The Real Estate Pendulum of History

25 thoughts on “The Real Estate Pendulum of History”

  1. I share your interest in the Great Lakes region as a place with abundant infrastructure and resources lying fallow —- but as a native upstate NYer who relocated to the Richmond, VA area in 2003, I have to point out some headwinds facing Buffalo.

    Buffalo currently faces 2 big longstanding problems and one eternal one: loss of its raison d’être, unhelpful policies handed down from Albany/NYC are changeable, but not guaranteed, and the climate is, uh, legendary.

    It’s true that it has great bones like so many other places in the northern tier, and yes it has cheap energy like Seattle did (does?) —– and that is why I think it will be, much like much smaller Amsterdam, NY, (or more famously, Detroit, a magnet for FORIEGN immigrants from poorer parts of the world who know a great deal when they see one, have much fewer options, and are WILLING to do what it takes make a less-than-perfect option work.

    1. They’re already moving in. Buffalo is filling up with hardworking immigrants from places like Somalia and Bangladesh. Right now. Kind of awesome…

  2. Johnny-
    You’re correct that particle board+time=equals compost. Particularly with shotcrete stucco (blown on, not trowelled) which leaves cracks and gaps which allow moisture to seep in, accelerated the process. Even more distressing, apartment buildings are now being built with OSB manufactured structural beams.
    But where does this leave us? Even if the flesh were willing, not everyone can move back to the bespoke masonry of the east coast and Great Lakes.

    1. My goal isn’t necessarily to offer solutions. I’m not clairvoyant and can’t predict the future or how best to move forward. Instead, I make observations and hold up pictures of the painfully obvious (but culturally invisible) and ask people to develop their own responses. Personally, I think many parts of North America are in overshoot – they contain more people than the land can naturally support. At the moment we have complex systems that pipe in water, electricity, natural gas, diesel,frozen foods, imported manufactured goods, etc. so life is actually pretty good. But as those complex systems wobble and become unreliable people will migrate to areas were the basics are more readily available at a lower cost. Will everyone in today’s Styrofoam McMansions in Scottsdale and Henderson move to a brick apartment building in Green Bay or Kalamazoo? Probably not. But the overall trajectory will favor places with shorter supply chains and more abundant local resources. How exactly that unfolds is a mystery.

      I will say that in the short term the catalytic crisis won’t be environmental, but geopolitical. War (or something very much like war) is brewing. When international trade breaks down we’ll all discover just how much of everything we need each day comes from very far away – when it suddenly disappears.

      1. Mmm, I don’t really think so. The international trade system is currently run by China’s mercantile empire — the copy of Britain’s mercantile empire — and they have no intention of letting it break down. (Britain’s mercantile empire never broke down. They sort of handed it to the US and then the US sort of handed it to China.) If China ever decides to embargo a country, that country is *screwed*, but they have no reason to do so unless another country goes hostile.

        So if a completely insane US administration declared war on China, China would embargo the US, the US would discover that we’re dependent on China to supply our army, and the war would end very quickly. More likely, the US government would recognize this and *not* be that insane.

        International trade will remain remarkably stable. The real issue is things like water, which is far to expensive to import from distant places. Also, things *will* get more expensive… but that won’t stop us buying solar panels from China, or similar productive machinery — why would it?

  3. Wow….As a thirty + year shop rat…(GM) I’ve lived these trends. First in the tractor factories (Iowa and Illinois) and later…(after Republicans took over in the 80s) in Michigan in the auto factories. I’ve lived the ebbs and flows of jobs and the effects migration has on families and emotions. I was one of the lucky ones, I had a trade, (Electrician) which was huge help for finding work. I also worked on the side and have seen the lost in pride in the workmanship that goes into building structures. All for the dollar. Whatever was the cheapest. No long range thought at all to what will happen in a hundred years.
    When I would say something out loud, “I wonder how long this house/building will stand?” It always can back, “long enough to get paid.”
    I found this article fascinating. You spoke out loud what I have been feeling/living all these years. I kept saying to myself, “Yes, yes, he’s soooooooo right.”
    When one goes to Europe, and I believe it should be a require class for every high school senior. One gets a completely different sense of place and time, especially time. Over there they don’t call a house/home/building “Old” until it is five hundred years old. They have a much stronger sense of place than we will ever have.

    1. I guess my only caveat, Clifford, is what you mean by “Europe”. sure, the classic old towns are that (classic). But have you ever taken a Google StreetVue “drive” (because I assume as a tourist one wouldn’t) around suburban Rome, or the outskirts of Marseille? Not pretty at all. Which is why all the crime and social disfunction is concentrated there?

      If anything, suburban Italy is worse, because the economy has been somewhat stagnant for thrity years!

  4. Great big picture look and I’m in full agreement with your overall analysis.

    Just one clarification – California (except for a few counties) is not a desert. It’s a textbook Mediterranean climate. Obviously, large populations have existed around the Mediterranean since the beginning of recorded history. Of course, lifestyles will have to adjust to the Mediterranean norm (olives instead of almonds, fish not beef, lavender not lawns, etc.) to support more people but it’s totally do-able and actually a really desirable lifestyle and not a disaster in the making at all.

    But what about the true deserts like Arizona, Nevada, etc? Well, I do see ancient precedents in places like Cairo, Baghdad and Tehran for large desert populations. But generally you have a natural feature like a river running right through town (e.g. the friggin Nile) in those places. And I also don’t see Arizonians willing to live like Cairo slum dwellers to get their water footprints down to a sustainable level. Plus the aforementioned fake Tuscan column expiry date. We’ll see how it plays out. Best of luck to ’em.

    1. Brian – When no water comes out of your tap or the water bill is prohibitively high… That’s a desert.

      It is absolutely possible to support twenty million people in Southern California, five million in greater Phoenix, and two million in Vegas. But not the way people are used to living there at the moment. It will be easier to abandon large chunks of these places rather then retrofit them. The parts that are saved will have to be worthy of the effort based on productive activity and real long term value.

      My personal expectation is that at a certain point portions of the water supply system will fail – possibly during an earthquake, very likely with the help of an economic crisis – and the cost of replacing the pumping stations, pipelines, and processing facilities in some areas will exceed the value of the real estate that is being served. When money is no object the state and feds write checks in the name of “restoration and job creation”. When all levels of government are flat broke some places (desert or Mediterranean) will lose value and depopulate.

      1. California has plenty of water to support its urban population even under the worst long-term drought scenarios. Urban use is only 20% of water consumption and half of that is for landscaping, which is easily dispensed with. The cost of the water infrastructure to get the water and deliver it to cities is small compared the value of property. Arizona also has a lot of ag use which will go before the cities. Nevada not so much; it’s the only state where water issues might significantly affect urban growth.

        1. Agreed. The other bogeyman is earthquakes. A whopping 63 people died in the ’89 S.F. quake. There was very serious damage ($63b) of course, but on high value land, things get rebuilt. Engineering and disaster training lessons have been learned, as well. Not to minimize the threat to lives and infrastructure, of course. Case in point: Fukushima. But obviously humans have been living in Japan for a while. It just becomes a fact of life in that region, as much as blizzards, hurricanes, etc are in other areas.

          The real threat to California is basic financial math, as this article points out. The cost of sprawl infrastructure, municipal pension costs, high taxes, coastal housing bubble, middle class exodus… all these things are coming home to roost and people are voting with their feet.

          Things will even out – they always do – but the question is when, how painful it will be and what California might look like on the 10, 20, 50 and 100 year horizon. I think the Rust Belt is a good bet, especially given the table stakes, but I also think California will be just fine, albeit a very different place over the long haul.

  5. Lots to agree with here, but it is important to distinguish southwest from southeast. Southwest may indeed run into water issues and hit a population limit (though of course nothing is certain), but southeast has plenty of water. Look, I’m a Midwest guy, and I love these old rust belt cities, but we can’t deny that all things being equal people clearly prefer warmer weather and beaches within a reasonable drive. The migration numbers scream that since the advent of air conditioning. And, even in post-2008 years, that big trend continues.
    Now, if for some reason air conditioning were not able to be affordable or widely available, the migration pattern would probably shift in a heartbeat. Atlanta was a pretty small place before AC, not to mention Houston or Dallas. But until that happens, I fully expect the big migration patterns to continue as-is. Even then, there are SO many people now in the sun belt that politics comes into play when considering resource allocation.

    1. First, I didn’t say that the Southeast would fail or become depopulated per se.

      The desert cities of Arizona, Nevada etc. will contract due to physical constraints like water shortages. But the Southeast will struggle mostly due to cultural limitations. The South is particularly ill-suited to wholesale reinvention. I’m confident that the Southeast “could” restructure itself since the land will naturally support more people than the desert West, but I don’t see the political will in the region even vaguely interested in having that conversation.

      When a city grows from a little Podunk town to a metroplex of five million people in just a couple of generations it has shallow roots. People drift in and they drift out. There’s no social cohesion. There’s no institutional memory. It’s more likely that people will turn on each other than pull together in a crisis. Post WWII development in the South is especially centerless and anonymous. People seek out retirement villages and gated communities specifically because they don’t want to be a part of the larger world or be bothered by their neighbors. When people do come together it’s often based on particular religious or racial affinities in an us-vs.-them scenario.

      There’s generally plenty of water in the Southeast, but it’s being badly mismanaged to support a development pattern that isn’t likely to hold up over time. Alabama, Florida, and Georgia routinely sue each other over water rights as reservoir levels drop during droughts. Lake Lenier outside Atlanta sinks pretty low at times. That’s a problem for people, but it’s super critical for the cooling water needed for all the power plants in the region. Miami and south Florida struggle with salt water intrusion due to over pumping. The Everglades and Lake Okeechobee have been getting funky for decades. Agriculture in parts of Texas pretty much came to a halt in recent years as the rains failed to materialize and temperatures hovered in the 100 degree range for months at a time.

      The Midwest has the advantage of physical plenty combined with a radically reduced population. It will be easier to ride out the multiple challenges of the 21st Century in Michigan or Ohio than the flimsy boomtowns of the Sunbelt. Air conditioning will be the least of the South’s problems.

      1. Ah, you suffer from some of the same delusions about the southeast that I once did, and many of my northern friends still do. Where to begin? First, let me say that hearing someone who grew up in NYS (about the most de facto segregated state in the country) who now lives in Maine (about the most homogeneous and having the least 17-25 year olds in the USA) grouse about the South’s struggles with “diversity” has gotten tiring. Not trying to accuse you of this, but I do feel the need to educate you on the broader issue. First half of my graduating class (and much of the “good” half) seems to have migrated to North Carolina somewhere. Raliegh in particular keeps topping various livability rankings nationwide — and, yes, there’s no shortage of water in the area. I’ve never been to Atlanta, but it seems to be, famously, a Xanadu for relocating reverse-migrating African Americans, a cliche even.

        Historically, you are correct, the South, like many other parts of the world, never reached anywhere near it’s potential because of muti-polar hostilities and long memories, but, other than the DEEP south, lack of air conditioning alone did not keep the place from developing (originally, Virginia was the most populated state); indeed, my adopted home makes me want to flee to Manitoba (or maybe just the Birkshires) in the Summer, but the Spring and autumns are LONG lasting, and the winters are sunny to a degree that, if your house has some thermal mass (mine is made from granite) homes are much cheaper to heat, and sweaters and light jackets are usually sufficient. So, I doubt that people didn’t settle in the upper south more because of climate — it was more likely what de Tocqueville pointed out about the divide of the Ohio river: North side, opportunity and industry; south side, stasis and indolence.

        That has all changed quite a bit. First, there are both a huge number of transplants from other regions in the USA, and it is starting to get a LOT more foriegn immigration — I think here in Richmond topped the gain in %s of Latin Americans in recent years, and THAT (foriegn immigration generally) I can say somewhat confidently, will be what drives domestic regional growth mostly more than anything else (my best guess: much of it will eventually be from Asia — in China alone an ABSURD number of people are moving to the cities every year, and many people in those cities will want out and will choose the USA as a lifestyle choice —- we have a LOT more space, and, in most places, it is CHEAP by world standards.

        1. Well, depends what you mean by “the south”, doesn’t it? South Carolina is still a scarily racist, sexist, and generally regressive place. Georgia outside Atlanta is too. Alabama is too. So is northern Florida. Mississippi is slowly getting *slightly* better…

          Virginia and North Carolina have had huge population shifts fairly recently so they’re a bit different. But of course the Virginia coastline is going to get hammered by flooding. North Carolina does have some decent potential.

          And Atlanta is the epitome of sprawl development, so it has some serious problems to overcome. Maybe half of it is salvageable?

  6. Oh, the Pacific Northwest is a terrible place to live! Awful! It’s SO gloomy, the people are SO unfriendly, and the coffee is SO bitter! Much better to stay in California 😉

    1. adrienne please tell everyone to stay away from the PNW! I don’t want any more Californiack coming here!
      Jim of Olym

      1. Dude, that ship sailed. Portland and Seattle et al are already overpriced and people are migrating away from the entire west coast – San Diego, Vancouver, and everything in between. Ordinary homes in the interior like Missoula, Montana are already selling for $350K – $800K because people from Seattle and Portland are migrating away from the coast and driving up prices. Or would you prefer internal passports to keep people where they are?

  7. The challenge for me is how to decide which place. Which is likely to be the better choice? Buffalo, Cleveland, Cincinnati? I like Buffalo for the reasons you stated and I like that it is relatively small and that it is flat, which makes cycling easy. But what about all the other towns? Youngstown, Akron, Erie, etc. Seems to me the places with a stronger cultural and architectural legacy would be a better choice. Ultimately, it’ll come down to which place has the better natural resources and geographic location. Many of the great old places exist where they are for a reason. Most often it has to do with navigable water and resources such as wood, furs, coal, and things you’ve noted here. I guess it depends on what the future deems essential. Things like hydroelectric power as in Buffalo will be probably be one of them. This is an exciting topic.

    1. The resource base and geography of a place are important. But just as important is the local culture.

      I’m confident that even really harsh unforgiving environments can be made to work if the population is cohesive and industrious. For example, Mormons in Utah and Idaho will band together and rise to the challenge of whatever trouble arrises. This is the “Israel effect”. You can make the desert bloom with enough effort if your people stick together and have wise leaders. But if you’re not a Mormon or a Jew in one of these regions you might have a problem. They’re good people. But they might not be your people. I know some wonderful Evangelical Christians that I’m confident will make things work one way or another. But you won’t find me migrating to Mississippi or South Carolina. They’re just not my people. These things will become more important in a crisis. You don’t want to become someone else’s pariah or scape goat.

    2. Hmmm. If you care about politics, Ohio is a long fight between the city governments vs. the state government dominated by hostile rural/suburban/*anti-urban* interests (about half the state population is rural, and it’s been gerrymandered to make the political situation worse). Upstate NY is more a case of benign neglect by a state government which is very corrupt and thinks of upstate as unimportant (more than half the population is downstate near NYC). Michigan is weirder yet, because the auto industry has such a mental control over the government at all levels that nobody in power, no matter how well meaning, can get out of their roads-roads-roads mentality…. but this may change.

      There’s also Rust Belt New England, which I dearly love — mostly in western Massachusetts, some in Connecticut.

      Pennsylvania…. has had some major political shifts very recently and honestly I can’t give a fair analysis right now. But I would consider Pittsburgh or Scranton or even Allentown.

      I agree with Johnny that you have to find a culture which “feels right”. I’m native to upstate NY so it feels right to me (and the New England vibe is similar). Other people prefer the Midwestern vibe which you get in Ohio or Michigan, which is subtly different.

  8. Johnny, what do you think about climate change and the recent harsh Midwest winters we’ve seen? Are Midwest folks talking about escaping that?

    1. Your question suggests that sunny weather all by itself is enough to depopulate an entire region. There was some truth to that in recent decades. But people tend to balance multiple considerations as they migrate. Lots of people would love to live in Manhattan or San Francisco, but it’s crazy expensive. So they live where the numbers add up for them instead. Toronto has miserable winters but it’s thriving anyway. Some people actually like winter.

      From what I understand climate change is supposed to bring more extreme events. Hotter summers, colder winters, more droughts, more floods, more tornados, and more hurricanes. The Midwest might very well have trouble dealing with climate change, but so will every place else.

      Do you want to buy property in Florida and have the insurance industry redline your entire county because the risk of yet another flood or storm is just too high? Do you want to live in Arizona when the last drop of ancient ground water is sucked dry and the Colorado River is reduced to a trickle? Do you want to live in Michigan or Upstate New York and get hit with a series of unusually brutal blizzards? And let’s not forget about earthquakes.

      People will ultimately pick their own poison. There will be winners and losers. Given all the options I personally believe the Midwest and Pacific Northwest are in a better position than the South or West. But there will be pockets everywhere that unexpectedly thrive or fail.

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