Hurricane Irene: Feeling Fortunate

The storm has passed, the skies have cleared, and the wind has died down. It is a bright and sunny Monday.

Sunday morning – before the eye of the storm arrived – turned out to be the worst of the weather for Greater Hartford. That’s when the bulk of the rain came through, and the strongest wind gusts, though they did not approach hurricane strengths. The rain died out quickly as the storm moved north of us, and the heavy winds that were forecast never materialized.

Sealing the Pit to keep Hurricane Irene OutOur biggest concern before the storm was that massive trees would not be able to withstand the heavy winds, especially with the saturated soil. We were worried about cars and homes getting hit, and were mentally prepared for a power outage. Thankfully, neither happened for us (though we know others in the immediate vicinity that were affected).

Our biggest actual issue during the storm was the heavy rain. Like most homes in the area, our basement has a portion of the foundation floor cut out at the low point to allow water to drain from inside to outside. During especially rainy stretches we sometimes see water collect in the pit, and attribute it to the rising water table. Early Sunday morning we began to see signs that the water may try to use the hole to come into the basement.

Our makeshift solution is shown in the picture – we basically tried to plug the hole using whatever we could find. The key components ended up being over sized garbage bags as a liner, wet kitty litter to mold the the bags to the irregular shape of the hole, a sheet of foam insulation to hold down the perimeter, and then lots of weights to apply pressure and seal the edges. It’s an ugly solution, but we didn’t get any water in the basement.

We feel very fortunate that we seem to have emerged unscathed, and are also grateful that the scope of the damage in the region was much less than expected. Other areas of Connecticut experienced considerably more problems – flooding, trees down, and power outages. Some friends in NYC were evacuated from their high rise apartment and then came back to water damage. Friends further south have also reported major problems.

Worst of all, it seems like just about all of southern Vermont, our home state, was devastated by flash flooding. All the major routes we would take to get from Hartford to Rutland are washed out – Route 103 in Chester and Ludlow (near Okemo). Route 9 in Wilmington (near Mt. Snow). Route 4 in Woodstock and Mendon (near Killington). Other towns sustained major damage away from the primary roads, especially Brattleboro. It’s the worst flooding pictures and video I have ever seen. Please consider taking a trip up to VT this fall or winter for some touristing activities – it’s a wonderful place to explore and their economy is going to need our help.

More on Demographics and Real Estate

Red Flowers in the West End of HartfordBelow is another article about demographics and other real estate trends that builds on the research of Arthur C. Nelson. It came to my attention after being posted by City of Hartford COO David Panagore. This continues on the themes of Mr. Condon’s piece from Sunday and our take on specific neighborhoods that may benefit from the market shifts.

I’ll be honest, I couldn’t get through the whole thing in the first sitting, but when I finally did, it seemed worth the effort.

The Next Real Estate Boom: How Housing (Yes, Housing) Can Turn the Economy Around
Patrick C. Doherty and Christopher B. Leinberger
Washington Monthly, November/December 2010

A New Home for Steve Jobs

Will the Bulldozers Roll onto Steve Jobs' Property?Steve Jobs, Apple CEO and technology visionary, has a gift for designing things. People have been going bananas over Apple’s various portable devices for the past decade, and he is credited with many of their important design principles.

Although gadgets are fun, we’re more about the real estate on this site. And this news piece definitely caught our attention – Steve Jobs is going to be building a new home! And the site plans are available on the internet!

The story of this property is too long and complicated for us to fully understand the details, but there seems to be two interesting themes – historic preservation and design.

Jobs bought the estate in 1984, lived in it for a while, rented it for a while, and let it sit vacant for a while. The existing structure is a 30 room Spanish Colonial Revival mansion with 14 bedrooms and 13.5 baths over multiple structures on 6 acres. Although Jobs has wanted to demolish the home for years, local preservationists have successfully intervened on the property’s behalf, working to either save the structure or move the home to a different site. In 2006 someone made their way onto the vacant property and took these pictures, which show significant neglect. There seems to have been rulings in favor of each side, with the most recent victory being for Jobs when the preservationists dropped their lawsuit seeking to prevent demolition. At this point, the demolition is on.

The other interesting subplot is about what the new home will look like. Jobs has the resources to build anything he wants, so what will it be? Conceptual plans for the new home were submitted to the Woodside Town Council, and they have reached the interwebs. I haven’t found images that I can zoom in on (please post a link in the comments if you find some), but these small images and the accompanying commentary give a good flavor for the space. The basic conclusions of those who have studied the plans in detail are that Jobs is sticking with the clean, simplified aesthetic popularized by Apple products. Also, that he won’t be throwing large parties at his house, it’s designed more as a peaceful retreat than a showpiece property.

Jobs has won the most recent battle with the preservationists, but will it be the end of the war? And if he actually follows through with his plan, will the final product truly be as restrained as the current plans? Only time will tell.

Comping Hartford: What is Hartford?

Pricing a house is all about using “comparable sales.” We always try to compare similar properties and the more similar the better. There is rarely a perfect match, but we can usually get pretty close.

Hartford looking southwest from over the Connecticut River

It seems to me that in evaluating a city we should be using a similar approach. When comparing our area to others around the country, we need to be comparing like to like. The current dust-up about Hartford being a “dead city” is the most recent, but far from only, example of how inappropriate comparisons skew reality in one way or another.

A wonderfully positive example is Kiplinger Personal Finance Magazine recognizing West Hartford as a town for the coming decade next to Austin and Seattle. The point isn’t that West Hartford is unworthy, or to minimize all the hard work of the town’s leadership, rather that comparing West Hartford and Washington DC (#3 on the list) as equals is not apples-to-apples.

We unfortunately can’t control how other people do their analysis, but we can draw our own conclusions so that we can decide on our own what truly matters and what doesn’t. Amy and I have lived in a few different parts of the country, but we’re going to need help from our readers to find appropriate cities to use as comps for Hartford.

But before we get to that, our first order of business is to define what we mean by “Hartford.”

The word “Hartford” can be used in a lot of different ways, and means different things to different people. In some of the most common uses the speaker means…
– The Downtown neighborhood where all the tall buildings are.
– Everything within the Hartford City limits.
– The general geographic area that is centered on the City of Hartford.
– The seat of the County and State governments.

Normally defining the city wouldn’t be a challenge, but boundary lines are drawn differently in Connecticut than in many other parts of the country. Is it appropriate to compare Hartford to Detroit? Hartford (as defined in the article) is strictly the City of Hartford, which is 17.3 square miles of land. Detroit, on the other hand is 138.8 square miles. In order to make a geographic area of comparable size, we would need to include Hartford, West Hartford, Wethersfield, Newington, Rocky Hill, Bloomfield, Windsor, and half of Windsor Locks. Would the conclusions be the same if the analysis included all of those towns?

I propose that we think of “Hartford” as the region – the general area centered on the City of Hartford, but including all the surrounding towns. There is no right answer, of course, but I think that taking a regional view is most appropriate because we have a regional economy with people frequently traveling between towns for work, to shop, and to have fun. Additionally, taking this view is the only practical way to compare Hartford to other cities since they are usually geographically much larger. The negative of looking regionally is that it will be very difficult to gather data on the Hartford region.

Going back to the article praising West Hartford, I think that Hartford (as a region) would still be worthy of inclusion as a best city for the coming decade. I’m no expert on Washington DC, but if Kiplinger is able to look past their challenges to see the potential, then they should be able to see past our challenges too.

I’d love to have folks weigh in with their take on how we should define “Hartford.” And if we can agree, then we can begin to look for other similar cities to which we can compare our current situation and future ambitions.

An Economist's View of the National Housing Market

Economists are divided as to the direction of the national housing market. Some believe that the environment is stabilizing and that prices will increase from here. Others see further price decreases once the government support fades away.

Richardson Building in Downtown Hartford

Barry Ritholz is one economist we follow regularly, through his posts on The Big Picture blog. Right now, he has a strong negative view on the future of the US housing markets. One of yesterday’s posts broke down his views in more detail.

Looking back at how we got to where we are today, Mr. Ritholz notes that that low interest rates throughout the 2000s caused a credit bubble, which in turn caused a housing boom. Lots of people bought houses they couldn’t afford because poor lending standards and very low mortgage rates allowed them to jump into the real estate markets. Five million homeowners have been foreclosed upon, and he expects five million more foreclosures to come.

His forward-looking thesis is that even after a 33% fall from the peak, prices are still too high when looking at traditional valuation metrics like prices vs income and the cost of owning vs renting. Supply is high, with more waiting in the wings. Demand is well below the inflated peak levels, caused by tighter credit and high unemployment. And when markets correct from severe imbalances, they usually move well below the mean.

How does his thesis translate to Greater Hartford?

Our markets did not appreciate nearly as much as markets in some other parts of the country, which has also meant that we have not seen as severe a correction. However, housing in the northeast is generally more expensive than it is/was in the boom areas, so there is more room to fall. And there is no guarantee it will always be more expensive up here.

Inventory: Real estate inventories in Hartford County checked in at just over 6 months of sales activity at the end of the first quarter. That’s right on the boundary between a neutral market and one that favors buyers, so we’re not seeing any major warning signs here. The number at the end of the second quarter should be comparable, or even better, since the tax credit created a huge spike in deals that will close by the end of June.

Foreclosures: The number of foreclosures has increased dramatically in the past few years. A recent Hartford Courant article focusing on the amount of money marshals earn indicates that “five or six years ago there were 3,000 or 4,000 foreclosures” per year in the state. Compare that to a statistic later in the article stating that 20,000 foreclosures were filed in 2009, which was 40% more than 2008.

Employment: The employment situation in Greater Hartford has improved over the past year. People we talk with say that companies are adding employees, though many positions remain unfilled and may never be filled. We are also seeing more relocation buyers coming from out of town, which of course means that they have jobs waiting for them. That’s the short-term view. The long-term view is more negative. One of our major employers has gone on the record saying that they want to move jobs anywhere outside of Connecticut. The comment made headlines, but nobody seemed especially surprised by the news. The housing market depends on buyers with steady income, which depends on employment.

Credit and Mortgage Rates: Buyers with good credit are able to get mortgages, and are currently seeing very low rates. However, buyers with poor credit are having trouble financing a purchase and often have to sit out of the market for a year or two to repair their credit. We know of numerous buyers in this situation – all of whom are gainfully employed.

Overall, the environment in Greater Hartford is trending in the same direction as the national picture for three out of four areas that Mr. Ritholz identifies as concerns. It’s difficult to know how severe our readings are relative to the national average, but it seems like we may be at risk for falling prices if his analysis turns out to be correct.