Flipping Land, Not Flapjacks

How nutty is the housing market today? In Los Angeles, people with no background in real estate are buying empty lots, plunking down a house real quick and selling for big profits.
by | October 2004

How nutty is the housing market today? In Los Angeles, people with no background in real estate are buying empty lots, plunking down a house real quick and selling for big profits. Says one developer, "Instead of putting their money into the stock market, people are looking to [vacant] land as a means of speculating." In Florida, a Kiwanis club is buying run-down houses, cleaning them up and "flipping" (or reselling) them. "We made more money than we ever made doing pancake breakfasts," boasts a former club president. Many observers, though, are worried that the housing bubble is just a quarter-point interest- rate hike away from bursting. If so, how would this play out in cities? Two housing markets seem particularly vulnerable: downtown lofts and suburban McMansions. Three years ago you could buy a 1,200- square-foot loft in L.A. for $233,000; today the same condo would cost you $524,000. In the 'burbs, meanwhile, the average home has increased in size by nearly 40 percent in the past 20 years. Why so big? Low interest rates make it easier to finance such behemoths, and people think they can't lose by investing in real estate. But prices have tumbled in the past, and experts warn housing is overpriced, by up to 20 percent nationally.

GRIM ABOUT GRIDLOCK

The Atlanta area is planning to spend $50 billion on transportation improvements over the next 25 years...only to see gridlock get worse. That's right. After expanding highways, transit, bike paths and so on, the Atlanta Regional Commission projects that, by 2030, traffic delays will be worse--but maybe not disastrously worse. Take the drive from Marietta, a suburb north of town, to Hartsfield-Jackson Airport, south of town. It takes about 48 minutes today. By 2030, it'll take 70 minutes. But, planners say, if Atlanta didn't spend the money, the same journey would take 84 minutes. Local officials are stunned by this news. Said one suburban mayor, "What I've heard is that if we spend $50 billion, we'll only be a little [better off] than if we do nothing. As a politician I can't take that back to my constituents." What's going on here? Two things: In the next 25 years, 2 million more people will be pouring into the region, overwhelming all that's being done to relieve gridlock. Second factor: There simply isn't enough money available for roads and transit to stay even with demand, they say, never mind speed things up. What would it take to actually get some relief? Nearly $75 billion over the next quarter-century, experts figure.

BLOW INTO THIS TUBE, DENVER

Is Denver really the drunkest city in America? With such famously intoxicated places as New Orleans around, you'd think it couldn't be so. But a recent article in Men's Health magazine makes a convincing case. The magazine looked up DUI statistics, traffic fatalities involving alcohol, and death rates from alcohol-induced liver diseases among the 101 largest cities. Its findings: Denver had the worst record of the bunch. (New Orleans was tied for fifth-worst. Others with drinking problems: El Paso, Anchorage, Albuquerque, Kansas City, Mo., and Spokane.) What could explain Denver's ignominy? "We are the Napa Valley of beer," said an official at one brewery. "We have more brewpubs per capita than any state in the country." And when Denverites stagger out of a brewpub, too many of them slide behind the wheel of a car, unlike bar-goers in New York or Boston, which have subway systems to transport the intoxicated. Mayor John Hickenlooper found no humor in his city's ranking. "Anytime you're in the bottom half [of a ranking of cities], you can't be happy with that," he said. The owner of seven bars, Hickenlooper said his establishments offered free soft drinks for designated drivers.

NOT YOUR FATHER'S BILLBOARD

How's this for a hot new urban trend? Giant billboards that paint the sides of buildings with neon, flash elaborate electronic messages and occasionally revolve to show yet another commercial message. Sound like the kind of thing your city would fight tooth and nail for? In fact, says the Wall Street Journal, many cities are welcoming monster- sized electronic billboards these days. Why? Three reasons. First, cities are trying to establish clearly defined entertainment districts, and what announces a fun-and-games zone as clearly as the gigantic neon signs you might find in New York's Times Square? In fact, the WSJ says, Times Square is the model for many places. New York allowed gigantic new billboards there about the time it started cleaning up the area, and the dazzling neon signs seemed to help attract new businesses. Second, in a Nintendo world, people are used to gaudy graphics. Says one city planner, "People are looking for the next stimulation. They're wired, they want instant communication." Finally, these aren't your father's billboards. They're graphically more interesting and, as a result, tend to attract a more sophisticated advertiser than their paste-and-paper predecessors. In fact, electronic billboard companies dislike the term billboard; they prefer "signage" or "display space."

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