Whats really at work beneath the surface
|August 26, 2008||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
Whats really at work beneath the surface
Obacain, shelf prices, and the business cycle all bow to site rent
To remind you of the potent role that real estate plays in politics, business, and general prosperity, we trim, blend, and append three 2008 articles: by Mike Sunnucks in the Phoenix Business Journal of August 22, by Jennifer Langston in the Seattle Post-Intelligencer of August 18, and by Rex Nutting in CBSMarketWatch of August 19.
by Jeffery J. Smith, August 2008
Sunnucks: Arizona Sen. John McCain launched an ad focused on rival Barack Obama’s links to developer Tony Rezko.
Rezko was convicted on fraud and influence peddling charges in June. When Obama was in private law practice, his firm represented Rezko businesses. He also supported the developer’s plans to build apartments for senior citizens in Illinois and bought residential property from Rezko’s wife in 2006. The Illinois senator later said he regretted the move.
Rezko was a major fundraiser in Illinois politics, especially in Democratic circles.
Democrats in turn have criticized McCain’s links to Charles Keating, a major figure of the savings and loan crisis of the late 1980s and early 1990s, as well ties to some Arizona and Nevada real estate developers.
JJS: Readers of this site might recall similar revelations of these and other politicians this campaign season. The money one can monopolize from land has been the key driver of not only politics but of all history. As long as we see site value as up for grabs, it will continue to corrupt governance and all else. Some day, some day Meanwhile, note the connection between spendy sites and spendy edibles.
Langston: A community survey — based on a list of items to healthfully feed a family of four for a week — uncovered a wide price range among supermarkets in Seattle metro region.
It found a $112 difference between organic food pioneer PCC and the cheapest grocer. A $35 spread separated other supermarkets — enough to matter to anyone watching food bills reach new heights.
In general, supermarket costs were higher in more affluent neighborhoods.
The survey priced a “market basket” of items, including celery, canned peaches, chicken thighs, milk, cereal, rice, sugar and eggs.
A Safeway spokeswoman said the chain does not price individual items any differently from one neighborhood to another, though occasionally a local store may [emphasis added]. But overall costs can vary simply because larger stores have a wider variety from which to choose, she said.
A spokesperson for another chain said store’s large size could account for some difference, but not likely one that big.
A third industry spokes person said any community effort could have data-collection errors. However, each team had an identical list of products — such as a 1-pound bag of carrots or a 26-ounce jar of spaghetti sauce — and instructions to note the cheapest price offered.
JJS: While the PR people grapple for an explanation that makes sense, what actually drives price is how much people can pay. The more people can spend — thanks to getting higher incomes — the more they will spend for desirable locations and tastier, healthier food.
However, such well endowed people in this tail end of the business cycle, which is really a land-price cycle, are fewer than when business was booming. Since the cycle has averaged 18 years for centuries now, its no coincidence that every new low is close to that length of time, or longer if this downturn is to be worse than the last one.
Nutting: US homebuilders sharply reduced the number of new homes starting construction in July and dropped the number of new single-family permits to the lowest level in 26 years.
Housing starts fell 11%. It marked the lowest level in 17 years. Housing starts are down 29.6% in the past year.
Builders are cutting back, trying to work off a mammoth glut of unsold houses. Rising foreclosures on existing homes are complicating the builders’ efforts to bring supply back down to meet sluggish demand.
The big decline in July was largely payback from a surge of permits and starts in June sparked by a new building code in New York City that provided a big incentive to rush major condominium and apartment-building permits through before July 1.
For single-family homes only, permits fell 5.2% to the lowest since August 1982. Single-family permits have plunged 41.4% in the past year.
The number of single-family homes under construction in July fell 3.5% to the lowest starts in 16 years. The number of single-family homes completed dropped 7.2% in July to the lowest completions since March 1983.
Builder confidence remained at an all-time low in August, although expectations for future sales improved slightly.
Jeffery J. Smith runs the Forum on Geonomics.
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