Landmark Links June 12th – Shut Out


Lead Story…. Last week, the San Jose Mercury News ran a story by Marisa Kendal with the shocking title: Nearly half of Bay Area residents say they want to leave.  Of course, the primary cause was the astronomical cost of housing, because that seems to be the cause of angst that most Californians entertaining a move are feeling these days.  Indeed, the survey data from the public policy advocacy group the Bay Area Council upon which the story is based paints a rather bleak picture of the future for the region.  Via The Mercury News (emphasis mine):

Forty-six percent of Bay Area residents surveyed said they are likely to move out of the region in the next few years — up from 40 percent last year and 34 percent in 2016, according to a poll released Sunday by business-backed public policy advocacy group the Bay Area Council.

The numbers show a disturbing trend in one of the nation’s most expensive housing markets: Workers desperate for a better quality of life and without housing options will go elsewhere, potentially plunging the region into a financial downturn.

“They couldn’t be more clear what the big problems are — and it is exclusively about the cost of housing,” said John Grubb, chief operating officer for the Bay Area Council. “They don’t see…enough action coming, and so they’re looking at taking matters into their own hands. And unfortunately, what they’re going to take into their hands is the steering wheel of a U-Haul to go somewhere else where there’s a better combination of salary and lower housing costs.”


When asked to pinpoint the most important problem facing the Bay Area, 42 percent of those surveyed said housing — a dramatic jump from 28 percent last year. Meanwhile, 18 percent said traffic and congestion, 14 percent cited poverty and homelessness, and 12 percent said the cost of living.

Those problems spell serious disillusionment for Bay Area residents. Fifty-five percent of residents polled said they feel the Bay Area has “gotten pretty seriously off on the wrong track,” compared to 42 percent last year.

Taken at face value, the above-referenced data implies that the Bay Area housing crisis would solve itself over time – albeit painfully – as departing residents bring demand back into balance with extremely limited supply.  However, I’m afraid that the survey and the story may have missed a somewhat subtle but significant point since the data was not sorted by income , at least not in the official poll data on the Bay Area Council website.  The reason that this is substantial is that the Bay Area is not facing the type of demographic catastrophe that the survey results may appear to indicate.  In fact, the Bay Area is one of the few places in California where more people are still moving to than leaving, thus the rapidly escalating home prices:


That is not to suggest that the Bay Area (and the rest of coastal California) does not have a major problem because it does.  That major problem is that the people who want to move out are mostly poor and working class and the people moving there are mostly wealthy.  For the most part, the working class in the Bay Area in 2018 fit into one of four categories:

  1. They bought their home decades ago and are actually wealthy on paper but not making a high income.
  2. They are in a rent-controlled or subsidized apartment
  3. They are effectively homeless or live in a vehicle
  4. They commute a very long distance

Every time that someone in the first group sells, someone who makes a lot more money takes their place.  This means one less teacher, buss driver, janitor, line chef, server, etc in the Bay Area and puts even more pressure on limited subsidized units and long-distance commuters.  It also drives the cost of living excluding housing up since employers need to offer higher compensation in order to offset housing costs which eventually gets passed on to consumers.  The only winners are landlords.  It is impossible to have a functioning economy that consists of only wealthy white-collar workers without running into unsustainable cost of living issues.  That, and not a mass exodus is the problem that the Bay Area is really grappling with and there is nothing out there suggesting that it gets better anytime soon.


We’re Screwed: Medicare’s trust fund is set to run out in 8 years and Social Security’s will be gone in 16 years.  Or Maybe Not: Why Social Security is still pretty secure and how the crisis of 1982 provides a road map for the future.

Coming Home: One part of the tax reform that is living up to its promise is that companies are repatriating overseas cash.

Help Wanted: Oil prices are soaring and that means that west Texas is once again an employment hot spot as shale drillers in the Permian Basin ramp things up.  However, there are not nearly enough workers to operate rigs, leading to soaring wages and costs as well as tension between drillers and other regional employers.

Trouble Ahead?  Former Federal Reserve Chair Ben Bernanke says that the US will face a ‘Wile E. Coyote’ Moment in 2020 as the bill for late-cycle stimulus comes due.


Take Out: Target is using it’s acquisition of personal shopper app Shipt, which it acquired last year to allow for curbside pickup service at its stores.

Secondary Growth: Why the biggest markets for office growth are not what you think.


Still Going Strong: Almost 80% of single family homes in San Francisco are going above asking price.

Opportunity Knocks: Failing golf courses should be a natural source of new housing for under supplied cities…. if NIMBYs don’t get in the way.

In House: How modular construction can help drive down costs and spur more development.  See Also: If you want less expensive housing then make it less expensive to build.

Profiles – Anthony Bourdain Tribute Edition

You typically won’t hear me lament about the passing of a celebrity.  However, Mrs. Links and I are both huge Anthony Bourdain fans.  We watched his shows religiously, read his books and followed his travel advise.  His story was uniquely American – dishwasher/line cook gets a break and goes on to become an iconic journalist and chef – and his shows really did change the lives of many of the chefs that he highlighted as well as his viewers.  RIP.

The Article that Started it All: Here’s Bourdain’s article for the New Yorker from 1999 that led to a best selling book and later his shows.  If you haven’t read it before, it’s great.

Down to Earth: The reason that Bourdain was so well loved was that he was our most accessible journalistSee Also: Anthony Bourdain and the power of telling the truth.

Making a Difference: Jason Wang, owner of Xi’an Famous Foods which made it big after being featured on Bourdain’s show, enabling his family to live their version of the American dream and move out of a one bedroom apartment in Queens,  donated 100% of net sales to a suicide hotline charity last Friday in tribute.  Side note: Xi’an Famous Foods is amazing  should you find yourself in the NY area.

Chart of the Day

Back on May 22nd, I wrote about how mortgage lender profit was going to come under pressure since higher rates meant that refinances would dry up.  I also noted that a likely outcome would be relaxed credit underwriting in order to prop up origination volume.  These two charts do nothing to dissuade that view.


and Chaser:


When You Gotta Go: A Pennsylvania man was arrested after allegedly pooping on another man in an act of road rage.

So Many Questions: A Canadian couple lost custody of their baby daughter after a stuffed animal lion that the parents claimed was Jesus Christ acted as their lawyer in a custody hearing.

Monkeying Around: A Home depot worker was attacked by a spider monkey that got loose in the store because Florida.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

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