Market Conditions: Toll Brothers Says Chicago and Las Vegas Worst Markets in the U.S.
The CEO for luxury homebuilder Toll Brothers, Douglas Yearley, gave an interview to Bloomberg yesterday discussing, what else, the state of the housing market.
As always, he is nothing if not optimistic.
“The recovery is here to stay,” Yearley, whose company is the largest U.S. luxury-home builder, said in an interview yesterday at Bloomberg’s headquarters office in New York. “I think 2011 will be an improving year, but I think 2012 will be a big year for us.”
The real estate industry, the trigger of the worst recession since the 1930s, is struggling to maintain a sustained recovery as foreclosures mount and the nation’s unemployment rate sticks close to 10 percent. The housing market will avoid a double-dip after reaching a bottom last year, Yearley, 50, said.
The company’s best markets aren’t really a surprise: New York, Washington DC and parts of North Carolina.
But the worst markets?
“Chicago to us is as bad as Las Vegas,” he said. “We sell more houses in Michigan than Illinois.”
Toll Brothers recently added 3,000 lots to its inventory, it’s biggest increase since 2005.
“We’re setting up for the next cycle,” Yearley said. “Housing brought this country down and we need housing to bring this country back.”
Toll Brothers CEO Sees Nascent Rebound in U.S. Home Sales as Worst Over [Bloomberg, John Gittelsohn and Monica Bertran, December 8, 2010]
Where in “Chicago” has Toll Brothers been particularly active?
Guess what, Pizza Hut has a hard time here as well, compared to, say, North Carolina (one of Toll Bros. hot spots). I guess that means the pizza biz in Chicago is truly among the worst in the country, right?
A better reporter would have pressed him as to the locations noted as “good” for Toll Bros. (New York, D.C. North Carolina), versus bad (Vegas and Chicago). The guy goes from saying “Chicago” to “Illinois” in his comments…that leads me to believe Toll Bros. never really had much, if any, activity in “Chicago,” but instead builds in one of the various “Chicago area” locations in Illinois. Just as Toll Bros. isn’t constructing homes in the Green Zone (it is, after all, a “luxury home builder”), I highly doubt it’s building homes in NYC. Or in D.C. proper, for that matter.
“Where in “Chicago” has Toll Brothers been particularly active?”
He’s clearly talking about metro areas. Toll Brothers has 14 developments in Chicagoland currently (none within the city limits itself). They’ve been building here since 1998.
Michigan has a 14% unemployment rate (and probably a 20% rate if you count those who have stopped looking.) His comments are pretty d*mning for the Chicagoland market. Toll builds in a lot of “bad” markets so it’s especially telling that our metro area is now being lumped in with the worst bubble markets.
But to be fair, Sabrina, a lot of the issues that Toll Brothers are facing in certain markets is a combination of local economic conditions and business decisions they’ve made as a company (i.e., where they’ve decided to locate their developments and what type of developments they decided to build).
Have JMM give the CEO a call and tell him the north shore needs new expensive construction because the current housing stock is too old.
“is a combination of local economic conditions and business decisions”
Of course. But that is true of every developer and builder. But if a market is healthy you don’t have the worst sales in the United States. That’s all I’m saying.
Toll has 18 developments in Phoenix/Scottsdale. Apparently, they are selling more there. It also has 13 developments in the hot bed of sales known as Boca Rotan. But apparently those developments are also doing better.
Maybe they’ve cut prices in those areas further and are able to move the product.
It has 9 developments in the Detroit suburbs. They range in price from $300k to $600k. They are apparently selling more of those than what is selling here in the Chicagoland market.
Actually, Toll Brothers is building in NYC. Read an article over the summer about their acquisition of land in Manhattan to build luxury SFH.
Perhaps this guy needs to consider his product and choice of location.
This was that latest project of Toll Brothers. http://www.globenewswire.com/newsroom/news.html?d=203702
They’ve also done a couple luxury condo projects back in 2006-2008, and are looking to do more.
Agree to disagree. You can compare their Detroit/Michigan developments to their Chicago/Illinois developments all you want, but they are completely different. The Detroit developments are concentrated in areas with good schools and good commuting proximity (FYI – for many reasons, living close to the city of Detroit is not nearly as desireable as living close to the city of Chicago, not the least of which is the lack of jobs within the city limits). In fact, most of the developments are very close to Ann Arbor, which has the most expensie real estate in the entire state AND a decent job market compared to the rest of metro Detroit. The majority of the developments in Chicagoland are not in the best areas (for example, Barrington already has a 5+ year supply of $1M homes, other developments are in Elgin and close to Auroura or include $400k+ TOWNHOMES in glenview). You can’t compare the two — I am not suggesting that the local economic conditions in Chicago are not a factor in this discussion, but Toll Brothers’ investment decisions in Chicagoland were poor and should not be ignored.
In the NYC area Toll Brothers has some ritzy high rises in:
– Jersey City, NJ
– Hoboken, NJ
– Williamsburg, Brooklyn
I don’t know specifically how well Toll Brothers are doing with sales, but generally these areas and also Long Island City, Queens were massively overbuilt with new condos. A trend I’ve been seeing is that developers have been unable to sell many units and have converted some buildings into high-end rentals.
Williamsburg has been completely ruined. It used to be a tough working-class factory neighborhood. It became bohemian in the 80s and 90s. It’s now upscale yuppie/hipster. There’s now an abortion of glass and steel highrises along the waterfront blocking the views of Manhattan for everyone else. And it appears Toll Brothers has renamed North 4th Street as “4th Place”. BARF.
I just don’t see Chicago’s more working class hoods (as of 2010) becoming upscale/hipster like your Williamsburg NYC example going forward. This may be a good thing, but also would be due to Chicago not having the same “draw”.
There is so many things wrong with this thread/article:
1. Toll brothers is not the authority on housing – they represent only a small percentage of the housing stock in Chicago
2. Toll brothers deals with new construction/new housing in specific areas in Chicago. Just because new developments in those areas are not doing well doesn’t mean that Chicago and Las Vegas are the worst housing markets in the US
3. The title of the thread is really misleading and, if people don’t understand the facts, they could easily misinterpret it. It is sensaltionalism at its finest!! Sabrina – I think you could be a great journalist!!
There is so many things wrong with this thread/article:
1. Toll brothers is not the authority on housing – they represent only a small percentage of the housing stock in Chicago
2. Toll brothers deals with new construction/new housing in specific areas in Chicago. Just because new developments in those areas are not doing well doesn’t mean that Chicago and Las Vegas are the worst housing markets in the US
3. The title of the thread is really misleading and, if people don’t understand the facts, they could easily misinterpret it. It is sensaltionalism at its finest!! Sabrina – I think you could be a great journalist!!
“Michigan has a 14% unemployment rate (and probably a 20% rate if you count those who have stopped looking.) His comments are pretty d*mning for the Chicagoland market.”
OK – this is really a joke, right? You really can’t be serious. You cannot make a generalization on Chicago real estate based on a builder of low-middle range homes (in the far far outlying areas of Chicago). I don’t know about other areas in the country, but here in Chicago, Toll Brothers is NOT anywhere near one of the top luxury builders (probably not even in the top 10). Also, the areas in which they build are entirely undesireable outlying areas of the metro Chicago. They probably comprise less than 1% of listings out there in Chicago – and you want to make broad based generalizations on Chicago real estate? That is as crazy as me making broad based generalizations about Chicago real estate just because my properties are doing well!!
“You cannot make a generalization on Chicago real estate based on a builder of low-middle range homes”
For once I’m with clio, even if I do disagree with his position on future RE price moves. And I suspect Toll Brothers isn’t doing any building at all these days they’re likely buying other distressed builders and essentially speculating on land.
We’ll see how that strategy works out for them.
Toll brothers is probably the largest luxury builder in the country. They used to sell a lot of luxury homes during the boom and they even forayed into condos for a while. IIRC the entire ‘The Glen’ development in Gleview is Toll Bros. Large homes, small lots. Expensive.
Toll Brothers’ strategy for Chicago is indicative of their forecast for demand for luxury homes here, which is not good enough in their minds to do current developments. As a public company with access to significant capital, they could do projects here if they wanted to, but at this point are choosing not to. This speaks volumes in my mind.
If their Chicagoland focus was on building luxury developments and exurb developments, then it would come as no surprise that they’re hurting right now. I see no direct correlation between the success of these developments and the metro area in general.
Morgan Stanley seems to agree with Mr. Toll.
U.S. Home Prices to Fall Up to 11% Before 2012 Bottom, Morgan Stanley Says
http://www.bloomberg.com/news/2010-12-08/u-s-home-prices-to-fall-up-to-11-before-2012-bottom-morgan-stanley-says.html?cmpid=yhoo
Zillow isn’t upbeat, either:
U.S. Home Values May Drop by $1.7 Trillion This Year: Zillow
http://www.bloomberg.com/news/2010-12-09/homes-in-u-s-poised-to-lose-1-7-trillion-in-value-this-year-zillow-says.html
Not sure this is a legitimate source given their wildly optimistic Zestimates on their website, though.
Don’t the Toll Brothers make chocolate, possibly in cahoots with Nestle?
hell, I’ll go so far as to say a continued decline in luxury house development is EXCELLENT news for Chicago.
The @!^@#%! land speculation that all of those McMansions helped fuel was a massive part of Chicago’s bubble. We do not need any more teardowns, we need to preserve, rehab, upgrade, etc the housing stock we have so it doesn’t deteriorate.
I’m with clio on the Tool Bros… Although, it does not surprise me that this could be the case. Chicago as a whole did lag the rest of the country on the decline (which was a positive at the time) and it looks like it continues to lag (not so positive now).
I think Toll Brothers is probably suffering from the fact that people don’t want to live in 5000 sqft McMansions that look exactly like your neighbors on a 1/8th of a acre 30 miles outside of the city anymore in what used to be a cornfield.
Chicago has much better luxury housing options imho in areas with thriving downtowns on public transportation lines.
Kind of like Cadillac complaining about the luxury car market because people were choosing BMWs and Benz’s over their craptastic El Dorado years ago.
This is good news, the last thing Chicago needs is more fugly mcmansions
STAY AWAY BOBTOLL
Roscoevillager hit the nail on the head. Chicago is no worse than the rest of the country…its just our decline started later. Hence, it makes sense, that our recovery will also begin later. You have to work your way through the cycle and excess inventory period.
As for toll brothers…there was one in my former NYC neigborhood. Its where all of the folks from Iowa bought when they moved to town. Toll Brothers does middle to higher end suburban homes, often in very speculative markets and excerbs. Excerbs are probably hit the hardest in the decline as there was no real draw to the area other than affordable (and bigger homes). Also, the Glen is facing such a problem b/c the whole neighborhood was new. Too much supply….much like South Loop only on a bigger scale. Toll Brothers suffers from poor decisions and bad timing…and is not indicative of the entire Chicago market.
“Have JMM give the CEO a call and tell him the north shore needs new expensive construction because the current housing stock is too old.”
This is a Toll Brothers issue, not a Chicago issue. In addition, the new construction in this area is generally above their build quality / price point.
“Zillow isn’t upbeat, either:
Zillow doesn’t have a lot of credibility given their track record during the bubble. The Zestimate is a laughing stock.
Yeah, the Zestimate counts parking places (which are deeded separately) as units, which artifically lowers Zestimate (counting 300 25K parking spaces as units will do that). Pretty bad if your data can’t tell the difference b/w a unit and a parking space.
When I get a chance today I’ll find Bob Toll,s infamous quote from 2005 about children living in their parents homes until they had grandchildren and then kicking them out into the housing market where housing cost 50% of a buyer’s income. Hilarious.
LOL yeah I remember that quote
Chicagoland? Chicagoland? What, like Rockford? Aurora?
The next place west of Bucktown I’d live is Denver/Boulder/Fort Collins.
“The next place west of Bucktown I’d live is Denver/Boulder/Fort Collins.”
Wow anonny you’re really warming up to the ol’ wild midwest. Nary a couple of weeks ago you would’ve said Halsted in lieu of Bucktown. At this rate you’ll be in an Iowa prairie in no time.
Toll Bro’s is having a rough time here because there is no more cheap land in accessible areas close to the city. Pinegree Grove (sp) is just way too damn far to build luxury and barrigton is a hot mess and thats about 20 minutes closer.
the demand is reverting back to city addresses and inner burbs, Montgomery was only built on a bubble. Toll Bro’s know this and know their Profit margins will be greater elsewhere.
Toll Bro’s profit margin does not make chicago a bad housing market.
In business there are always territories/areas/divisions/departments that are doing better and worse. It allows a company to have an average growth multiple. That is it end of conversation
Mr. Toll in any year some markets are up while others are down. Life goes on. Perhaps rather than complaining about the situation Toll can find a solution to the issues in IL and have that market rebound to be one of the highest growth sectors of his company.
For almost five years I used to travel around the country on a weekly basis working with our distribution network. The ones that were struggling would all explain how it was “different” in their market. Over time I learned that with a few extremely rare exceptions it was not the market that made them fail rather it was how they were positioned within that market that held them back.
Looking at their map it is not a surprise. Gurnee, South Elgin, The Glen, and North Aurora have all experienced setbacks over the last three years. Perhaps they need to reprice to current market rates. Do they need to change plans and build different structures to meet todays buyers needs? Finally in some areas maybe it is time to find better managers to jump start those markets.
on the note of “the Glenn”, as much as my wife hates the place cause it looks like a fake azz movie set, i on the other hand think they way they planned it should receive a reward or something. also the way they used the tower was cool even if it is highly american-commercialized.
now the people living there are hot messed, to sell people need to get a smidge below what they paid for BRAND new in 2002 (or is it 2001?)
every time i go to the kohls museum i say to myself i can see if i had three kids that this place would work out, i get the concept even if it is plastic barbie.
Let’s all just pack up and move to Denver and Austin!
I’d be buying up land there if I was a builder.
White Flight this time around is going to see people moving to Texas and Colorado instead of the burbs.
Just watch.
Bob Toll, October 16, 2005, in an interview with the NY Times:
“In the past couple of years, Toll and his deputies have begun analyzing European housing data to see if they hold any lessons for a maturing American housing market. Toll has been talking up the research to stock analysts and the financial press for the past year. His conclusions carry a whiff of new-paradigm thinking, but he nevertheless seems convinced that Europe’s present-day reality is America’s destiny. I asked Toll what our children – my kids are both under 8, I told him – would be paying when they’re ready to buy. “They’re going to live with us until they’re 40,” Toll said matter-of-factly. “And when they have their second kid, then we’ll finally kick them out and make them pay for the house that we paid for. And that house will cost them 45 to 50 percent of their income.”
http://www.nytimes.com/2005/10/16/magazine/16brothers.html?_r=1&pagewanted=all
Bob Toll may actually be right about what he’s saying, but not for the reasons he thinks. In the future, most people will be too poor to move out of the house before age 40, and when they leave, they earn so little income that it takes up 40 to 50% of their income; as opposed to what Bob Toll was trying to convey, that housing would be scare and expensive like (allegedly ) modern day Europe.
“Toll Brothers has 14 developments in Chicagoland currently”
Per the Toll Bros. website, they have *9* developments, with 18 products. The 9 developments are in Bloomingdale, Elgin, Morton Grove, Gurnee, Inverness, Hawthorn Woods, Glenview, North Aurora and South Barrington. Like jp3, I’m not surprised that these locations = trouble.
Looking at their NY offerings, except for the one condo building in Murray Hill, they are generally at lower starting price points than the Chicago developments–and are mainly in Dutchess County, the rough commuting equivalent of Joliet.
Much of Toll Brothers supply in Chicago is in the I-47 Corridor. Elgin, Carpentersville, down through Aurora. This is the worst property in Chicago. There is an oversupply of builder lots and half finished development projects many of which are building up on bank balance sheets. There is no secondary market for this garbage. Banks can’t sell it b/c of the .25-.40 on the dollar mkt value. Too much of a hit to capital. Unfortunately these areas basically trades at agriculture value bc that is generally what most of these developments were. You are also 45 mins to an hour from the city no traffic. Same goes for the Toll Bros. development up in Gurnee and Wauconda. I certainly wouldn’t call 40 miles from the city CHICAGO and compare it to areas with population density like Hoboaken or Brooklyn.
If you look at any of the older metro areas Minny, Milwaukee, Chicago these national developers reached 40 miles from the city center buying up what was farmland. This was appealing to the over-levered buyer bc he could get a bigger house by moving 10 miles futher west. However, I will argue that in older cities location is very very important because jobs/activities are very centralized around the city center. In areas like the Carolinas this is not the case. Take Raleigh/Durham for instance. Jobs are distributed around the metro area. There is not a dense concentrated area where everyone needs to travel to everyday such as the Loop.
Some of TB’s other projects are in Glenview at the Glen. This development is off Willow Road west of Northfield. Yes it’s technically the North Shore but it is certainly not as appealing an address to the typical North Shore buyer. Most look to the mature tree lined streets of Evanston, Wilmete, Winnetka, Highland Park, Glencoe, or Lake Forest. It is basically a North Shore starter community for upwardly mobile people who want to transition from downtown into the cheapest option on the North Shore. Otherwise this development is for empty nesters can downsize to a zero maintenence living. The quality/location of the properties in Toll Bros Glenview townhome development does not present a whole lot of value. $450,000 for a 1500sq ft 2/2 townhome in the burbs doesn’t seem like all that great of a deal.
My conclusion, Toll Brothers built a) In remote locations with plenty of available raw land b) lower tier projects in upscale neighborhoods. While we certainly aren’t short on weakness I think their assessment of the Chicago mkt is more a reflection on poor corporate decision making as opposed to an idicator of the overall Chicago mkt.
“Looking at their NY offerings, except for the one condo building in Murray Hill, they are generally at lower starting price points than the Chicago developments–and are mainly in Dutchess County, the rough commuting equivalent of Joliet.”
I know someone who lives in Westchester but basically on border of Dutchess (in a Toll development as it so happens). A lot of their neighbors commute into the city. There’s also a lot of corporate stuff in Westchester.
“I know someone who lives in Westchester but basically on border of Dutchess (in a Toll development as it so happens). A lot of their neighbors commute into the city. There’s also a lot of corporate stuff in Westchester.”
Yeah, I know. And I know a lot of people who work in the Loop and live in or near Joliet, and there are/were a lot of jobs at points in between. And Dutchess is (in general–not necessarily where Toll has props) nicer than Joliet for about 1*10^23 reasons, but they are roughly equivalent as commuting time goes. Note also the number of Toll developments in Fishkill–home to a max security prison, just like Joliet!!
“This is the worst property in Chicago. There is an oversupply of builder lots and half finished development projects many of which are building up on bank balance sheets. There is no secondary market for this garbage. Banks can’t sell it b/c of the .25-.40 on the dollar mkt value. Too much of a hit to capital. ”
So basically the market is being prevented from correcting itself due to accounting shenanigans to delay the inevitable demise of the banks (or prolong it out long enough to beg for another bailout).
“While we certainly aren’t short on weakness I think [Toll Bros.] assessment of the Chicago mkt is more a reflection on poor corporate decision making as opposed to an idicator of the overall Chicago mkt.”
To be fair, the comments were all made in the context of Toll Bros. results and projects, rather than the overall market.
Aurora & Elgin are pretty depressing places right now. Not a lot of jobs/corporate presence in the immediate vicinity. Most of the economic growth/jobs in the Fox River Valley over the last decade came from real estate development. Whether it was strip malls or housing developments.
“Most of the economic growth/jobs in the Fox River Valley over the last decade came from real estate development. Whether it was strip malls or housing developments.”
Precisely why most of this stimulus is a huge waste of money. Its trying to kickstart the economy by flooding it with money where most of the past decade’s economic growth was tied to the housing bubble and housing valuations. Including millions of people mis-allocated to this industry. Giving the construction worker who was making 70k/year during the boom unemployment benefits ad infinitum because there are no construction jobs out there or they pay $10/hour is a huge waste of public funds.
As I call it, the edge of the sprawl. Literally, some of these developments are on the edge of civilization. I mean, there’s nothing but corn fields beyond these developments for 20 miles or more until you hit the next small town, which northwest is Marengo or Belvidere. Those homes off 47 are closer to Rockford than to Chicago. That’s why I-90 is backed up for miles and miles headed westbound from Schaumburg every night between 4:00 and 6:00 .
Homedelete – a lot of the Single Family in the Glen was local developers (ER James for one) as well as big national developers.
Sheridan B – thank you for the clarification.
“Yeah, I know.”
I know.
“lot of people who work in the Loop and live in or near Joliet”
Why? People I know in very upper westchester do so to get more space at lower cost than the could 10-15 minutes south. I would have thought it would be much less of an issue re Joliet, but I frankly have never thought about Joliet.
I know of one person who lives in Milwaukee and commutes to the loop…
I also know of a person who lives in Bourbannais and commutes to the loop
And last but not least I have heard of people that live in Peru (illinois) commute to the loop
chicagobull: “White Flight this time around is going to see people moving to Texas and Colorado instead of the burbs.”
I think that available fresh water supply will increasingly become a major issue in where people settle. I know a couple living in a SFH in Denver paying over $100/month in water bills.
I read about studies showing that Colorado in the past 100 years have been unusually wet compared to the norm.
“Why? People I know in very upper westchester do so to get more space at lower cost than the could 10-15 minutes south. I would have thought it would be much less of an issue re Joliet, but I frankly have never thought about Joliet.”
Houses are cheap–there are newish 4/3s for under $200k. I didn’t say they were of a particular income level, just that I know several people who live out there and commute downtown. The train access and schedule is pretty decent, I hear. I know not why aside from “cheap” someone with no connection (job/family/prison) to Joliet would live in or near Joliet, however.
“I read about studies showing that Colorado in the past 100 years have been unusually wet compared to the norm.”
True – water rights in the west were determined about a 100 years ago towards the end of a period of abnormal wetness (as was later determined), unfortunately the distribution is now set in stone, which causes shortages and endless litigation.
“prison”
Heheheheh. Joliet’s most reliably loyal residents (even if most are temporary).
snowpack in CO evaporates (for the most part), it doesn’t melt and flow into kick-butt rivers like the Cascades do.
People were talking about Route 47 as the next Randall Road way back in the early 1990’s.
Don Draper commuted almost daily from Ossining which is near westchester (I know he’s a fictional character);
route 47 will be the outer edge of the sprawl for quite sometime unless we suddenly have a major increase in population, or, alternative hubs of industry develop in the outer burbs.
“Don Draper commuted almost daily from Ossining which is near westchester (I know he’s a fictional character);”
I don’t think there’s any dispute that people commute into nyc from westchester. Ossining (which has Sing Sing BTW) is a lot closer to city than northern westchester/dutchess.
“I don’t think there’s any dispute that people commute into nyc from westchester.”
People commute to Manhattan from Scranton; which is about like coming to Chicago from South Haven or Port Washington.
Ossining to Grand Central is about the same as Naperville to Union Station–not even a notable commute.
There is so much variety available in the “Chicagoland” market. I notice that folks here are not so swayed by the national “luxury brand” claims of Toll Brothers. I have a friend in NJ that owns a Toll house and boasts about it being a “Toll” house. I remember a discussion at a party in a Chicago Suburb Toll house where the owner was hesitant to admit that he had a Toll house rather than a more one-of-a-kind boutique-builder type house.
“I have a friend in NJ that owns a Toll house and boasts about it being a “Toll” house. ”
That’s because people in NJ boast about dining at such elite establishments such as Applebee’s and TGI Fridays.
And Red Lobster.
“People were talking about Route 47 as the next Randall Road way back in the early 1990’s.”
Man, oh man, does Randall Road ever suck.
thats crazy!
“People commute to Manhattan from Scranton; which is about like coming to Chicago from South Haven or Port Washington. “
Excellent article from a few years ago; it took me a while to find it on the internet but I’m glad I did; I sacrifice for your reading enjoyment:
http://www.newsweek.com/2006/04/30/the-long-and-grinding-road.html
The Long and Grinding Road
At 5:40 a.m., the alarm blares news-talk radio and Bill Small rolls out of bed. With a two-hour commute ahead of him, the Chicago doctor wastes little time. He showers, dresses and is out the door by 6. At this hour, his car is the only one navigating the winding streets of his upscale neighborhood in St. Charles, Ill., a quaint community nearly 50 miles west of the Chicago hospital where he works. Small’s routine is so finely tuned that he won’t stop for coffee if there are more than three cars in the drive-thru. Today there are just two, and he picks up an extra-large. But there’s no time for a bathroom break, so Small, 41, won’t allow himself a single sip for nearly an hour. At the halfway mark, he takes his first swig as he hits gridlock on the Eisenhower Expressway. With the sun rising over the Chicago skyline, he crawls along, placidly listening to sports radio. Finally, he arrives at exactly 8 a.m. Though he won’t return home for 12 and a half hours, Small still says the killer commute to and from exurbia is worth it. “It’s a nice place to raise kids,” he says. “And it does feel like you’re away.”
The drive to get away from it all is turning us into a nation of nomads. As we’re pushed to the edge of civilization by runaway home prices and a longing for wide-open spaces, the daily rat race is turning into a marathon. “Extreme commuters” who travel more than 90 minutes to work, one way, are the fastest-growing group of commuters, according to the U.S. Census Bureau. More than 3.4 million commuters take that long road to work every day, double the rate of extreme commuters in 1990. And the fastest-growing departure time is now between 5 and 6 a.m. Even $3-a-gallon gas and growing gridlock aren’t slowing the rise of this group, which is changing the way we live as we spend more time in our cars and less time in our communities. This endless commute is becoming the defining characteristic of the 21st-century working stiff. So much of what we worry about today–volatile real-estate prices, sleeplessness, our overstressed lives–all merge together on the road, as we search for the elusive simple life in some suburban Shangri-La. “We’re obsessed with the commute,” says Joy Mander, 42, a nurse who drives 45 miles to work the over-night shift at Children’s Hospital in Oakland, Calif. “How much is it worth to own your own home if you end up spending four hours on the road and not playing with your kids, not sleeping enough and rotting in traffic?”
It’s apparently worth plenty, because more people than ever are willing to trade time in their car for the American Dream: big house, big yard. Nearly 10 million people now drive more than an hour to work, up 50 percent from 1990. The average commute today is 25 minutes, up 18 percent from two decades ago. What drives us to drive so far? Many are doing what California real-estate agents call “driving ’til you qualify.” New- home prices have nearly tripled in the past 20 years and now average almost $300,000, according to the National Association of Home Builders. In places like southern California, each exit along the interstate saves you tens of thousands of dollars. That’s why Chris Neelley, 43, lives in Lancaster, Calif., and drives 80 miles to L.A. every day. For $400,000 last year, he moved his family of five into a 3,000-square-foot home, twice the size of the place they used to have closer to the city. The trade-off: he now spends three to six hours a day on the road. “I love being out in the middle of nowhere,” he says, “and seeing no people around.”
[Click the link for the rest of the article]
Copyright 2006 Newsweek: not for distribution outside of Newsweek Inc.
Insane to commute that much every day. Doubly insane to wake up to a “talk radio” alarm… blerghhhh!
Homedelete- I remember that article! At the time I thought they were insane- especially the California people. 3 hours one way to get to work? And all for the joys of homeownership.
I once had a coworker who commuted to San Francisco from Modesto every day in some kind of shared ride van (someone else did the driving.) They would leave at like 5:30 am every morning. When he had to work late he would use Priceline to get a cheap hotel room in the city because he would have to miss the van ride back home. Who wants to live like that?
I don’t know why people live like that. I suppose they want to be away from home – for whatever reasons – and a long commute gives them the excuse. I like how the article starts out with a doctor who commutes from St. Charles to an unnamed location in Chicago. I’ve had to drive to St. Charles (Geneva actually) from the NW side in the morning to make various court calls and it’s a solid hour and fifteen minutes to hour and a half taking I-90 to 31. If I lived closer to downtown I could take the Ike to the extension to 355 S to 88 to 59 N to Roosevelt road and that’s a nearly two hour commute in and of itself. That’s insanity. Being on the road is dangerous, it’s filled with nutjobs, drunks, uninsureds, and some truly crazy people. The less time I spend on the road, the better.
I google mapped modesto to San Fran; that’s insane. over 90 miles. in california traffic. I know you can get a lot for your money when you travel out but that’s just ridiculous.
“I google mapped modesto to San Fran; that’s insane. over 90 miles.”
Yep. He had two small kids at home but he wanted to buy a house and that’s the only place he could afford (on a modest middle class income.) My thought always was- when does he see his kids? What’s the point? You can only do it so long- anyway- before you burn out from the commute. At least he wasn’t actually driving it himself- but just a passenger in the van with a bunch of other crazy commuters.
RE: long commutes
I agree with all of you – I personally know several people who make 1 hour plus commutes. When I asked them why they did it (as all of them were very rich and could afford to live in nice places around where they work), their main reasons were:
1. School system (some are neighbors who are MDs in chicago and like the Hinsdale/OB school district).
2. Spouse (wife wants a big house, etc… and they want to keep the wife happy – I could have learned something from them!!).
3. Spouse (tired hearing the wife bitching about the kids, etc. and enjoy the alone time the car provides).
4. Family situation – most are wealthy and their wives don’t work outside of the home. The wives take care of most ALL of the the business around the house (ie, cooking, cleaning – or paying the maid, shopping, social calendar, paying bills). Also, most of these people are wealthy – so they can pay for someone to mow their lawn, do repairs on their houses – so they actually have more free time than normal people.
HD,
Great find on that article!!
i know so many (we all do) that rob themselves of life commuting to only enjoy part of saturday and sunday in their dream home.
one reason i live where i live, is i am at my front door at 5:25 pm. I will always say this and have repeated it here many times;
“live a close as you comfortably can to your job”
also look at it this way, think of not taking the job offering 10k-15k more a year because its an extra 30min one way to your commute. I know i turned down a job offer that had a slight bump of tittle but a 26k bump in pay about a year ago because it was in libertyville. F-dat groovy aint drive that far to collect a pay check. i actually like being around my wife and being able to hang with my son is worth more than that.
“Spouse (tired hearing the wife bitching about the kids, etc. and enjoy the alone time the car provides).”
i thought thats what the bathroom is for? or the “man shack” (garage). i know when i need a break i just go to the garage and fix something. its a nice little brain reset and a second positive you actually knock something on the to-do list, its a win win!
BTW a lot of those homes in CA that are an hour drive or more i.e. Palmdale, Lancaster, Stockton, Freemont, etc have all suffered severe price declines this bubble. 50% or more in some cases. Another article:
http://www.kcet.org/socal/dream_interrupted/issues/housing/model-homes-guard-expanse-of-sand-and-unfinished-development.html
A Monument to Palmdale Housing Bust
by Mark Evitt
Tulip. Fuchsia. Orchid. Lily. Pastoral street names all meant to evoke the image of suburban, lush greenery and beauty in the desert city of Palmdale. These names are registered on official maps in City Hall, but off Palmdale Boulevard they are only posted on temporary white signs. And those signs serve little purpose other than to catch dead tumbleweeds and to starkly remind any passerby of just how hard the housing crisis has slammed what once one of the fastest-growing cities in America.
Near the intersection of Orchid and Lily Way, two partially finished “model homes” sit within a few yards of each other. The outside stucco has been finished and the tiles for the roofs sit stacked in neat piles, waiting to be layered on. But on closer inspection, it’s clear these two houses have been waiting for their roofs for a long time. There are no signs this is a working construction site. The doors and windows have been boarded up.
The two homes look out over a vast expanse of sand and scrub brush, interrupted only by a partially paved ring of streets. This is the state of home construction in Palmdale, where this one development has been sitting in a state of suspended animation for more than 18 months. The desert is a cruel and unforgiving preservationist.
During the housing boom years, new developments sprung up along Palmdale Boulevard, the city’s main thoroughfare, as fast as contractors could truck in the materials and labor. And, seemingly overnight, land that was previously populated by gray-green yucca plants was converted into instant neighborhoods of single-family homes with red tile roofs. This development at Palmdale Boulevard and 55th Avenue was meant to hold 67 homes on 19.5 acres of cleared land. But today there is only sand, that road, and those white posts jammed in the dirt marking street intersections and driveways that don’t exist.
[Click link above for rest of article]
With Pics too.
And another from JUNE 2009!!!
http://articles.latimes.com/2009/jun/10/business/fi-cheaphomes10
Median home prices drop below 1989 levels in some parts of Southland
Properties in several areas are selling for less than they did 20 years ago, and that’s not including inflation. Some first-time buyers are nabbing houses for less than what their parents paid.
June 10, 2009|Peter Y. Hong
In parts of Southern California, the housing crash has upended a basic tenet of the American dream: that home values always increase over the long term.
Properties in several areas are selling for less than they did 20 years ago, and that’s not even counting the effects of inflation.
[Click link above for rest of article]
HD and everyone else – this is all misinterpreted data. Individual house prices ANYWHERE in the US are not lower than 20 years ago. You really need to critically analyze the data (something reporters/media/lay people are unable or unwilling to do). Average prices ARE down – (and possibly could be lower than average prices 20 years ago) – BUT these sales are absolutely skewed because they are mostly made up of foreclosures and short sales. If you want to provide a more accurate picture , you need to do the following:
1. Take short sales/foreclosures out of the calculations for average price. While these may make up a majority of sales, they only account for a minority of houses out there (much less than 5%).
2. Separate houses from townhouses from condos. The tribune publishes data on avg. sales but fails to separate these types of housing = useless and misleading data.
3. Compare apples to apples. You can’t compare a 3/3 in Englewood to a 3/3 on ELSD – yet both of these sales will be clumped together as “chicago”. The same goes for the suburbs. In OB, for example, you can’t compare a house in the hinsdale central school district with one in the Elmhurst or Downers school districts – huge price difference.
When you analyze data correctly, you will get a clearer picture – things are not as bad for the majority of people out there. THERE IS NO NEED TO PANIC!!!!
Clio, cherry pick the data how you like in order to achieve your desired result. I don’t need to do that because the data is already out there.
HD – not cherry picking – but you can’t deny facts.
You need to analyze data correctly in order to get a clear picture. Believe me, I have a LOT of skin in the game. If I thought real estate prices were going to drop and were not coming back for another 10-20 years, you bet I would dump everything at a loss right now.
Believe me, I just want to know the truth. I have no ego issues to admit I was/am wrong (if I am). It would be much easier for me to accept I am wrong, dump my properties at a loss right now than it would be to hold on to “depreciating high expense assets” for the next 20 years. I have analyzed the data and real estate IS coming back – just wait and watch.
“Yep. He had two small kids at home but he wanted to buy a house and that’s the only place he could afford (on a modest middle class income.) My thought always was- when does he see his kids? What’s the point? You can only do it so long- anyway- before you burn out from the commute. At least he wasn’t actually driving it himself- but just a passenger in the van with a bunch of other crazy commuters.”
I knew folks who drove themselves from Modesto to the peninsula. In 1990. To afford a house with a small yard. And it’s only gotten much much worse out there, for affordability.
“I knew folks who drove themselves from Modesto to the peninsula. In 1990. To afford a house with a small yard. And it’s only gotten much much worse out there, for affordability.”
Anon, how do you reconcile this with all of the ccers out there claiming that the data supports that prices are going back to 1990 levels?
“Anon, how do you reconcile this with all of the ccers out there claiming that the data supports that prices are going back to 1990 levels?”
If (okay–*because*) you haven’t noticed, I regularly fight the “we’re returning to pre-98 nominal prices *everywhere*” nonsense. Some properties are, most won’t.
But, EsEff metro is *entirely* different from Chicago metro from housing price, housing options, commuting and employment perspectives. And others, somewhat less relevant to house price trajectory. It’s like comparing the downtown Manhattan office market to downtown Dallas, or the Las Vegas strip to Rush Street–unfair to both sides of the comparison and likely to mislead.
anon, thanks – just needed more support for my argument that we are NOT heading to pre 98 pricing anytime.