Category Archives: Everything Else

Local gossip, humor, celebrity housing news, and anything else worth talking about.

California Goes Dry, But The East Bay Has Plenty Of Water

84531-004-A65B8F51This January will be the driest every recorded in California, with essentially zero rain in the Bay Area. California is preparing for drought conditions, and water rationing. However, thanks to good planning and conservation,  East Bay has plenty of water.

From the Mercury News:

Like big earthquakes and budget deficits, droughts are a part of life in California that seem to come back around every decade or so.

Remember not flushing the toilet? Putting a bucket in the shower? It’s time to dust off those tips, as California finds itself in a brutally dry spell. On Friday, following the lowest rainfall year in the state’s 163-year history, and with the Sierra snow pack at 17 percent of normal, Gov. Jerry Brown called a drought emergency and asked California residents to cut their water use by 20 percent.

Some areas are getting hit worse than others. Willits, in Mendocino County, is down to just 100 days left in their water supply.

California’s reservoirs are low and falling, with little hope of improvement. Our snow-pack is about 13% of normal.

res snow

The good news for those of us in the East Bay is that we should be fine for 2014, without any drastic drought restrictions imposed.

Tom Barnidge explains:

The Contra Costa Water District keeps a month-by-month graph that charts the average precipitation in its northern Sierra watershed. A wavy line above shows the wettest year on record, and another below shows the driest. Down at the bottom, barely detectable, is the flat line tracking 2013-14.

If it were any lower, it would fall off the page.

“It’s been dry,” said the district’s planning manager, Jeff Quimby. “There’s no doubt about that. So far this water year is shaping up to be one of the driest on record.”

Dry, in this case, means 3.2 inches of precipitation in the last three months. A year ago, that total exceeded 30. An average year brings 44 inches, so there’s a lot of catching up to do.

This would have been a big problem in the past, but expanded reservoirs and improved water conservation have had enormous impacts.

“People use water a lot differently than they did in 1977,” Quimby said. “We’ve made significant investments in conservation and we use water more efficiently. We’ve made investments in recycled water and in offstream storage.”

The Los Vaqueros Reservoir southwest of Brentwood stands as testimony to lessons learned. Originally built in the late 1980s with a capacity of 100,000 acre feet, it was enlarged by 60 percent in 2012.

“Before the original reservoir was completed,” Quimby said, “we were entirely dependent on the Delta — whatever water and water quality was available when we needed it.”

Los Vaqueros currently has 130,000 acre feet, brimming with water harvested when it was cleanest and most desirable. That enormous reserve — paid for through increased user fees — is one reason the Contra Costa district envisions no need this year for rationing.

EBMUD anticipates no rationing in its near future, either. That’s largely because consumers have embraced conservation techniques — high-efficiency showers, low-flow toilets, drought-resistant plants — that have reduced water demands by one-third of what they were 40 years ago. EBMUD’s reservoirs currently stand at 66 percent of capacity, which is nearly normal for this time of year.

As for the City of San Francisco? Maybe fog catchers are the answer.

(hat-tip Burrito Justice)

 

A Bear Turns Bull: There Is No Trigger For Another Housing Crash

foreclosure_massacreHome prices are basically back to where they were at the peak of the housing bubble, so why aren’t people afraid of another housing crash?

Larry Roberts, one of the most popular “bubble bloggers” explains:

I have a challenge for housing bears: outline a realistic scenario where prices crash from here. I’m an old housing bear; I would be happy to carefully and loudly pontificate on an upcoming market crash, but I simply can’t come up with a realistic scenario whereby it occurs. Sure, there are implausible scenarios, mass investor exodus, suicidal lender policy changes, sudden interest rate spike to 7%+, but nothing that seems very likely — or possible at all.

The premise of the original housing market collapse went something like this: People took on mortgage debt which couldn’t be sustained by current income; those borrowers were going to default, lenders would foreclose, lenders would liquidate their inventory, and the resulting flood of must-sell inventory would push prices lower quickly. For the most part, the bust played out in that fashion until the rules were changed — mark-to-fantasy accounting, loan modifications, shadow inventory, long-term squatting. Once the rules were changed, lenders were able to gain control of the flow of inventory, and house prices bottomed and the bubble reflated strongly. With all these measures in place, and with no pressure to remove them, a housing bust with rapidly declining house prices is very unlikely in the foreseeable future.

I don’t see a crash coming any time soon. As long as supply continues to be restricted and the percentage of all-cash purchases is high, prices simply won’t go down. Sales volumes may continue to decline, but prices will remain suspended where more buyers can’t afford them unless something changes at the banks and they begin approving more short sales or foreclosing on their delinquent borrowers rather than modifying their loans. At some point, we may see a medium-term slow-burn decline like the mid 90s, but a 00s type crash isn’t forthcoming.

Back in 2005, there was a trigger for a collapse: resetting subprime loans. Borrowers had to either sell or be foreclosed on, causing inventory to spike and prices to begin their tumble. Today, however, there is no trigger. Most troubled loans have been modified to the point where owners have zero interest in ever selling. Instead of homeowners being incentivized to sell, they are incentivized to stay. The result is that our normal housing inventory is down by 50-75% across the Bay Area. 

It makes sense that, at some point, prices will become so high that even people with modified 2% interest rates will decide to cash out. At that point, we should see inventory normalize and the rally cool off. 

That point doesn’t appear to be coming any time soon.

The Truth About Danville’s Affordable Housing Plan

Now the downtown Danville’s redevelopment is officially underway, let’s revisit Danville’s controversial affordable housing plan. Rumors are spreading that affordable housing will open the floodgates to drugs, crime, and an unsafe downtown. However, if we look at what “affordable” actually means, you can see that these rumors are completely unfounded.

First, remember that the State of California requires that a portion of new development in all towns be “affordable,” and they will withhold critical funding if towns like Danville don’t comply. The Department of Housing and Community Development sets the necessary income targets based on the median income for the county.

For both Alameda and Contra Costa Counties, the median income (for a 4-person household) in 2012 was $93,500. Here is a link to their official PDF that explains their methodology and gives data for all counties.

alccmedian

The best way to understand the income requirements for affordable housing in Danville is to look at  what’s already happening in Dublin. They have the same median income, so Danville’s requirements will likely be very similar.

Affordable Housing In Dublin

The City of Dublin has a page on their website that explains their affordable housing program:

In general, the City of Dublin’s Inclusionary Zoning Ordinance requires that 12.5% of the units constructed in a residential development project of 20 residential units or more be restricted in occupancy and in sale price or rent charged. Such restricted units are referred to as Below Market Rate (BMR) units.

For units being sold, 60% must be affordable to moderate-income households and 40% to low-income households.

For rental units, 50% must be affordable to moderate-income households, 20% to low-income households, and 30% to very-low-income households. (Section 8.68.030.B)

That page also details affordable housing programs for seniors, including senior citizens on fixed incomes.

In Dublin, 12.5% of all new units must be affordable. Given Danville’s 9.6 acres in question, that might end up being around 30 actual affordable units downtown.

The income requirements for affordable housing in Dublin are higher than most people are assuming. One of the developments on the city website is Chateau at Fallon Crossings, described as:

Standard Pacific Homes is currently offering two 3-bedroom Below Market Rate (BMR) Units and two 4-bedroom BMR units for sale to qualified households of 3 – 8 persons.

Standard Pacific Homes is accepting applications for one Low-income and three Moderate-income* households.

Here are the actual income and credit requirements from the PDF:

income

Here, “Low-Income” means a family of four with an income not to exceed $65,350 and the affordable “Moderate” income would not exceed $112,200.

Got that? Most of the “affordable” housing will still go to families earning six figures.

Let’s look at affordable housing in Toll Brother’s high-end Terraces development:

Toll Brothers is currently offering 2-bedroom Below Market Rate (BMR) Units for sale to qualified households of 2-4 persons.

Toll Brothers is accepting applications for Moderate-income* households.

terraces

That’s right, a family of three could qualify with an income up to $101,000.

It’s also worth noting that the applications are tedious and thorough… most who apply won’t be accepted.

Affordable Housing Income Requirements For Danville

Using Dublin to approximate, the proposed affordable housing in Danville will generally be sold to families with incomes between $60,000 and $120,000 per year in today’s dollars. Some, no-doubt, will be sold to retirees (and, yes, I’ll be putting my mother on that list as soon as it happens).

These are not Section 8 renters. Or crack dealers. Or criminals. An additional 30 or so families in this income bracket isn’t going to destroy our schools or property values.

People around town are up-in-arms about the idea of low-income housing in Danville, but I doubt that many of them actually understand what that means. It still takes a huge salary to be able to afford “affordable” housing around here.

If you are opposed to Danville’s 2030 General Plan for other reasons, fine. Or if you are unhappy with the fact that ABAG and the State of California can influence Danville’s growth, this is a reasonable debate to have.

But, if you are one of the many who are freaking out about all of the poor people who may move here, then the numbers above should calm your nerves. Or, to think about it differently, lots of households in town already make below these limits. The poor people are already here.

If you know of anyone in Danville who is concerned about how affordable housing might impact our downtown, please share this post with them.