Extraordinary Observations

Electric Cars

noreply@blogger.com (Rob Pitingolo) — Fri, 10 Feb 2012 12:58:00 +0000

The documentary Revenge of the Electric Car opens with a shot of a busy, congested Los Angeles freeway. A voice begins talking about how LA's freeways are great. How they've enabled mobility... how they've allowed businesses to spring up around them. The problem, the voice says, is that almost none of the cars driving on these freeways are electric.

(from alforque on Flickr)

Already, 30 seconds into the movie and I'm cringing, wondering how I'm going to get through an hour and a half of fetishizing electric cars and "happy motoring" as Jim Kunstler would say.

It's true that having lots of gasoline powered vehicles polluting cities is a problem - it's a big problem. But to think that it will be some kind of paradise when LA's freeways are packed, jammed and congested with electric vehicles is a bit silly, to be frank.

Electric car proponents do seem genuinely concerned with the environment - at least I don't think they're putting on an act. But they seem way more obsessed with cars than about some environmental goal. As you watch the movie, you hear little bits about how electric cars are great because they're fast and they can accelerate quickly and they are fun to drive. And that's probably - but when you're crawling along at 10 mph during a Los Angeles rush hour, none of that really matters.

The film closes with another shot of the congested Los Angeles freeway. It's weird, because I imagine a documentary film about the awful problem of sprawl opening and closing in the exact same way. It also makes me think that when you show that image and people say "wow, there's a serious problem here" that they might not have the same thing in mind as you.

Yuengling's Success Story

noreply@blogger.com (Rob Pitingolo) — Fri, 20 Jan 2012 12:53:00 +0000

AdAge has a headline that reads: D.G. Yuengling & Son Becomes America's Largest Brewer. Of course, once you get into the meat of the article you see that it's technically true because all the major beer conglomerates have now all been acquired by even bigger foreign conglomerates, not because of some ridiculous growth trend in Central Pennsylvania.

(from stevegarfield on Flickr)

Still, I was struck by this quote:

Yuengling's growth -- which was fueled by a huge launch in Ohio last year -- is remarkable considering that the overall beer industry remains in a funk. Total beer shipments fell by 1.4%, according to Beer Marketer's Insights, continuing a multi-year slump.

I don't find Yuengling's growth especially remarkable at all, and unless you're only judging the company from it's income statement and balance sheet, I think many people who enjoy anything other than light beer feel similarly.

Yuengling has a unique market position. When you go into a bar, it's often lumped into the "domestics" category, along with Bud Light, Miller Light, Coors Light, etc. So when a bar runs a happy hour special, like $2 domestic bottles, you essentially have your choice of Yuengling or light beer; and plenty of people feel that Yuengling is a superior quality beer.

Craft beer snobs may still be the minority of beer consumers, but there are enough of them to matter, and their numbers are growing. For all the talk about how the beer market has been shrinking in recent years, the numbers clearly show that it's at the expense of the conglomerates, not the small craft brewers.

Yuengling is a great compromise beer in this respect. People who wouldn't be caught dead holding a Coors Light might be perfectly willing to have a Yuengling if it's part of a happy hour special or it's what their friends have in the fridge.

I think the ratings over at Beer Advocate cement my case. As of today, Yuengling comes in at 79 out of 100. In school, that would be a high C - not a score worth hanging on the fridge, but not an unacceptable failure either. Bud Light, Coors Light and Miller Light score 49, 51 and 56 respectively - all of which would earn a big fat F.

As long as Yuengling can continue to hang around in the "domestics" category, I think it will continue to do well. If it ever gets bumped anywhere near the "craft" category and starts getting priced as such, I think that momentum will grind to a halt.

On Income and Wealth

noreply@blogger.com (Rob Pitingolo) — Wed, 18 Jan 2012 12:57:00 +0000

True or False: a household whose income is $160,000 is "wealthy" or "rich"?

I asked this simple question on Twitter earlier in the month and it sparked a small debate. Some people said true, others said false, a few said the issue is way too complicated for 140-characters, which is probably right.

(from badlyricpolice on Flickr)

$160,000 is what I'd estimate was the household income of my former 4-person group house in Arlington. We lived comfortably enough, always had money for the rent and the bills with a little left over at the end of the month, but I don't think any of us ever necessarily felt financially rich.

With all the Occupy rhetoric about the 1% and what it means to be wealthy, a lot of nuance has been lost. On paper, a person like me would seem to be doing pretty well, if the only data point you look at is my household income. But that ignores the fact that my cost-of-living is very high, that I have (student) debts, that only a fraction of my household income actually belongs to me, and that only a certain amount of my income is actually discretionary.

But let's back up to this question of household income. Consider four different types of households:

Single person
Married couple, no kids
Married couple, two kids
Group house with four adults

This is by no means the complete list of household structures, but for simplicity and the sake of argument, let's go with it.

Consider the person living alone. Let's say she makes $160,000 and rents a nice downtown loft apartment and pays $4,000 per month for it. That's a ton of money, but at the end of the year, her leftover income (before taxes) is $112,000 - not bad.

Now let's consider the 4-person group house. Each person earns about $40,000 so they also have a household income of $160,000. They rent a decent house with 4-bedrooms, but not nearly as luxurious as the loft. They also pay $4,000 a month for it. At the end of the year, each person in this household will have (before taxes) $28,000 leftover. It's still a decent amount of money, but it's hardly what the single person household has at her disposal.

This data can easily be manipulated. For example, I could say that 17% of households in DC earn more than $150,000. Which sounds astounding, especially when only 8% of households nationally earn this much. I could manipulate a headline that says something like "DC has twice as many rich people as the national average".

So is the city of Washington really that much wealthier than the national average? Or is it a data point that exists because of circumstance... Does the high cost of living tend to push wages higher, but not so high that all adults can afford to live alone, which subsequently pushes up some household income numbers? Does being a city with such a high degree of college degree holders mean that it's also a city where a lot of people have a lot of student debt? Or maybe there are some people in the city who are actually just filthy rich?

The answer is probably all of the above. And using household income as a proxy from wealth is far from crystal clear.

Brewing a Good Cup of Joe

noreply@blogger.com (Rob Pitingolo) — Wed, 28 Dec 2011 22:19:00 +0000

For a while now I've been enjoying food shows - mostly stuff on the Food Network, like Good Eats and Iron Chef; but recently I've started watching America's Test Kitchen, which really is a fantastic show. Like many things on public television and public radio, America's Test Kitchen does a good job of communicating information without diluting it with a lot of fluff.

Another one of the things that makes the show so good is that they don't just show you recipes, they review different brands of ingredients and different pieces of kitchen equipment. Here's a segment that they did on drip coffee machines.

Not surprisingly, most of these machines make a pretty bad cup of coffee. To me, the idea of paying a hundred or more dollars for an appliance that makes coffee as bad as a cheapo machine makes me cringe. Of course, the reviewer does make a good point - fancy bells and whistles may simply be disguising the fact that the "guts" of the machine aren't any good.

I think it says something when the best cups of coffee come from the simplest brewing methods: French press, pour-over cone and Chemex. Sure, they require a little work and a source of hot water, but honestly, it's really not that much extra work considering how much better the final product is.

Profits at Non-Profits

noreply@blogger.com (Rob Pitingolo) — Mon, 26 Dec 2011 16:39:00 +0000

Last week I was walking home from work, and without my iPod and earphones, had little ability to block out the loud conversation taking place behind me. One woman was telling another woman that she needs to get out of the non-profit sector because "there's no money in non-profits".

Meanwhile, over at Mother Jones, Josh Harkinson has argued that non-profit credit unions often serve their customers and their employees more effectively than giant corporate banks. I think this points to a fundamental misunderstanding, by a lot of people, about what it means for an organization to operate as a non-profit.

(from I-5 Design & Manufacture on Flickr)

There are some complicated legal and accounting details when it comes to classifying non-profits, but I think it can be summed up as simply as this: A non-profit organization is an entity that does not have owners or shareholders; a for-profit company is an entity that does.

A lot of people think "non-profit" is synonymous with "non-revenue". That's true in a few cases, but not across the board. A non-profit can have customers and funders, the same way a corporation can have customers and investors. A non-profit does not have to be a charity that relies entirely on donations to stay afloat. It's bad deductive reasoning to think that because all charities are non-profits, that therefore all non-profits are charities.

Consider two hypothetical banks. One is non-profit credit union and the other is for-profit bank. They're both relatively conservative, don't engage is risk-taking, and at the end of the year, each has $1 million leftover after it's paid the bills.

What does the for-profit bank do? It divvies up the money and cuts checks to the owners (shareholders) based on how much of an ownership stake each person has. What does the non-profit bank do? It gives a raise to its employees and re-invests the rest of money back into the business, so that it can grow and expand and better serve its customers.

Which of the hypothetical companies is better to work for or do business with? Plenty of people would say the non-profit bank, despite the broad claim that there's "no money in non-profits".

Of course, the world isn't as simple as this; but for-profit companies lay off employees, slash benefits, and screw their customers all the time. To say that they're acting in their best interest because they're motivated by profit is only partially true - it's their owners that are motivated by profit. Sometimes, the employees and customers are also the owners, but not all of the time. When they're not, there can be conflicting interests.

Saying "there's no money in non-profits" is as vague as saying there's enormous money in the field of law. Some attorneys work for corporations, others work for governments. Some work for rich clients, others are public defenders. Some prosecute the bad guys, others defend them. How much money there is to be made in law is pretty contingent on exactly what type of law your practice.

Sometimes the non-profit model works, other times it's not the best fit for an organization. Sometimes, like in the case of banks and credit unions, they can even exist side-by-side.

Traveling by Air

noreply@blogger.com (Rob Pitingolo) — Fri, 23 Dec 2011 16:19:00 +0000

Later today I'll be boarding a plane and flying to Ohio for the holidays, just like I did last month for Thanksgiving, and dozens of other times this year, for a variety of reasons.

Last month I heard a pretty interesting interview on public radio with Andrew Thomas, who's written a book about the airline industry. I've always felt like kind of an out-of-place urbanist when it comes to air travel. From my experience, many urbanists love trains, buses, and bikes, while air travel often seems to get shunned along with the automobile as an occasionally necessary evil.

(from thomas23 on Flickr)

Without a doubt, one of the biggest downsides of airports is that they're almost always on the outskirts of cities. Train stations, on the other hand, tend to be centrally located. A downtown-to-downtown trip by air often involves ground transportation on both ends that can be expensive, and frankly, a pain. Asking someone for the "airport pickup" is a favor that usually requires great repayment. So yes, I get why people don't love it.

There's also a lot of things that fuel constant complaints. TSA has become the prime example of everything that's wrong with doing things in the name of "security". The problem is, if it's true that TSA is mostly in the business of "security theater" and the reasons for its existence is arbitrary (that some bad people chose to abuse airplanes rather than trains) then there's a real risk that TSA could be applied to other forms of transportation if something terrible were ever to happen.

The reality is that traveling is difficult and expensive. It doesn't matter whether it's a trip cross-country or a commute from the suburbs to the city. The longer the distance, the more painful it's probably going to be, regardless of the mode of transportation used. When I hear people talk about how much they hate to fly, I think what they often mean is that they hate to travel.

How Demolition Came to Mean Stabilization

noreply@blogger.com (Rob Pitingolo) — Mon, 19 Dec 2011 16:00:00 +0000

Yesterday's lead story on 60 Minutes was about vacancy and abandonment in Cleveland. This is an issue that hits close to home for me.

I started studying the problem in 2008. Back then the pressing question was how to target HUD money to strategically knock down blighted houses. The amount of money that HUD had to distribute wasn't nearly enough to take down all the vacant and abandoned houses, so using it wisely was key, and it still is.

I want to emphasize that even though 60 minutes may have opened a lot of eyes to demolition in Cleveland, it's not something that's new. The idea of knocking down houses as the means to saving neighborhoods may seem counter-intuitive, but it's been the prevailing strategy for several years now. Detroit has been following a similar strategy as well.

I do want to add something to the 60 Minutes analysis - a piece of the story that I don't always feel gets told. Foreclosures may have fueled vacancy in Cleveland, but foreclosure is not the only reason why it's such a big problem.

When homes go into foreclosure, they should get taken by banks and sold at auction for the price they're worth, allowing investors to pick them up and rehabilitate, or allowing new buyers to own a home for a price they can afford. But banks themselves are walking away from these homes, because they're literally worth zero dollars. When you look at it at the scale of the metro area, you realize that there is a big glut of housing supply on the market that's driving down prices across the board, and in these extreme cases, all the way down to zero.

Believe it or not, the house I lived in before I moved to DC went through foreclosure. In 2008, the bank holding the delinquent mortgage sold it for $23,500 to an owner who rehabbed it, and then sold it the following spring for $96,000 (these numbers are all public record, in case you were curious). This is what should happen in a healthy market. Foreclosure shouldn't necessarily mean vacancy, but too often in Cleveland, it does.

The Cleveland metro area is made up of the five counties around Cleveland - Cuyahoga, Lake, Geauga, Lorain and Medina. Between 2000 and 2010, two important but divergent trends emerged:

The population of the Cleveland metro area fell roughly 3 percent.
The number of housing units in the 4 counties excluding Cuyahoga grew more than 13 percent.

In other words, homes kept getting built between 2000 and 2010, even as people were fleeing the metro area. And most of these new houses were getting built in the suburban fringe counties. If you want to understand why there's an oversupply of housing in the Cleveland area, look no further than these counties.

The fact that there were more houses but fewer potential buyers created an imbalance. When houses started to go vacant, no potential buyers stepped up because there were no potential buyers out there. If there had been potential buyers, houses might have gone through the process that my former house did. Many instead became vacant, because folks looking to buy a house had plenty of areas to look, and the weakest neighborhoods were obviously the first to go rotten.

But there's more. Now that the bulldozers are starting to demolish houses and even entire blocks in the name of stabilization, it's creating a metro area where tons of vacant undeveloped land is being created in the urban core, while developers are simultaneously building on greenfields in the fringe counties. Slowly but surely, it's creating a "donut hole" that will make the entire metro area weaker.

Getting urban neighborhoods stabilized should rightly be the top priority, and Cleveland has decided that demolition is the best way to accomplish it. Unfortunately, years or sprawl and overbuilding, fueled by a foreclosure crisis, has created this reality. Further sprawl isn't going to make the situation on the ground any better.

Cities, Urbanism and the Appeal of "New"

noreply@blogger.com (Rob Pitingolo) — Sun, 18 Dec 2011 17:20:00 +0000

There's been a lot of chatter around the blogosphere about Christopher Leinberger's New York Times op-ed that I think really hits the nail on the head when it comes to the issue of what's ahead for fringe suburbs.

(from Mark Strozier on Flickr)

Basically, the hypothesis presented is that fringe suburbs are headed downward, and I think this piece of evidence is really the most damning.

Many drivable-fringe house prices are now below replacement value, meaning the land under the house has no value and the sticks and bricks are worth less than they would cost to replace. This means there is no financial incentive to maintain the house; the next dollar invested will not be recouped upon resale. Many of these houses will be converted to rentals, which are rarely as well maintained as owner-occupied housing. Add the fact that the houses were built with cheap materials and methods to begin with, and you see why many fringe suburbs are turning into slums, with abandoned housing and rising crime.

Leinberger goes on and cites several examples of urban neighborhoods that have transformed from slum to hip in recent history: Capitol Hill in Seattle; Virginia Highland in Atlanta; German Village in Columbus, Ohio, and Logan Circle in Washington.

I don't know much about Capitol Hill or Virginia Highland, but I do know something about Logan Circle and German Village. One very important (and I think non-trivial) quality that they share is that they both have a high quality, durable housing stock that has held up very well, given its age, all things considered.

When I think about what made cookie cutter houses in suburbs appealing to people, in addition to the square footage and the yards and the school systems, I really suspect that one of the things that people were drawn to was the absolute "newness" of everything. People love having new stuff - new appliances, new counter tops, new floors. When stuff is brand new, it's almost guaranteed to be in style. When it's brand new, it's not in need of immediate repair. There's a lot to like about brand new.

The problem though, as Leinberger notes, is that fringe suburbs were built on the cheap - literally. They may have looked nice initially, but the drywall they used to throw up houses in Prince William County is not the same as the brick they used to build rowhouses in Dupont Circle. At the time, the appliances they put into new suburban homes might have been nicer than what was in old urban houses, but appliances can easily be replaced, structures can't.

Around DC, a lot of old rowhouses have gone through the process of renovation - some have gone through many renovations since originally being built. The interiors have been gutted, redesigned and rebuilt, but the physical structure is generally the same. These houses were built to last, I can only imagine what a cookie-cutter house on the suburban fringe might look like in 100 years. The rowhouses in DC that have been re-built look beautiful, easily as nice as what got built in the suburbs during the boom.

At one point, the suburbs looked so much "nicer" because that's where the building was - that's where stuff was brand new. That's not necessarily true anymore. Now, some of the newest, shiniest stuff is right in the heart of the city.

I was reminded of this when I saw this article in the Plain Dealer last weekend. The author makes the case that there's more demand for housing in downtown Cleveland than the market can keep up with. A lot of folks will use this as evidence of a downtown renaissance, I think it says that people are no longer afraid to live downtown (something that was true in Cleveland for many years) but I also suspect it has something to do with the quality of downtown housing.

While it seems true that downtown Cleveland is doing well, many other urban Cleveland neighborhoods are not doing well at all. The apartments and condos popping up downtown are all brand new, beautifully renovated spaces. The houses in Cleveland's urban neighborhoods, on the other hand, are much lower quality. Compared to Washington's rowhouses, they're downright terrible. I suspect that many of Cleveland's houses are also below replacement value. The only hope is to knock them down, and that's exactly what's happening.

When I studied home prices in Cleveland a few years ago (pdf), I found that, while downtown was in fact the neighborhood in the city with the highest prices, there was nevertheless a positive relationship between home price and the distance from the city center. In other words, the farther from downtown you went, the higher the price of homes. It was "drive til you qualify" in reverse.

I think the future of suburbs as Leinberger imagines them is going to look like some of Cleveland's neighborhoods today - Hough, Mount Pleasant, Cudell - places with generally poor housing stock that isn't worth fixing up. Places where crime is frustratingly high, where most of the housing that isn't vacant is renter-occupied, and where few are willing to make any investment.

(from Wayne Senville on Flickr)

Is it true to say that millennials and baby boomers have a taste for urban living? I think there is good evidence to support that theory, but it's clearly the case that they don't want to live just anywhere in the city. Nobody wants to live in a slum, and the type of homes that people want has to meet at least a certain threshold of quality.

In high-cost cities, like DC, that's not so hard to pull off. A $200,000 rowhouse rehab might be well worth the cost when you can turn around and sell the house for half a million or more. A similar job simply doesn't make any financial sense in a city like Cleveland. In fact, the Plain Dealer article above specifically says that developers aren't building in downtown Cleveland without government incentives because the rents are too low to support the kind of investment they need to make.

I think the more realistic assessment of suburbs and cities is that some suburbs will see a precipitous decline, some urban neighborhoods will experience a renaissance, and the degree to which each happens will be highly dependent on local market conditions. In other words, it will happen, but it won't be as clear cut as the magazine articles might lead you to believe.

Sprawl Killed the Mail

noreply@blogger.com (Rob Pitingolo) — Sat, 17 Dec 2011 14:32:00 +0000

The fact that the U.S. Post Office is basically a failing enterprise is nothing new. Figuring out where things went wrong is becoming a common theme in the blogosphere.

(from Bennett V on Flickr)

Jordan Weissmann has this post over at the Atlantic that proposes several compelling theories, but it glosses over one that I've written about in the past: sprawl.

Sprawl is a problem for the postal service for the same reason it's a problem for regular citizens... you have to drive everywhere, gasoline is expensive, traffic is congested, it's hard to get places, etc.

When I think about a postal carrier doing a route in a city, I imagine them taking a push card and walking from the post office to houses and offices. The number of pieces of mail they can deliver per ounce of effort has got to be so much higher than the carrier who has to drive, in his/her truck, from one house, then to the next house, then to the next house.

Of course, for reasons of "fairness" or otherwise, the postal service decided that mail should cost the same amount, whether it's going to a central city or a fringe suburb - whether it can be delivered on foot or has to be driven from the post office in a truck.

Maybe cities would be able to subsidize suburban postal service in a world where the population was heavily living in cities, but today, that's just not the case. Even worse is what's happened in "hollowed-out" cities where postal carriers still have to do routes, but the fact that a significant number of houses are vacant destroys the efficiencies they once enjoyed.

It's one example of what a mess we've got on our hands.

Politics Without Context

noreply@blogger.com (Rob Pitingolo) — Mon, 28 Nov 2011 23:10:00 +0000

Someone sent me a link to this video today. It purports to show Mitt Romney as a wild flip-flopper. Watch for yourself.

Is Romney really incapable of holding a single position on these issues?.. maybe, probably; but this video provides zero real evidence, because all of the clips have obviously been sliced and diced, cherry picked, and presented without any relevant context.

This is what is so offensive about politics. The folks who made this video (apparently the Democratic National Committee, as it turns out) know that there are people who will actually be persuaded by it. To me, that says that they believe either a) people have already made up their minds and just want to make themselves feel good about their decision or b) people are not independently-minded enough to think beyond these carefully selected clips.

I don't care for Romney, but I'm also not persuaded by this sort of video. Sadly, it's going to continue, because enough people are. It looks like it's already shaping up to be a long political season.

Seasonal Scarcity

noreply@blogger.com (Rob Pitingolo) — Wed, 16 Nov 2011 23:09:00 +0000

Earlier in the month when I was traveling in Ohio, I got to drink some of the first Great Lakes Christmas Ale of the season. I've always been intrigued by its popularity. Even though it's a seasonal beer and only sells for two months of the year, it's the second highest selling beer in GLBC's entire portfolio.

For a beer that popular, it must be good, right? I've always thought so; but I recently looked it up on Beer Advocate, and found that the reviews are not nearly as overwhelmingly positive as I might have expected.

(from The Cleveland Kid on Flickr)

The primary complaint appears to be that it's overly spiced. Beer fanatics, it seems, don't like a lot of "stuff" in their beer. I get that. It's much like a coffee fanatic who doesn't want sweeteners, dairy or other flavors distracting from the taste of the drink.

Even so, I do think the seasonal scarcity is what makes a beer like Christmas Ale so good. You really can only drink the stuff in late fall and winter, which is why I've never found the "Christmas in July" events at bars in Cleveland appealing. Christmas Ale is good because you only have it for 2-months out of the year, then you stop. If it were around for any longer I suspect it would probably start to taste not-so-good and its popularity would wane.

In a way, I feel the same way about pumpkin. When September rolls around, like many others, I'm gung-ho about pumpkin - pumpkin pie, pumpkin bread, pumpkin cookies... but by November I'm pretty sick of it. I don't eat any pumpkin for another year, and then the cycle continues.

Some foods and drinks are seasonal because of mother nature. You harvest certain crops at certain times of year. Others are seasonal because it makes more sense to consume them when the temperature outside is a certain way. Christmas Ale falls into the latter category; but in a way it's also artificially seasonal, in the sense that the brewer decides to stop selling it on January 1st, rather than February 1st or March 1st. That's probably a smart move on their part, at least in terms of keeping the mystique and allure alive.

A Change of Heart on Homeownership

noreply@blogger.com (Rob Pitingolo) — Mon, 14 Nov 2011 23:10:00 +0000

Emily Badger has a though-provoking article over at The Atlantic Cities about the desire, even in today's market, to buy a home, rather than to rent. If there's one topic that I've had a major change of opinion since I started writing this blog, this would be it.

(from Images_of_Money on Flickr)

Nearly three years ago I sat down and wrote a four-post series about why I thought owning a home was a rotten deal. Today, I feel nearly the opposite. What's changed in the meantime is the place where I live. I believe that place, even at a subconscious level, is a major driver in opinion on this topic, all else equal.

To understand further, it's important to recognize the difference between the place I was living then (Cleveland) and the place that I'm living now (Washington DC). These are two wildly different housing markets, both on the rental and the sales side. Buying in one has benefits that don't exist in the other. Renting in one has benefits that don't exist in the other.

First and foremost, renting in DC is a hedge against inflation. This isn't so much the case in other cities, because inflation isn't much a problem in other cities. Between 2000 and 2010, I calculated that real-dollar rents in DC increased 52%, compared to only 8% nationally. For a home-buyer, that means that whatever your monthly payment is on the day you close is going to be (roughly) the same for the next 30 years. In an inflationary environment (and I would not hesitate to classify DC's rental market this way), buying locks you into a predictable payment for the long-term.

The biggest wildcard, of course, is maintenance and repairs. This is especially true if you're drawn to DC's beautiful Victorian housing stock, much of which is old and fragile. You never know when you're going to need a new roof, when you might have a problem with the foundation, or a pipe in the basement might burst.

The thing is, when you pay as much as, say, $2,000 a month for your mortgage, repairs suddenly feel a lot less outrageous. Need a new stove or dishwasher? The price is basically the same no matter where you live, but in DC, it might cost less than one monthly payment. In other city, it might be equivalent to several payments. When you think about it on that metric, it doesn't really seem so bad. That's not to say it's a cost that doesn't exist, but psychologically, it doesn't feel as painful, compared to someone who has to spent the equivalent of a year's worth of mortgage payments on home renovations.

If I were living in Cleveland today, I believe I would still have very little interest in buying. In Cleveland, there's a pretty significant risk that your house might decline in value. There's a risk that if/when you want to sell it will sit on the market with no interested buyers. There's a risk that you'll have a hard time finding a good tenant to rent it out to. These are all much much smaller risks in DC.

In Cleveland, you can get a luxury apartment or even rent a whole house for under $1,000. For that little, I'd happily invest my remaining discretionary income in stocks and bonds. This is much less feasible when rent makes up a large portion of your income. Like it or not, homeownership is a form of "forced savings", and when you're putting as much as $2,000 a month toward the mortgage, that adds up fast. Even if the home turns out to be a dud as an "investment" and you sell it down the road for what you paid, you're still walking away with a lot of cash in the bank that otherwise would have simply been "consumed" on rent.

I'll end this by saying that for some people, homeownership will never be a good deal. The responsibilities you take on when you buy is something that will cause them more anxiety than it's worth. And there are others who will want to buy, no matter where, or what the cost and the risks. It's the people in the middle, like myself, that I think are most heavily influenced by place.

In Defense of Road Tolls

noreply@blogger.com (Rob Pitingolo) — Sat, 22 Oct 2011 15:59:00 +0000

I don't do much driving, but this year, I've made a couple of long-distance trips. The first was a round-trip between Washington and Akron - about 700 total miles. The second was the round-trip between Washington and Virginia Beach I did back in August - about 420 total miles. The first trip cost an extra $30 in tolls. The second trip was "free" as we often think of it. The first trip was generally low-stress and easy to drive. The second trip was high-stress and challenging to drive. Both trips took roughly the same amount of time (6 hours each way).

(from Joming Lau on Flickr)

When I tell people that I paid $30 to drive on the Pennsylvania and Ohio Turnpikes, they usually respond with "oh, what a ripoff" or "that's really expensive" or something of the nature.

I think the price is completely worth it.

See, people want to drive on a road as nice as the Pennsylvania Turnpike, with as little traffic, they just want it to be "free". The problem is that it's counter-factual thinking. It's easy to imagine cruising down the Turnpike at 65 mph with minimal traffic and say "I want to pay less for this," but you can't, because if there were no toll, then a key variable would change, and there's nothing to say it wouldn't be just as packed and congested as any other "free" interstate.

Honestly, I cringe at the thought of ever driving to Virginia Beach again, in slow-moving, stop-and-go traffic. I dread the delays, the red break lights, and the sea of vehicles ahead as far as the eye can see. I hate the complete unpredictability of the drive and not having a good idea of how long it's going to take.

So yes, as a driver, I think tolls can be great. As a consumer, sometimes it makes sense not to always be totally cheap. Often it's better to pay more to get something that's a better value. When it comes to my highway driving experience, I think that's exactly the case.

Yelping

noreply@blogger.com (Rob Pitingolo) — Wed, 12 Oct 2011 22:15:00 +0000

There's a really interesting article over at GOOD about the power that Yelp has on local businesses. It describes my behavior pretty accurately, and makes me realize just how crucial a tool Yelp has become in my own life; and also for the businesses I patronize.

(from roboppy on Flickr)

Of course, Yelp has been around since 2004, and the idea of rating and reviewing businesses is nothing new. What is new is that a significant number of people now have smart phones, iPads, and other devices that can access to Yelp whenever and wherever they want.

Recently I was thinking about the appeal of Starbucks. It's not a place I go very often for a cup of coffee, but I do visit occasionally. Imagine you're on a road-trip, and it's getting dark, so you decide to pull over at the next rest stop. Inside the food court there's a Starbucks and a place called Carl's Coffee. Which do you pick? This Carl might have the best coffee in America; but he also might serve some truly awful sludge. Starbucks, at least, is consistent and predictable. In other words, it's safe.

When I went to Virginia Beach in August, I was almost entirely unfamiliar with the city. Once at the hotel, I opened up Yelp on my phone and searched for nearby restaurants. I found a pho place within a mile that had great reviews. Once I was on the beach, I used my phone to locate a highly rated coffee shop behind the boardwalk and a seafood restaurant on Lake Rudee. If it weren't for Yelp, I might not have visited any of these places.

Today I logged into Yelp to look at my reviews, and noticed an interesting statistic in my profile. To-date, I've reviewed 127 businesses. My rating distribution skews positive. I've given a lot of positive reviews, some middle-of-the-road reviews, and just a couple of bad ones.

Maybe I'm just a generous guy and generally happy with the businesses I visit; but it also could be that I'm only going to businesses that I already know I'm going to like.

In that sense, Yelp has created a sort of selection bias. When I'm in a new city, I like to try new places, but I also want to minimize my risk. I don't pick restaurants at random, or rely on a hotel concierge, I choose them carefully based on popular opinion via Yelp.

This also demonstrates just how crucial maintaining a positive aggregate rating is to a local business. I ate pho in Virginia Beach because it had a positive consensus. If the reviews had been more mixed, I probably would have skipped it and ate elsewhere. Getting a lot of good reviews right off the bat can feed on itself. Getting some not-so-great reviews right away can put a business in an unfortunately downward spiral that's not easy to reverse.

The Groupon Effect

noreply@blogger.com (Rob Pitingolo) — Sun, 09 Oct 2011 16:03:00 +0000

Last week this headline caught my attention: "Pizzeria Eschews Groupon, Offers Own Half-Off Deal". The article is about a gourmet pizzeria in Arlington that will offer half-price pies every Monday... all you have to do is walk in and ask for the deal.

(from afagen on Flickr)

There's nothing novel about businesses offering discounts on slow days. These discounts have been around for as long as there's been commerce. Groupon and it's endless copycats have been around for about 2 or so years, and already we've forgotten about what life used to be like before they existed.

When I was in college, I ate 40-cent wings every Monday. That's more than 50% off the menu price, and no coupon required, just come on any Monday after 3pm and order them. This bar also had specials on Tuesday, Wednesday and Thursday. Half-price pizzas, steak dinner for under 10 bucks, and 5-dollar burgers. It was designed to bring people in during the slowest part of the week, and from what I could gather, it seemed to work pretty well.

What Groupon effectively changed was a few things.

Removed blackout dates from discounts
Applied discounts to the entire menu
Offered a one-time email blast advertisement to a huge mailing list of people

The first two benefits don't necessarily help businesses. A restaurant that's expecting a full house on Saturday night doesn't want a bunch of people coming in and redeeming Groupons. They want them in on a Wednesday evening when there are seats to fill. Similarly, bars sell half-price wings and burgers as a loss leader, knowing that people will still order drinks, the real money-maker. When Groupons apply to drinks, it really distorts that logic.

I'm not sure how anyone can be surprised that businesses are going back and doing what they've always done. Groupon seemed like a good idea, and like I've written before, is probably dying a slow death. Everybody wanted to try it at least once. And those businesses that didn't like it will probably never do it again.

That said, I do find the "Instant Deal" technology that LivingSocial rolled out a few months ago to be pretty interesting. Unlike the daily deals, the instant deals can be used as a sort of "revenue management" tool for businesses. If a restaurant has empty seats to fill, the manager can log into an account and run an instant deal. If the place is packed, they don't need to offer anything. If there's a reason to think these websites will continue to thrive, I expect it to be the result of these instant deals.

Talking Coffee

noreply@blogger.com (Rob Pitingolo) — Sat, 08 Oct 2011 16:55:00 +0000

Kojo Namdi did a very good show on coffee last Wednesday. Click through and listen to the segment, it's about a half-hour long and it's very good. They even produced this little video up at Qualia Coffee (hands down the best coffee shop in DC).

The show covers a number of coffee-related topics that I've written about here, including home roasting and culture around good coffee. Coffee is an interesting drink because the quality can vary so wildly depending on how it's roasted, ground and ultimately brewed. And unlike wine or beer, coffee is always made to-order. Someone can appreciate good wine, but wine is fermented and then stored in glass bottles. Beer is brewed and then canned or bottled. Someone who appreciates good coffee has to also appreciate the process by which its brewed in the moments immediately before it's enjoyed.

Also, for what it's worth, if you're in DC, check out the new website DistrictBean. It's not 100% there yet (I find some boilerplate template filler on some pages), but when it's complete it will serve as a great guide to coffee and coffee shops in DC. One thing that's been on my to-do list for months is to write a "comprehensive guide to DC coffee" but I think DistrictBean already beat me to the punch.

Streaming Video Will be Like Cable TV

noreply@blogger.com (Rob Pitingolo) — Fri, 07 Oct 2011 23:19:00 +0000

Streaming video is the wave of the future? Right? That's what Netflix seems to believe, and what a lot of people are really wishing will be true. I'm not quite as optimistic.

(from craig1black on Flickr)

I actually see a future where streaming video is more like premium cable than like a high-tech video rental store.

With cable, if you want to watch an HBO series, you have to pay for HBO. If you want to watch a Showtime series, you have to pay even more for Showtime. On the other hand, the old "video store" concept ensures that, no matter which movie you want to rent, you can go to any rental store and find it there. We have the first sale doctrine to thank for that; and it's the reason why you can find virtually anything on Netflix. Unfortunately, no such thing exists when it comes to streaming video.

Already, streaming video providers are starting to sign contracts with content producers, some of them exclusive deals. Fox recently signed a deal with Amazon. Dreamworks will have an exclusive agreement with Netflix. Microsoft is going to enter the market and offer streaming service through its XBox gaming system. There are even more potential start-ups to come.

The result could be a slew of competitors, all of whom offer different content libraries. So, if you want to watch a Sony movie, you've got to go to one service, if you want to see a movie distributed by Warner Brothers, you've got to look elsewhere. This is very similar to premium cable stations, all of whom have agreements with different studios. A movie playing on Starz won't be available to watch on HBO.

When everyone was upset with Netflix last month, many of them opted to keep the streaming service and drop movies-by-mail (or at least the most vocal among them did). I went ahead and did exactly the opposite. While the streaming service is very convenient, it lacks content. So I concluded access to a much bigger content library is more valuable than access to some content instantly.

Even many of those who stuck with Netflix streaming service gripe about the limited amount of good content. Perhaps they're hoping that over time the Netflix library will go. I'm not sure it's going to grow enough to satisfy a lot of people.

On Monopolies

noreply@blogger.com (Rob Pitingolo) — Thu, 06 Oct 2011 23:25:00 +0000

Lydia DePillis wonders if competition will really improve car sharing in the District. I'm not too certain it will, as I wrote over the summer. In any case, plenty of people are happy that there's competition coming, because they love the idea of competition. Monopolies, on the other hand, have a pretty bad reputation.

(from masck on Flickr)

Not every market is perfectly competitive. Sometimes monopolies can and do provide goods and services more efficiently than several competing companies. This is usually the case in industries with high start-up and capital costs, which is very much the case with car sharing. The monopoly chapter of any intro to microeconomics textbook lays this out pretty clearly.

When people say they don't like monopolies, I think what they're really saying is that they don't like taking on the risk that the monopolist is going to fail to provide good customer service or reasonable prices.

Comcast is a great example of this. In much of the DC area, if you want cable TV or cable broadband, Comcast is your only option. They also happen to have dreadful customer service, so when your blood is boiling after spending hours on the phone trying to get your service to work, the thought of switching to somebody else is highly appealing.

Ticketmaster is another example. They're virtually the only game in town when it comes to concert tickets, and the "fees" they charge have upset plenty of folks. There is a legitimate fear that once a company becomes a monopolist that they'll jack up prices and screw customers who no longer have anywhere else to turn.

Zipcar, for what it's worth, has gone above and beyond for me on more than one occasion. I've found their service to be excellent, and even when new competitors enter the market, I'll keep my Zipcar membership. The truth is that they do have competition, it's just from different modes of transportation, not from other car sharing companies. When I need to go somewhere, it's not necessarily a question of which car sharing service to use, but what mode of transportation to use.

Housing Markets 101

noreply@blogger.com (Rob Pitingolo) — Mon, 03 Oct 2011 12:00:00 +0000

Stephen Smith has a post about housing and gentrification that I think hits on some good points, but it only tells one piece of a bigger story about how housing markets works. He opens with this:

When libertarians (and liberals) argue that increasing the supply of urban housing will lower the price of urban housing, they’re drawing on some pretty basic and well-established economic concepts. And yet, the coexistence of gentrification and housing supply growth seem to put a lie to that theory – in cities across America, we see neighborhoods adding housing while still seeing rapid increases in the price of housing. From the point of view of the poor and often non-white residents who are being pushed out, the market remedy of increasing supply just doesn’t seem to be working.

Count the number of times the word "supply" appears. Now count the number of times "demand" is in the above paragraph. Herein lies a major problem with this discussion: it focuses way too heavily on the supply side of the equation. After all, the price of housing is measured as the equilibrium of supply and demand. If you ignore the demand-side, of course you're going to be perplexed when you see a boost in supply accompanied by a rise in price levels. It doesn't put a lie to the theory. In fact, it proves the theory.

(from M.V. Jantzen on Flickr)

I tackled this issue recently, arguing that we can't really talk about the "housing market" because housing isn't homogeneous. People are willing to pay more for high-quality housing than they are for low-quality housing. So if you change the type and quality of housing in a neighborhood, you alter the underlying structure of the market itself, and the price at which people are willing to pay to live there, all else equal.

But let's set that aside for a moment and assume, for argument's sake, that housing is a commodity. From a theoretical perspective, we can draw the housing market as a series of simple charts, similar to what you might remember from an intro to microeconomics course.

In a neighborhood housing market, the demand curve is downward sloping. There's nothing notable about this; and in the short-run, the supply curve is a vertical line. This is consistent with the reality that in most neighborhoods you can't start construction whenever you want to. In fact, it's often a huge hassle to construct new units, for a variety of reasons, NIMBYism being one of them. So in the short-run, the supply is fixed.

The theory continues that in order to meet the high or pent-up demand, as well as make housing more affordable, we ought to increase the supply of housing. Graphically, this is shown as a shift of the supply curve to the right. If all goes well, the resulting equilibrium will be a lower price and higher quantity of housing.

But it doesn't end there, because we haven't accounted for the demand curve, which very well may shift. This could be because new amenities have popped up in the neighborhood; but also because the neighborhood is getting safer, cleaner and generally becoming a more desirable place to live. It could even be for a completely exogenous reason. Whatever the case, let's imagine that the end result is a rightward shift in the demand curve.

If the shift in the demand curve is great enough, it can completely overwhelm the shift in the supply curve, leading to an equilibrium with higher prices.

Now, I'm not using this as an argument to say we shouldn't work to increase density in cities or metro areas. But I do want to show that the simplistic "increase supply to make housing affordable" argument doesn't always hold, for theoretical reasons, especially at the neighborhood-level, and in urban areas that are already relatively dense and desirable.

So if you want to bring down prices in a housing market, you need to boost supply, while keeping the demand curve from simultaneously shifting too far to the right. How do you accomplish this? It's a tough question to answer. Stephen Smith says build more in rich, already-developed areas. Ryan Avent says build more in low-density suburbs. The consensus seems to be that we need to build. The disagreement is about exactly where we need to do it.

I also want to note that we can't actually expect to witness falling rents, because rents, like the price of many things in the economy, are sticky. Imagine getting a call from your landlord at the end of your lease, during which she says, "hi, I know you're been paying a thousand dollars, but it looks like the market rent in the neighborhood has dropped, so how would you like to pay $900 for the next year?" It's not going to happen.

Landlords will almost never lower a rent, as we think of it. They might do so subtly, by offering "first month free" or "move-in incentives" that effectively lower the average price you pay per month, over the length of the lease; but the "contract price" won't actually go down over time.

For that reason, the best we can hope for is a sort of rent stabilization, where rents stop climbing in nominal dollars. A $1,000 lease five years from now is going to be a better deal than a $1,000 lease today. People hate thinking in terms of "real dollars," because we're bad at it - but it's what we've got to do to see how rents are changing.

A Tale of Two Coffee Shops

noreply@blogger.com (Rob Pitingolo) — Sat, 01 Oct 2011 15:43:00 +0000

I've got a new post over at Greater Greater Washington about two coffee shops in my neighborhood. A block apart from each other, one opened just a few months before the other closed. In a twisted way, the situation shows that 14th Street is both a desirable place where businesses want to be, and a place where it's nonetheless difficult to run a business.

(from NCinDC on Flickr)

When I lived in Cleveland, it was painful to watch businesses fail. Usually, it happened because there weren't enough customers, and the businesses couldn't generate sufficient sales. It happened because businesses just couldn't get people in the door and at the end of the day that was hardly any money in the till.

In DC, it's like the polar opposite. On 14th Street, businesses are closing because they can't afford the rent. They need affordable retail space in order to survive, and they simply can't get it in a neighborhood that's becoming popular.

Both situations demonstrate problems; but in DC, when a business closes, it's usually replaced by a different, more upscale, more expensive business. In Cleveland, when a business fails, it often becomes a vacant storefront. So while yes, it's frustrating to see 14th Street losing its unique character as its long-time businesses close for another upscale restaurant I can't afford, I like to think that I haven't lost touch with the reality that the situation could be so much worse.

Against the Self-Checkout

noreply@blogger.com (Rob Pitingolo) — Wed, 28 Sep 2011 23:38:00 +0000

Retailers are finally starting to get rid of self-checkout lanes at their stores. I'm neither surprised nor heartbroken by this development. I've found self-checkout to be more trouble than it's worth, and I avoid it whenever possible.

(from pin add on Flickr)

My beef isn't with self-checkout itself, it's with the fact that it's poorly implemented in a lot of stores. It could be a great substitute for the "express" checkout, because there are some stores I don't even bother shopping at if I'm not buying a full basket of stuff, because I have no choice but to stand behind people doing their heavy shopping.

The real problem with self-checkout is that there's no predictability. When you get into a regular line behind someone with a cart full of stuff, you can reasonably guess how long it's going to take for the cashier to ring them up. When you get in line behind someone at the self-checkout, you have to wait for them to awkwardly try to find their produce in a big on-screen list, you have to wait for an employee to come over and properly ring up their beer and wine, you have to watch them fumble with coupons. It's often a total mess.

If self-checkouts were exclusively for customers with less than 10 items, all of which have bar codes and aren't alcoholic, then I'd be all for it. For that matter, I wish there were more express lanes generally, but stores have apparently decided they aren't worth it.

Working at an Amusement Park

noreply@blogger.com (Rob Pitingolo) — Sun, 25 Sep 2011 14:56:00 +0000

I really liked This American Life's Amusement Park episode. I spent four summers of my teenage life working at an amusement park, so this was something I could certainly relate to. There's something special about working at these parks that, even years later, I've never fully been able to wrap my head around.

(from Steve Snodgrass on Flickr)

As far as jobs go, amusement park jobs look awful on paper. When I worked as a ride operator, I earned minimum wage (if I remember it was something like $5.25 an hour at the time). We usually worked 60 or more hours per week, and got 1 day off every week. "Open-to-close" or "OC" was a term that everyone knew. We worked many of those shifts.

Since we were classified as "seasonal employees" under Ohio law, we weren't entitled to overtime, benefits, or anything else you might expect from full-time employment. If you worked hard maybe you'd get promoted, earn $8 or $10 per hour, and get to manage a team of people.

Despite all that, so many people genuinely loved working at the park. I don't think it had to do with the work itself, which was incredibly boring and repetitive. It certainly wasn't dealing with customers, most of whom were fine, but enough of whom were demanding, offensive, and obnoxious. No, I think it was the fact that going into work was like going and hanging out with a big group of friends. It was the social aspect of it all.

I always thought turnover at the park was relatively low, all things considered. The stories on This American Life reminded me that it's probably the same story at every amusement park in America, and it has more to do with the people you work with than the work you do.

The Truth About Gourmet Burgers

noreply@blogger.com (Rob Pitingolo) — Fri, 23 Sep 2011 11:04:00 +0000

Last winter I set out to figure out what's so special about the gourmet burger craze in DC. At the time, I couldn't understand why people were so excited about a simple food that's not especially difficult to make at home. Over the course of the year, I've eaten at about half a dozen of DC's "gourmet burger" restaurants. I've found them to be more similar to each other than unique, and hardly anything to write home about.

(from frivolous_accumulation on Flickr)

One thing that all of these places have in common is that they're surprisingly expensive. I went to BGR and the "lunch special" set me back over $10. A burger, fries and drink at Good Stuff Eatery was $14-something. And a burger, fries, and shake at Shake Shack during lunch cost me $16. The burgers are "unique" in that they often have toppings and sauces that you might not usually put on a burger, but at the end of the day, you're still just eating a piece of ground beef formed into a patty and slapped on a bun.

I think what's happened is that we've gotten so used to McDonalds and Burger King that Big Macs and Whoppers have become the new "normal" when it comes to hamburgers; so any burger that's prepared properly, from fresh (not frozen) beef, and served with fries that didn't come from a bag in the freezer, seems like something amazing.

I guess I'm not quite willing to pay so much for "gourmet burgers" because I can make something nearly as good at home for a fraction of the price. Sure, I might not be able to come up with the same combination of toppings and sauces, but that's OK. On the other hand, I'm willing to pay for good sushi, because even though I could make sushi at home, I can't make it easily or well at all. There's a skill involved in making sushi that I simply do not have.

There is still one restaurant that I still tried - Ray's Hell Burger. Ray's claim to fame is that they raise grass-fed cows and age the meet to perfection. In that sense, it's not just that they're putting exotic toppings on regular burgers (they also do that), but that they're actually offering a product that you can't get anywhere else.

Housing as a Commodity

noreply@blogger.com (Rob Pitingolo) — Mon, 19 Sep 2011 23:19:00 +0000

I recently got a chance to read Ryan Avent's Kindle book The Gated City. I have a lot of respect for the author. I think he's one of the smartest people around when it comes to urban economics. I even interviewed him here on this blog back in 2009. As far as the book goes, it's very good, and I recommend it to anyone reading this post.

There are two points that I wish wish would have gotten fleshed out more in the book, and in discussions of housing markets more generally. I'll cover one today, and the other later.

A recurring argument amongst writers like Ryan Avent and Matt Yglesias and Ed Glaeser is that the housing market suffers from a supply/demand imbalance. More specifically, there isn't enough supply, and that's the reason why so many neighborhoods in so many cities are unaffordable. If only we could boost the supply of housing to meet the demand, we could bring down, or at least stabilize, rents.

(from M.V. Jantzen on Flickr)

This idea rests, first and foremost, on the assumption that housing is a commodity. Consider a different commodity market - wheat. If wheat prices are very high, one way to bring them down is to boost production and flood the market with more wheat. This works because wheat actually is a commodity. Every unit of wheat is more-or-less the same as every other unit, so the price is whatever price the market dictates.

Housing is different. There are many unique types and styles of housing, some of which are more desirable than others. When demand for housing rises in a neighborhood, rents will rise, regardless of the type or quality of the housing. A neighborhood might have century-old rowhouses, 70s apartments, and brand new luxury buildings. If demand is rising in that neighborhood, rents for all types of these units will rise.

But what if a neighborhood doesn't have any vacant land sitting around waiting to be developed? How do you increase the supply of housing when there's no place to build new housing? Basically, you have to knock something down and replace it with higher density housing.

Furthermore, let's imagine that a developer is proposing to level some not-so-great 60s style townhouses in an urban neighborhood. In their place, the developer is going to build a multi-level apartment complex with gym, pool on the roof, and ground-floor retail. Perhaps the developer is going to knock down 10 low-quality units and replace them with 50 high-quality units, for a net-gain of 40 housing units.

Even though the number of housing units in the neighborhood goes up, it's virtually guaranteed that the market rents for those new units are going to be higher than the rents for the old units. So the folks who might have been able to afford one of the 60s-style townhouses no longer can afford a luxury-apartment in the neighborhood.

From a developer's perspective, this is a no-brainier. The biggest cost in constructing housing is building the structure itself. The cost of making the units look cosmetically luxurious is marginal, but the price that people will pay for a "luxury unit" makes it more than worth it for developers.

For this reason, it's understandable why some people oppose development, and it's not so simple as sitting them down and saying, "don't you get it?! there's not enough supply to meet the demand in your neighborhood, and that's what's driving your rents up! Once we increase the supply of housing everyone will be better off."

The truth is that increasing the supply of housing units in a single neighborhood might not have its desired neighborhood-level supply/demand effect, because housing isn't necessarily a commodity. But city-wide, and metro area-wide, it might actually accomplish something.

Unless a developer is going to replace 10 low-quality units with 50 low-quality units, there's going to be a change in the structure of the neighborhood housing market that's different from the impact on the metro area housing market.

Avent argues in The Gated City that homeowners often engage in NIMBYism because they are conservative, risk-averse, and are cautious out of fear that the project might fail. To that I'd add that renters often engage in the same behavior, but they do it because they're afraid the same project might actually succeed.

Neighborhood Transformation

noreply@blogger.com (Rob Pitingolo) — Sun, 18 Sep 2011 23:03:00 +0000

Yesterday I rode my bike over to check out the H Street NE neighborhood festival, followed by a screening at the DC Shorts film festival at the Atlas Theater. Ever since major construction finished on H Street NE this summer, it's become clear as day that it's now only a matter of time before the area becomes another established, trendy DC neighborhood. After last year's festival I wrote that the neighborhood still looked like a wreck, and I tried to imagine its future . In only 12 months, it's amazing how much things have changed.

(from DDOTDC on Flickr)

If I had money to invest in real-estate, H Street, or Near Northeast, or whatever people are labeling the area, is definitely where I'd buy. The area has a very nice housing stock, consisting of many historic rowhouses. Some need work, while others are already in the process of renovation. Though it's not "well connected" to the rest of the city at the moment, the new streetcar should change that, as soon as it begins operating.

A lot of people look at neighborhoods in urban areas and comment about the amazing transformation that has occurred over the years. Everyone knows of at least one where "nobody in their right mind" used to go that's transformed into something that's incredibly desirable. H Street is interesting because you can literally see it happening right now. It's like being able to see 10 years into the future, knowing more or less what the neighborhood will become.