Monthly Archives: May 2007

Josh on Housing – Part 1

Wandering around the web, I found this article on the economics of housing:

Home Economics – New York Times

In 2000, Glaeser took a sabbatical from Harvard and began to spend a few days a week in Philadelphia working with Joseph Gyourko, a real-estate economist at the Wharton School of the University of Pennsylvania. Glaeser had already been thinking about the relationship between housing and urban poverty when one day he and Gyourko began to discuss why cities like Philadelphia and Detroit — places with poor future prospects, both economists believed — weren’t doing even worse in terms of population. Why didn’t everyone leave, Gyourko wondered, and go to a place like Charlotte, N.C., that had a fast-growing economy? This question addresses a puzzle of urban economics. Cities (think of Las Vegas or Phoenix) can grow at a very fast rate, exploding overnight with businesses and residents. Some can increase in population by 50 or even 60 percent in a decade. But cities lose their residents very slowly and almost never at a pace of more than 10 percent in a decade. What’s more, when cities grow, they expand significantly in population, but housing prices tend to rise slowly; even as Las Vegas grew by leaps and bounds in the 1990’s, for instance, the average home there cost well under $200,000. When cities decline, however, the trends get flipped around. Population diminishes slowly, but housing prices tend to drop markedly.

Fascinating observation: When a location becomes undesirable, house prices collapse quickly – but the affordability of housing keeps people living in them. Rural Australia exhibits this kind of behaviour in droughts, and generally. Basically, only poor people live where noone really wants to:

Glaeser and Gyourko determined that the durable nature of housing itself explains this phenomenon. People can flee, but houses can take a century or more to finally fall to pieces. “These places still exist,” Glaeser says of Detroit and St. Louis, “because the housing is permanent. And if you want to understand why they’re poor, it’s actually also in part because the housing is permanent.” For Glaeser, this is the story not only of these two places but also of Buffalo, Baltimore, Cleveland, Philadelphia and Pittsburgh — the powerhouse cities of America in 1950 that consistently and inexorably lost population over the next 50 years. It is not just that there were poor people and the jobs left and the poor people were stuck there. “Thousands of poor come to Detroit each year and live in places that are cheaper than any other place to live in part because they’ve got durable housing still around,” Glaeser says. The net population of Detroit usually decreases each year, in other words, but the city still attracts plenty of people drawn by its extreme affordability. As Gyourko points out, in the year 2000 the median house price in Philadelphia was $59,700; in Detroit, it was $63,600. Those prices are well below the actual construction costs of the homes. “To build them new, it would cost at least $80,000,” Gyourko says, “so there’s no builder who would build those today. And as long as those houses remain, the people remain.”

So, houses can be bought for less than they be constructed for – kind of paying full price for the house, then getting a discount because of the dirt they’re built on. The prices are very attractive, but they’re that cheap for a reason – you don’t want to live there. The only people who will live there are those that can’t afford to live elsewhere. You get a massive supply of housing (that doesn’t get smaller – not quickly anyway) that is insensitive to price, so basically demand drives prices in a falling market. If the demand is falling because the place is no good to live in, prices will fall like a stone as everyone who can afford to live elsewhere does.

Buying in an environment like this, the price you pay needs to work on the assumption of $0 residual value at the end of the economic life of the house on the property. So rental returns have to compensate you for the forgone income (i.e. provide a return on your investment) and holding costs (rates, insurance, etc) plus compensate you for the depreciation of your investment. This would imply that rents in these kinds of environments have high yields compared to markets where the property is expected in increase – or at least not decrease – in value.

What I’m taking away from this is that old adage – you’re buying the dirt, not the house. Also, location location location. Plus, yield alone is a bad thing to chase.

As a guide for purchasing, the article seems to say that you want to go where there’s a natural upper limit on housing, and better yet a rapidly depreciating house stock.

Glaeser likes to point out the close correlation between a city’s average January temperature and its urban growth; he also notes that cars per capita in 1990 is among the best indicators of how well a city has fared over the past 15 years. The more cars, the better — a conclusion that seems perfectly logical to Glaeser. Car-based cities enable residents to buy cheaper, bigger houses. And commuters in car-based cities tend to get to work faster than commuters in cities that rely on public transit. (The average car commute is about 24 minutes; on public transportation, it is around 48 minutes.) While many of his academic peers were looking at, and denigrating, how the majority of Americans have chosen to live, Glaeser (though no fan of the aesthetics of sprawl himself) didn’t think an economist should allow taste to affect judgment. “You shouldn’t go around thinking that all these people are just jackasses for deciding to drive an automobile,” he says.

I wonder if Melbourne commuting is longer because it’s difficult to move house closer to your job? Also, Melbourne is a huge city compared to many US cities, there’s only a handful of American cities larger than a couple of million people, and most are sub 500K.

Disproportionate Response?

Aussie software pirate extradited to the USA because enough people downloaded software cracked by him and his cohorts that, had every single copied program been sold would have generated retail revenue of $US50 million.

In a fun aside, the article points out that anyone accused of pirating software worth more than USD$1000 could also be extradited.

Now I don’t know about you, but every time I’ve seen commercial software cracked it’s so that it could be used as shareware – try before you buy. Which I see as a perfectly reasonable thing to do, given the returnability and fitness-for-purpose clauses within commercial software – i.e. if it sets fire to your house, it’s your problem not ours. So testing before dropping hundreds of dollars on something seems sane. And those who would steal the software rather than test it were never going to buy it in the first place, even if it was impossible to pirate software. I really don’t see what the problem is.

In the meantime, the USA is the only country which voted against a resolution for an arms trade treaty to control the proliferation of small arms in areas of conflict.

I think the places that copyright law is taking us will lead to an uprising. This is getting ridiculous.

Speeding up torrents

Call me slow, but it took me until the weekend to work out why my torrents were running so slowly. (You know, all those Linux distros I keep downloading. Yeah.) Almost always stuck at about 15-20kbps — if that. Sometimes markedly slower.

Having read about problems with the original firmware, I got to the point of flashing my WRT54G router with the very nifty DD-WRT, which is so amazingly cool that I can’t believe some people took the time to develop it for free. Enthusiasm for innovating is a wonderful thing. But that didn’t fix it.

I switched from ABC (“Another BitTorrent Client”) to uTorrent. Which gave me nifty features like scheduling that will help me avoid burning up my peak hours (7am to midnight) traffic quota. (Came perilously close last month to being “shaped” down to dialup speed. Eek!) But that didn’t fix the torrent speed.

Finally I resorted to fiddling with my speed limits in uTorrent. Changed the upload speed from unlimited down to 20kbps and suddenly the download I was on jumped to 35kbps. Brought the upload down to 15kbps and the download leapt again to 60-70kbps. Eureka!

Dropping the upload to 10 didn’t really affect it further. And by that point I was happy with the speed, so I left it at 15.

See, I’d been going with the principle that it was good to uncap your uploads, to share everything around. What I’ve now learnt is that it’s a good idea to cap them while downloading, and set no limit for once the download has finished. And with the scheduler in uTorrent, you can also tweak things so that most of your downloads happen in off-peak periods at night, but uploads can keep on pumping all the time. (With appropiate caution if you use an ISP that charges for uploads; happy to say mine doesn’t.)

Why don’t they explain this stuff when you start? I guess there’s a bunch of complex stuff to explain to beginners. Mind you, if I’d actually read the documentation, that might have helped.

There’s some other things you can do to optimise Torrents, including patching and fiddling with the Windows XP TCP configuration and lots of other tweaking.

Waste of time

Complete waste of time: Swatch Internet Time. What a stupid concept that was. Centred on Biel, Switzerland (Swatch’s headquarters). Accuracy to only 1 minute 26.4 seconds. I remember for a while CNN.com displayed Internet timestamps. Totally meaningless to almost everybody. Just stick to UTC fellas, at least people have a chance of understanding that.

Spreading it

A reader on my personal blog left this comment:

09-F9-11-02-9D-74-E3-5B-D8-41-56-C5-63-56-88-C0

It’s a set of numbers that’s being spread around by a few people at the moment. According to this post:

…it is the HD-DVD processing key for most movies released so far, published on the net by the AACS (Advanced Access Content System) a couple of days ago by mistake.

…and the legality of even publishing it, at least in the US under the DMCA, is apparently in doubt.

This page quotes a Wikipedia article about it which, intriguingly, has been deleted from Wikipedia itself. It’s also caused a ruckus at Digg.

Interesting stuff. Though it’s not like 99.99% of people would have any idea how to apply the number to anything… though I suppose that could change rapidly.