the cycle in terms of quality, condition, and level of investment:

GROWTH & DEVELOPMENT. India, China, United Arab Emirates, Singapore.
A high percentage of GDP goes to build new systems and networks to replace inadequate or nonexistent infrastructure.

COASTING ON PROSPERITY. United States, Canada, Australia.
Post development phase where government reduces infrastructure spending focusing on maintenance over capital projects.

INADEQUATE INVESTMENT. Russia, Brazil, Mexico, Czech Republic, Panama.
Insufficient funding for infrastructure maintenance and recapitalization leads to economic weakness from lowered productivity and efficiency.

REINVESTING AND REVAMPING. European Union (TENs Projects), Germany, United Kingdom, Spain.
Infrastructure spending increases. New infrastructure is planned and built to improve competitiveness.

The U.S. is firmly entrenched in the “COASTING” category as is evidenced by our repeating infrastructure failures. These are issues no one wants to deal with. Despite the disasters in Minneapolis with the bridge collapse and New Orleans with Katrina, people quickly lose interest and focus. The report card is not looking good:

• The U.S. Army Corps of Engineers has identified 122 high-risk levees in danger of failure, including the system that protects California’s water supply.


• Vehicle miles traveled in the U.S. has increased 95 percent since 1980 but the road capacity has only increased four percent. Supporting studies suggest that traffic congestion costs motorists $78 billion a year in wasted fuel and lost time.


• About 14,000 fatalities each year are blamed on road conditions. About 24 percent of major roads are in poor to mediocre condition and 25 percent of bridges are structurally deficient or obsolete.


• The U.S. needs three to four new airports to handle capacity. Air traffic controllers use decades-old radar technology limiting capacity in flight corridors. The DOT cites a loss of at least $15 billion annually in productivity from flight delays.


• Our port facilities are woefully inadequate for the burgeoning import demands and off-loading to markets from the ports creates transportation nightmares on the connecting roadways.


• High-speed rail initiatives find no support in Congress and viewed as too expensive (although Bush just signed a $47 million bill for a study for a high-speed train from Orlando to Las Vegas?).

Infrastructure is not on the short list of cool topics for politicians or for cocktail parties. It’s taken for granted. No that’s not really correct. It’s that nobody wants to deal with it because the issues are is sooooo BIG and it is such a gargantuan job to fix what’s wrong today - to effectively plan for the huge changes that an extra 100 million people added to our population in the next 30 years will dictate and then to pay for it with empty coffers. That’s a pretty tall order.

There is no presidential candidate, past-present-or future, which has the guts to present Americans with a trillion-dollar budget for repair and regeneration of our infrastructure system. It is almost too big an issue for us to get our minds around when soaring gas prices, health care, social security, global warming, and the Iraq War demand the lion’s share of our attention.

We have a choice…we can suffer some heartburn today or we can do a “life-saving resuscitation” later. We can deal with these big issues as they are or the growing monster can be left for our children to tame. Maybe they'll be smarter than we are.

The subject of infrastructure is firmly on the ULI radar screen. Those who stand to win or lose greatly by how this is dealt with – the real estate industry – can no longer turn a blind eye.

Friendly warning: If you're in real estate and you, no doubt being smarter than the average bear, will understand and appreciate the fascinating nature of infrastructure matters. But really, I don't recommend you drag this stuff out at a dinner party or over cocktails. It can evoke the glazed-over eyes which certainly means you will not be invited back.

Infrastructure 2008 - State of Our Union

Infrastructure 2008 - Part I

When the Urban Land Institute and Ernst & Young team up on one of their brilliant collaborations, people listen. Most notable is the annual Emerging Trends in Real Estate report which is eagerly awaited every year by industry leaders. Their newest joint venture, now in its second year, deals with infrastructure and examines the surrounding issues and trends.

Infrastructure is the pyramid base for the real estate industry. It is the backbone for communities, cities, and nations. Our roads, ports, bridges, utilities, airports, schools, and communication systems power our economy, advance commerce, and make our lives easier. It’s really important stuff that we take for granted - until we are shaken by inconvenience or disaster.

Infrastructure 2008: A Competitive Advantage takes a global view of infrastructure with an in-depth look at China, Japan, India, Europe, and of course, the United States. When it comes to the infrastructure race, the U.S. stacks up miserably. ULI/EY issues a dire warning that the U.S. infrastructure system is broken and that if the outdated regional planning process is not overhauled and a “viable federal framework” created we will lose our ability to compete in a global marketplace.

It was a sobering morning session when Tom Murphy, a ULI senior resident fellow and former mayor of Pittsburg, presented the report’s findings to industry professionals in Atlanta. I knew the U.S. was sorely lacking in its attention to the matter but only now understand the gravity of the deficiencies and the lack of any vehicle in place to correct a country-wide antiquated and ailing infrastructure system.

The message as presented by Mr. Murphy was so powerful as to cause Tad Leithead, SVP of Development for Cousins Properties, to proclaim that if this same case was made to each and every member of Congress, focus and action might realign to these issues.

Before I launch into the ugly truths of where the U.S. stands globally when it comes to the infrastructure fountain, I want to share an underlying and obvious problem – other than sheer dollars.

The Federal Government has decreased its commitment to infrastructure annually since Eisenhower. The Feds checked out of the conversation on infrastructure and the range wars started as local and Federal governments fought over who was going to pay for this stuff. The Feds stuck it to the locals by saying “it’s your problem.” But it is a national and regional issue, at least to a great extent, and cannot be effectively patched together purely on a local level.

ULI/EY suggests that “2008 marks a critical juncture and the changing economic environment demands new approaches to land use, infrastructure, and energy efficiency which will likely reorder the next generation of winners and losers.”

No doubt that infrastructure is expensive. Roads need constant investment. The average life span for road beds, bridges, and tunnels is about 50 years before they need extensive capital overhauls or even replacement. The report estimates that the United States has at least a $170 billion annual funding gap.

“America heads for a crisis in the next ten years if nothing is done.The status quo increasingly looks like a precarious option.”

Click here to get your own copy of Infrastructure 2008. It's well worth the $50 investment ($40 for ULI members). It's a really interesting read in its entirety.

NAR & NHBA at Opposite Poles on Economic Forecasts

Lawrence Yun, NAR
It was only this morning I published my latest diatribe concerning Mr. Yun, Chief Economist for the National Association of Realtors and his overly enthusiastic optimism and complete disregard for reality. I thought it a refreshing contrast to quote a section from today's Housing Overview by the National Home Builders Association's Chief Economist, David Seiders.

By the way, I'm not saying the news is refreshing (it isn't, it's bleak) but that Mr. Seiders at least is not blowing smoke and does not seem to have his head in the sand.

Quoted from the Seiders Report:

• Official monthly data on home sales and housing inventory are notoriously deficient, although supplementary quarterly data on housing vacancies along with NAHB’s estimates of net sales at large builders help document a worsening imbalance between available supply and effective demand in the homeowner market. A rising tide of foreclosures is adding to the inventory overhang despite aggressive efforts by lenders to unload REO in short order.


• The increasingly serious supply-demand imbalance is putting strong downward pressure on national average home prices, and prices have been falling substantially in recent times — according to the best available repeat-sales price measures. Indeed, average prices started to fall around the middle of 2006, the average was down 15.6% by the first quarter, and the seasonally adjusted annual rate of decline exceeded 20% in the first quarter.

• Falling house prices, growing household income and receding mortgage rates have substantially boosted standard measures of housing affordability from the lows of 2006. But home sales are being held down largely by consumer expectations of further price declines and by tightening of non-rate mortgage lending standards.

And a glimmer of hope and guarded optimisms:

• NAHB’s forecast shows stabilization of home sales around the middle of this year followed by decent recovery over the balance of the 2008-2009 forecast horizon. But temporary tax credits for home buyers may very well be needed to get sales off the deck this year, and the Congress is working toward this type of stimulus along with measures to improve housing finance and stem the upswing in mortgage foreclosures.

You decide who's the better economic soothsayer.

Yun Speaks to Miami Realtors After Lobotomy

It is just too painful to pen yet another post proclaiming the idiocy of the Chief Economist for the National Association of Realtors, Dr. Lawrence Yun. Luckily I don't need to because even the International Herald Tribune has taken up the mantra, "What are you thinking, Dr. Yun?"

Speaking to a Miami Realtor Association, Yun reports “The downturn is a short term phenomenon,” assuring his audience that key economic indicators remain strong. “The good news is that [the market] appears to have stabilized.” Not for the first time Yun predicted that "valuations in mid-level cities like Miami, Las Vegas and Phoenix will grow 10 to 50 percent over the next five years."

Obviously not an opinion shared by 99 percent of the nation's economists.

But go ahead, read on. It's apparent Dr. Yun doesn't.

Real Concept's Green Series


Inconvenient Green Truths - Rethinking Everything

The Greening of Shareholders

"Vehicle Miles Traveled" Becoming a Zoning Issue as Governments Fight to Reduce Emissions

Builder's Facing Green Conundrum

Over The Top Eco-Iconic Architecture

Searching For The Green Realtor

The Greening of America - Keep It Real

Inconvenient Green Truths - Rethinking Everything

Real Concept's Green Series

Inconvenient Truths According to Wired

"In the age of climate change, what matters most is cutting carbon dioxide and other greenhouse gases. That means rethinking everything you ever learned about being green."

SCREW ORGANIC
GO NUCLEAR
LIVE URBAN
CRANK THE A/C

"The war on greenhouse gases is too important to be left to the environmentalists.

"There, we said it."

The "we" is Wired Magazine, always irreverent, always entertaining, often right. While most of the population is dealing with light bulbs, recycled products, and organic foods while being bombarded with the green message, we're missing the larger and more important picture. The green message is infused with confusion and contradiction and although we may be buying into saving the planet, we mostly are doing the opposite. . . . according to Wired. . .

"The environmental movement

has never been short on noble goals."

NOT ALL TREES ARE MOTHER NATURE'S FRIEND - The most surprising misconception for me was that all trees are not good for the environment. Blasphemy! Get ready, here comes the cold hard facts...trees act like a vacuum cleaner sucking up atmospheric carbon only up to a certain point. After a certain age, trees become emitters of carbon (say it's not true!). An oak tree's growth slows after 55 years and it absorbs less carbon. Eventually, it will decay releasing all its carbon.

The optimal use of trees to benefit the environment is to clear the oldest trees, remove dead trunks and replant. Plant seedlings and harvest when the tree's carbon absorption abilities mature. Maybe somebody should tell the Sierra Club that logging is a good thing.

WHEN ARE ORGANICS NOT GREEN? Scared cow #2. Cows raised on organic feed produce 8% less milk than conventionally raised cows (pumped with hormones). Cows are big carbon emitters and organically raised cows emit 16 percent more greenhouse gases than the other guy. Organic cows are global warming machines. And don't get me started on beef from grass-fed cows... A meat intensive diet of an average American generates 1.5 more tons of greenhouse gases than a vegetarian. And if your organic pest-free fruits and vegetables are grown by Big Ag and being shipped across time zones in carbon-belching trucks, well that's just not helping the planet.

LIVING A BUCOLIC EXISTENCE IN THE WILDERNESS IS NOT GREEN. Commuters contribute roughly 1.9 billion tons of carbon dioxide a year to the global carbon cloud. Give up the lawn mowers that spews 11 cars' worth of pollutants per hour and move to the city. Would you believe that Manhattan is maybe the greenest place in the U.S.? A Manhattan resident's carbon footprint is 30 percent smaller than the average American. Fewer cars, high-speed transport, and energy efficient vertical buildings all contribute to a smaller carbon footprint - per person. I'm hearing a few rumblings out there. Give up Green Acres for a flat in Manhattan?

GO AHEAD - CRANK UP THE A/C. Everybody come on down to the South or head to the western deserts if you really want to make a green difference. Empty Finland and Norway and while you're at it might as well take Greenland (no pun intended) and Sweden too. Save the planet. Heating the country releases nearly eight times more carbon over the same period than cooling by air conditioning. It takes less energy to cool a given space by one degree than to heat it by the same amount. If you live in a cold climate take heart in that with global warming you can turn the heat down every year.

EMBRACE NUCLEAR POWER. Or at least don't scream like a banshee. Think about it. Coal-fired power plants release 520 times more atmospheric carbon per hour than its nuclear counterpart. "There's no question that nuclear power is the most climate-friendly industrial-scale energy source." Coal vs. nuclear in the warming contest. The experts say "Nuke it."

The environmental scared cows are led to slaughter, one by one, in the name of truth and the fight to save the planet. We can be sure that myths will be debunked daily as we gain more and better truths. We will discover that our best efforts to fight global warming are in fact the worst offenders of the environment and readjust yet again.

But like the journey toward better health, we follow the wisest advice du jour and change course when proven facts are rewritten for today's truths.

I could do way better in cutting my personal carbon footprint, but it's darn hard work. I would have to sell our house, move the dogs into a high-rise building downtown, get a bicycle because Atlanta's mass transit sucks, and probably die in a car/bicycle collision.

Or I could cut down 20 some carbon-mature OLD oak trees in our yard and be fined thousands of dollars for destroying Atlanta's coveted trees. That's some pretty hard choices. I think I'll just sit still and try not to stir up the carbon.

Real Concept's Green Series:

Inconvenient Green Truths - Rethinking Everything

The Greening of Shareholders

"Vehicle Miles Traveled" Becoming a Zoning Issue as Governments Fight to Reduce Emissions

Builder's Facing Green Conundrum

Over The Top Eco-Iconic Architecture

Searching For The Green Realtor

The Greening of America - Keep It Real

Worthy Nods

This week's Worthy Nods in the news and on the blogs:



San Francisco Gate: Is Suburbia Turning Into Slumburbia?

The Economist: Green in the East - China and India are increasingly keen to show how they are tackling climate change.

New York Times: About 1 in 11 Mortgage Holders Face Loan Problems - Both the rate of new foreclosures and late payments surged to the highest levels since 1979, a new report says.

New York Times: International Agency Urges the Start of an ‘Energy Revolution’ - The International Energy Agency said investments of at least $45 trillion are needed over the next half-century to prevent energy shortages and greenhouse gas emissions from slowing growth.

Business Week: Don't Fear the Bubble - Could speculative booms and busts be good for the long-term health of the economy?

CoStar Group: REIT Week ’08 Redux: Uncertainty Marks More Somber Industry Conference - Predictions are that commercial real estate will dodge the big bullet. Barring a deep and prolonged recession the commercial real estate market ought to be able to side step a serious downturn.

Wired Magazine/AP: House of Lords reaching out to young with YouTube - See YouTube video.

Wall Street Journal: Foreclosures Rise 48% in May As U.S. Housing Woes Deepen

Wall Street Journal: LandSource Chapter 11 May Hit Calpers

MSNBC: Rising oil prices squeeze homebuilding sector - 'Unfortunately, I think we'll be caught in a squeeze,' says one top builder.

Forbes: Top Tips for Vacation Home Buyers

BigBuilder OnLine: Feds Fine Home Builders for Water Pollution - Four of the nation's largest builders are fined $4.3 Million by EPA & JD for failure to control runoff at construction sites in 34 states.

Forbes/MSNBC: The Most Expensive Homes in the U.S. - What a difference a year makes.

IHT, Raising the Roof Blog: Study finds 204 towers under development in Panama City - CBRE’s report found 204 residential buildings under construction or in pre-sales, representing 21,710 units

And la pièce de résistance ... The Wall Street Journal: The Donald Dinna Ken the Scotts - “As The Donald is beginning to realize, it’s not his plans for a world-class golf course near Aberdeen that have incensed so many Scots — it’s him.” Also see IHT Blog: Donald Trump’s performance in Scotland panned by critics.

If You Were a Piece of Luggage . . . other important stuff

The U.S. could be looking at a very different aerial landscape if the finances of our domestic airlines continue to bleed red. The deficit rate is so staggering as to bring to mind the image of a small plane running out of gas, tossing luggage, seats, passengers - anything with weight - in order to attempt a landing. The airlines are cutting costs in the same desperate fashion in a self preservation effort. I file this topic under "other important stuff."

But this is not a eulogy, at least not yet. For now it is a visual, an analogy, of the disparity, the insanity of the price of passenger airline tickets. I want to pay as little as possible for a seat, but I also want the skies populated with financially viable airlines.

Consider this...

If you were a piece of luggage and your combined travel weight with bags was 240 pounds, it would cost $1,214 to fly Fed Ex round trip from Atlanta to Chicago...

Or you could fly Delta as a live passenger for $221...

The speed with which the airlines are jumping on the slippery slope of checked baggage fees may come to an inglorious end with American Airlines’ infamous $15 fee. Apparently passenger acceptance has its limits and charging for the first checked piece of luggage may be it, although we're now seeing the "pile-on" syndrome with other airlines following suit.

When United Airlines boldly went where no major domestic airline had ventured before, charging for the second checked bag, talk on the street centered on better planning – not revolution.

AA and followers may discover they have crossed the line of demarcation. Isn’t it an inalienable right for passengers to check a bag within the cost of their airline ticket? I couldn’t find anything in the Constitution, but I think it may be carved in stone somewhere in the Sierra Nevada’s and can be clearly seen when flying into Sacramento.

MSNBC did a very clever comparison of AA's check bag fee with what it would cost to ship a 50-pound suitcase to your destination for next day freight delivery:

“The estimated cost of shipping a 50-pound suitcase from Boston to Chicago via FedEx is $231 for delivery the next morning by 10:30 a.m. and $222.63 for delivery the next afternoon. Even second-day delivery is priced at $124. These quotes are for one way. Now look at the airfares. According to AA.com, the least expensive airfare from Boston to Chicago for flights a month in the future costs $226 round trip. That’s almost exactly the same price as shipping a suitcase one-way on FedEx either next morning or afternoon delivery. (Note: with AA your luggage is “same-day delivery” and travels conveniently with you.) With a promotion like “pay to ship one piece of luggage to Chicago and the passenger flies for free” the airlines would actually make more money based on the FedEx guidelines.”

Let's take it a step further. According to industry analysts, the average number of bags attributed per passenger is 2.5 including checked and carry-on pieces. Let’s say the average passenger weight is 180-pounds (CDC). Include a 50-pound checked bag and a ten-pound carry-on. We’re now at 240-pounds for transport from say Atlanta to Chicago. To send a 240-pound parcel via Fed Ex from Atlanta to Chicago for arrival by 10:30 a.m. next day is $607 (and that is a previous evening check-in by 8:00 p.m. – 14.5 hour point to point) and that my friends, is a no frill flight. No movies, no peanuts, no Cokes, no water. And that is just a one-way ticket. If you shipped yourself by Fed Ex and you wanted to come home the total nut would be $1214.

Checking Expedia, you can book a round trip ticket at least two weeks out for as low as $221 on Delta! I’m buying stock TODAY in Fed Ex. My brother, who is a captain for Fed Ex, swears the packages they transport never, NEVER complain. My other brother who is a captain for U.S. Air says that ticket should be about $700 just to break even - still a bargain compared to shipping yourself as a piece of luggage.

Although this is a simplistic comparison without the economic subtleties of two very different business models, it does demonstrate a huge gap in the price to move matter from point A to point B. All things being equal (which they aren’t) I would think it should cost way more to transport comfort-loving real passengers versus an innate box of matter. Is it any wonder airlines are losing so much money? The manpower it takes to coddle the flying public must be enormous - feed them, entertain them, make them safe and comfortable - and deliver it all at a rock bottom, unprofitable price.

I for one am not opening my mouth about checked baggage charges and I'm going to gratefully eat my pretzels, and if necessary even pay for them (or bring my own).

The Greening of Shareholders

Real Concept's Green Series

Let me explain further, although I'm sure I don't need to … this is what the greening of America means to shareholders…


A little too honest? Too straightforward? Any shareholder, CEO, or CFO would be more than happy to go to all shades of green as long as the weigh-in at the end of the day fell to profits. As a shareholder, I would expect nothing less.

This week I attended an Urban Land Institute session on Green Buildings + Design – How the Green Movement Influences Real Estate Development and Architecture. The panelists included:

Stanley Daniels – Chairman, Jova/Daniels/Busby Architects - Atlanta

Betsy Del Monte – Principal, Beck Group – Architects, Construction, and Development, Dallas

Richard Feiss – Pace Home Builders – Luxury, Atlanta based builder

Jap Spivey – Director of Analytics, CoStar Group – Bethesda, Maryland

It was an excellent panel and after the obligatory discussions on the topic du jour we went to audience questions and they provided honest forthright answers. The following were the salient points I wanted to share:

• The motivations for going green vary across property classes. The most likely properties to be developed and built with a LEED's certification are income producing properties where the owner is responsible for the usually substantial expenses of the building, i.e. office buildings and hotels. Where operational expenses are passed along to the tenant, the motivation to go green greatly diminishes, i.e. apartments, retail, and industrial.
  
  
• We are in the infancy of experience when it comes to the financial benefits of green building. There is very little meaningful data as yet and it is hard to come by. CoStar is in the midst of completing a study based on a database of 1366 green properties built since 1990. These properties are compared to properties in similar locations and of comparable quality of finish. The study shows that LEED buildings are selling for $170 more per square foot – a 64% premium – than a non-green property. There is virtually no meaningful data available on the cost or returns on building green residentially.
  
  
• When building green homes one big hurdle is educating prospects and buyers as to the benefits of whatever green program is in use. In the home buying process the attention span for the green topics are generally very short and the eyes tend to glaze over during the green presentation. The rating systems for green construction can be complicated and technical and consumers lose interest. If a buyer has to go to class to grasp the benefits of green, you lost most of them at hello.

Everyone will agree that green building in whatever property class is a good thing and it is very important that we do our part to protect the environment. But developers and builders must find the profit in green before it will become mainstream. At the end of the day, green is self-serving. Only when energy efficiency and carbon emission reduction is mandated by the market or by regulators will we see the real estate industry embrace the world of green with consistency.

Real Concept's Green Series:

Inconvenient Green Truths - Rethinking Everything

The Greening of Shareholders

"Vehicle Miles Traveled" Becoming a Zoning Issue as Governments Fight to Reduce Emissions

Builder's Facing Green Conundrum

Over The Top Eco-Iconic Architecture

Searching For The Green Realtor

The Greening of America - Keep It Real

"Vehicle Miles Traveled" Becoming a Zoning Issue as Governments Fight to Reduce Emissions

Real Concept's Green Series



Forget the light bulbs and recycled countertops. Bamboo floors...please. We've got much bigger green fish to fry here. We're sweating the small stuff while the larger issues are lurking around the bend prepared to crush the residential building industry's knee caps with a Louisville Slugger.

"What now?" you say. The terrors of the "C" word - carbon - as in emissions, is raising yet another alarm. The Urban Land Institute, along with every other "smart growth" organization, has celebrated the high density, urban lifestyle for years as the smart-eco and sustainable housing and lifestyle choice. What do they know that we don't? In the coming years we may be facing the biggest catalyst for change in housing since the post-war creation of the suburb - in my humble opinion.

LOCATION, LOCATION, LOCATION...will take on a whole new meaning and it will carry a "C" connotation.

With ever increasing pressure to cut green house gas (GHG) emissions - faster - regulators are broadening their carbon net to focus not only on the building requirements and energy conservation, but on the site location and its proximity to daily needs requiring transportation. Remember this - VMTs. You're going to be hearing a lot more about VMTs, vehicle miles traveled.

The most significant measure of a development's GHG emissions is the, yes that's right, the VMTs by residents as they go about their busy lives picking up the kids, doctor visits, ballgames, movies, shopping, and of course commuting to work. The VMTs could easily negate to the red any energy conserving measures integrated into a home. An office worker's VMT could also negate the emissions mitigated from a green office building.

U.S. cities have added rings of suburbs since the 50's, each one further from the city center and each one progressively less dense. The result is exponentially growing VMTs. The easiest, fastest way to cut GHG emissions is to cut VMTs. You see where this is going? The fastest growing category of commuters is what the Census Bureau calls the extreme commuter who spends 90 minutes or more each way to work.

Despite all this, outward bound, low-density growth continues because it provides affordable housing and an affordable lifestyle at least before gas prices skyrocketed. Those dreams are now a hard resale in some suburban markets flooded with mini-mansions and commutes that break the spirit and the bank. Nevertheless, continued outward growth and increasing VMTs continues and it is undermining U.S. efforts to reduce total GHG emissions. There will eventually be a tipping point.

For the most part, we have not yet reached the pain threshold for outward bound growth even with the heartbreaking commutes. Buyers are still searching for a better life and a bigger house at a cheaper price. It seems apparent however that the pain limit for our vehicles is gas at $4.00 a gallon - which is when we heard the SUV bubble bursting. Now hybrids (even with a two to 10-year payback) have become the ascending star.

The extent to which a development's location will affect the calculable level of its greenhouse gas emissions is now on the government's radar. Consider the 2007 case where California sued Bernardino County because the local government failed to consider the GHG emissions from commuters when they granted zoning. Needless to say the zoning considerations for Bernardino have changed considerably.

Massachusetts Environmental Policy Act Office passed GHG Emissions Policy and Protocol which requires developers to submit, as part of the environmental impact study, the potential GHG emissions for a development that will result from the distances residents will have to travel for normal daily activities, including commuting to employment areas.

As the radar blips continue to grow, states are likely to consider how a property's location will impact GHG emissions. We have entered the era of accountability. There is likely to be a tidal wave of land planning reform. Since developments do not turn on a dime and can take years to realize, these ramifications could render a development obsolete before it reaches market.

But for today, the suburban lifestyle still holds appeal (except for the commute). Government regulations coming down the pike to combat global warming however are likely to eventually cause a seismic shift in the real estate markets. Many experts are calling the classic version of the great American dream as no longer sustainable in today's world. But no one has told the buyers. They keep coming to the suburbs and will keep coming until they are no longer allowed to or until the promise of bigger and better at a lower cost is no longer a reality. When and if that happens, we'll define it as the housing tipping point.

Real Concept's Green Series:

Inconvenient Green Truths - Rethinking Everything

The Greening of Shareholders

"Vehicle Miles Traveled" Becoming a Zoning Issue as Governments Fight to Reduce Emissions

Builder's Facing Green Conundrum

Over The Top Eco-Iconic Architecture

Searching For The Green Realtor

The Greening of America - Keep It Real

The Gobi Desert Marches Towards Beijing Threatening Blue Skies for the Olympics

Real Concept's China Series - Update

Claro Cortes IV/Reuters - Walkers in the Olympic Green Zone, where industrial pollutants have abated but desert dust remains.

In the recent Real Concept's China Series, I voiced my skepticism that the Chinese government was going to be able to clear these skies by the Olympic Games:


I assumed the unrestrained construction taking place in Beijing on seemingly every square inch and the ensuing "construction dust", must be attributing to the dismal air quality. How could it not?

Mao's vision for a "vigorously industrialized" China is finally realized and I'm sure Mao is proudly watching through his eternal sleep in Tienanmen Square. China got "a Beijing skyline teeming with belching silos. Mao got his wish; everybody else got a persistent cough."

The Chinese government is taking serious measures to clear the air by the Olympics. They will stop construction, they will restrict automobile usage, they will shut down factories emitting offensive crud, and I have even heard they plan to artificially "inject" the skies with chemicals to induce rain to clear the skies. (This last is purely rumor, but the rest is verifiable.)

Even if the government is successful in reigning in pollution in its public relation's quest to produce Big Blue Skies (BBS) for the Games, there is a problem that may elude the best efforts of the Beijing Olympic Committee.

Beijing is coated with "a layer of dust so thick you can write a newspaper article with your finger." And it not the ubiquitous construction brand of dust.

"Beijing lies downwind of the Gobi Desert, and every year, that dusty ocean advances by a few more li or chi or something toward the gates of the city. Beijing is built on dust. It seeps and creeps and glides and slides across the floor, under the door and all around the walls."

I did not know the Gobi Desert had launched an assault on Beijing. Where is Mao when you need a ruthless leader to stand up to the enemy? My source for this fascinating perspective was a blog post - not just any posting - but one of the most entertaining prose "observations" I have read in a long time - from Donald Morrison writing for the IHT, Globespotter Blog and republished in the New York Times. Mr. Morrison lives in Beijing with his wife and an apartment full of Gobi Desert dust. He hopes someday soon that he will be able to see the Olympic Village from his apartment, one mile away.

Don't deprive yourself of the post in its entirety.

Builder's Facing Green Conundrum

Real Concepts' Green Series

Green is the hottest brand going today. Marketing is themed in green even if the product has nothing to do with the environment. Anything green has to be good, right? Green is a positive message and elicits a feel-good response.

Trendwatching.com proclaimed ECO-ICONIC the latest and greatest on the branding bandwagon. "At the heart of ECO-ICONIC is a status shift; many consumers are eager to flaunt their green behavior and possessions because there are now millions of other consumers who are actually impressed by green lifestyles."

But unlike many other industries, residential construction has not yet come into its own when it comes to building green.

The housing industry has not completely embraced the green race for many legitimate reasons. The market is not demanding it, the governments are not requiring it, the returns are still questionable, and there is no consistent set of quidelines that clarifies what consitutes a green house.

I have read several accounts from the National Association of Home Builders' Green Building Conference consistently describing it as a free-for-all debate attempting to answer "What is green building?"

From Teresa Burney at BigBuilderOnline, "The fact is that nobody I talked to at the conference--or who lead any of the seminars I attended--could come up with one clear, succinct definition. In fact, a fair amount of time at every seminar I attended involved people postulating definitions only to discard them as being piecemeal explanations of what green building is."

Commercial buildings have it all over residential building when it comes to going green. They have the golden LEED standard to guide them. LEED stands for Leadership in Energy & Environmental Design and is under the aegis of the US Green Building Council (USGBC). LEED is a road map for commercial developers to go green. A Leed's certification is now considered in many circles as mandatory for an office building to be classified as Class A space. And that brings real value.

Residential builders, who are all scratching their heads over the green issue, have no such bellwether standard. There are hundreds of various designations across the country for housing that carries some form of a green hue. But there is no consistency in the standards so the gargantuan task of deciphering the meaning and real value of these green building designations is impossible for buyers.

One valuation for commercial property is based on net income so operating expenses, or the reduction thereof, via energy efficiency becomes a vital consideration to the net operating income and so, the return on investment, or ROI. Studies by the Green Building Council indicate that the ROI is 6.6 percent higher for green commercial buildings than for conventional structures.

There is no supporting data to date to support a higher return for green residential building. The housing market, at least in today's reality, is reduced to the lowest common denominator -PRICE. A residential LEED program was launched in December under a pilot program but it carries a $2,000 inspection fee for certification. Factor in extra construction costs to make the green grade and you can easily see that is not going to fly in today's housing market.

The upcoming NAHB Audio Seminar: Green Building as Good Business is available for $145. A panel of industry professionals will discuss the benefits of building green. I personally am a skeptic.

Marketing green is no doubt a positive message and the hottest brand today. Buying green is self-satisfying. We all want to be seen as doing the right thing for society. The green reality for any business is profit, but if that profit can be made, or even enhanced, while saving the planet, I think you'll find the green train full. Having said that, I will repeat my Machiavellian view of where we are today:

A builder is likely to build a green house only if:

• It furthers their ability to sell their product,
  
• It adds value to the home in the eyes of the buyer (same thing really),
  
• Government regulations forces green building standards, thereby leveling the playing field, and
  
• It does not reduce the bottom line.

A buyer is likely to buy a green house only if:

• They hold a firm belief that it is the only responsible decision and is willing to pay for that contribution to the environment, or
  
• It doesn't involve a sacrifice either in terms of cost or housing preference.

Being green is our only responsible choice, but a house in and of itself is not the largest threat to the environment. Where the house is located and the density of the housing as it relates to the necessity of getting in our cars to go about our daily business is the larger blip on the radar.

Reduction of green house gases will be required in just about every corner of our life, but the larger, more immediate impact can be made through more efficient transportation. Translated, that means less miles driven.

Take an imaginary carbon credit example: a family of four, living in the burbs on a large lot in a single-family house, driving 30 miles one way to the office in the Hummer assault vehicle, would have to buy property in a rain forrest to neutralize their carbon footprint. Or they could purchase those credits which means the kids can't go to private school any longer, which is OK because they can't afford the gas anyway. Suck it up and get on that public school bus.

More to come on the latest seismic market shift predicted to hugely affect residential development in the future.

Real Concept's Green Series:

Inconvenient Green Truths - Rethinking Everything

The Greening of Shareholders

"Vehicle Miles Traveled" Becoming a Zoning Issue as Governments Fight to Reduce Emissions

Builder's Facing Green Conundrum

Over The Top Eco-Iconic Architecture

Searching For The Green Realtor

The Greening of America - Keep It Real

Lender Credit Screws Requiring Builder Pay Downs on Existing Loans

Credit has tightened over the last year. Tell me something I didn’t know. Stating the obvious sometimes draws derision from “in the know” quarters but look a little further and you might just learn something you didn’t know. In this case it’s insight into the credit screws that have been tightening around the necks of our nation’s builders.

While few builders have been immune to the pain of the burst real estate bubble, 2008 is definitely presenting the greatest challenges yet. If adversity builds character, as my Grandmother always claimed, we’re going to end up with a group of absolutely stellar builders and developers when the dust settles.

Yesterday the National Association of Home Builders published the results of a recent survey of builders and developers on the subject of credit and yes, you guessed it, responses verified that credit has tightened since last year. Duh! But don’t zone out. While verifying the obvious, the NAHB survey also reveals some interesting new lender requirements.

That lenders are reacting to the current market is no surprise…acquisition, development and construction loans (AD&C) have thinned to seemingly disappear. (Those crafty bankers have also observed that we don’t need more developed building lots.) Sixty-nine percent of respondents said that credit was more constricted for single-family construction loans. Even in the multifamily market which still shows signs of strength, 78% of those polled reported tighter credit conditions for construction loans.

So the ability to get a new loan is obviously much more difficult than last year. Not new news. But here’s the rub that is clearly illustrated by the NAHB survey. Lenders are examining outstanding loans (NAHB survey addressed single family construction loans, land acquisition and construction loans, and multifamily loans.), ordering new appraisals and as a result of declining values asking the builders and developers to pay down part of the original loans and/or put up additional assets as collateral.

The survey showed consistently across the three loan types that on average 63 percent of those with loans that were reinspected were asked to reduce principal with pay downs or pledge additional security.

In order to satisfy lenders, 54 percent of the builders and developers surveyed funded the additional credit requirements from personal savings. Twenty-six percent took out equity from an investment property, 21 percent took out equity from their primary residence and 20 percent said they borrowed from an investor or sold personal assets.

The order of business these days is to stay in the game, to be standing on the other side of this ugly market. But such personal capital depletion to do so is particularly concerning for small to medium builders and developers.

There is a long road still ahead.