one year...

ago today my wife came home and we were relaxing. and then her water broke. i don't remember what 'relaxing' is any more.

but i would never sleep again if that's what my daughter needed.

no bigger change in my life in a one year period than going from no child to having a spectacular little girl who brightens my mood whenever i think of her, and sends my spirits soaring when i see her.

wouldn't trade a minute.

wait for it

my wife is a scientist. she has a masters in geology and likes to research things. she spent 5 years as an equity research analyst. today she manages people's money, continuing to study the market. she can absorb incredible amounts of data and convert it into information.

now more than anything, though, she's a mom. there's no doubt that parenting is largely about heart, not mind. more art than science. and, she's unbelievable at it.

but, her scientist brain has driven her to voraciously consume books about pregnancy and breastfeeding and sleeping and eating and weaning and everything else imaginable. those books are important for her, because it helps her to diagnose issues and to anticipate changes. pregnancy is a profound experience. all those hormone changes were confusing. reality blurred.

the books were helpful for her. it makes perfect sense there are so many. after all, it really is a big deal to have a baby grow inside you, come out and then depend on you for everything.

so she's got all these books. i've read a couple. really. but they're essentially written for women. there weren't many testosterone-centric books to choose from. the books warned her about how she may feel and helped her set expectations. i had nothing.

i'm not complaining. i'm just reflecting. i am a guy. so, talking to other guys was going to be complicated. after all, guys have hazing as a central hard-wired trait. we actually enjoy seeing other guys go through uncomfortable (but not fundamentally dangerous) times. so no-one warned me.

we guys need a book. here's a sample of the things no-one told me:

1. during the last three months of pregnancy and the first three months of life dad is the lowest being on the family totem.
2. during that period, your only job is to make the mother of your child more comfortable.
3. regardless of how wrong she is, the woman carrying your child is NEVER wrong (as far as you tell her)
   
4. nesting is some serious shit. not only will the honey-do list expand, but it will likely include knick-knacks. it may feel as if this is the first step to turning into your parents.
   
5. your selfishness will not be well received. at all. seriously. you don't need to go out with the guys. you don't need to lay on the couch and relax. remember 2 above.
6. it will be perfectly normal for you to be totally amazed by the birth process, and to think your baby looks like an alien
7. it's ok to feel totally useless when the baby first comes home. you kind of are useless because you don't have mammary glands. as a result, you serve no real purpose to the baby. see 2 above.
   
8. babies cry for a relatively limited number of reasons: hunger, fatigue, physical discomfort. knowing this is not all that helpful.
9. everything is unpredictable. this is particularly true about mom's mood.
   
10. women have an instantaneous and profound emotional and chemical connection to the baby. you will not for some time and that's ok.
11. there is no right way or wrong way to parent. there is ONLY mom's way.
    
12. the first time your baby smiles at you, because it's you, will change your life forever

the book i'd write would be called "wait for it." 1-11 above sound like no fun. but they're just the price of admission to 12 - and that is worth the wait.

faster than a speeding condartment

the skyline view above this post no longer exists. first place, now renamed something totally different in an effort to re-brand and de-stigmatize it, occupies this elbow on the river. i will only call it first place since, afterall, that's what it was named in the first place. it was a condominium development. it failed. but, they're still condominiums. that is to say - you could go to mandel group and purchase one today.

what about the other failed developments in our market? people are asking regularly about the extent of condominium oversupply in the market. how many months (years) of absorption are needed to consume all of the available units? when will we fully understand the extent of the losses? when will another condominium deal ever be developed? can any of the remaining proposed deals happen, or like palomar will they ride their horse out of town?

i find the questions nearly impossible to answer, and it's my business to be able to answer them. here's the problem as i see it: i don't even know how many condominiums are available in the market. i choose to define a condominium as a housing unit you can identify this year and buy this year. i mean close on it and move in. if a unit is rented until 2010, is it an apartment or a condominium? what is that exactly?

take landmark on the lake. it was a failed apartment-to-condo conversion. a third party purchased ~100 units at a steep discount, and is able to carry them almost indefinitely as apartments. they are rentable, and they are renting. they are also purchasable. so what are they? if they don't have to be absorbed as condos, are they fairly included in a market inventory number? are they apartments? is every single one different?

consider next park lafayette. that deal is an absolute mess right now. construction has stopped. there's apparently no more construction funds available. there are no residents. what are those units? you probably can't (and it seems one almost certainly shouldn't) buy and close and move into one this year. there has been talk that someone bought a chunk of units to rent. they hired a leasing person. but i don't understand when someone could even move in. so are they apartments or condos?

finally, consider the apartment market. for many years, the apartment market has been well-defined. mandel developed the overwhelming majority of new market-rate construction apartments downtown. new land also entered those waters. today, mandel group is developing the north end and lighthouse is developing bridgeview. both of those deals rely on new market tax credits, and the north end received a substantial tif. the market still doesn't seem to support new construction apartments without some creative financial engineering.

i think both of the new deals will do well. but i think we can no longer think of the apartment and condominium markets separately. we have to consider the impact of what i call the condartment. these are units owned as condominiums, but they walk, fly and quack like an apartment. some in the business would call them the "shadow apartment market". many are rented by individual condo owners. some, like landmark, are rented en masse by a larger entity. but they sure seem to me to be more like apartments than condos.

so, when people ask how many years of oversupply we have, i struggle to find empirical evidence to support a strong answer. i think the apartment deals under construction and even several of those proposed will do well. but i also think that they have competition that fights dirty. condominiums are typically built differently than apartments. by that, i do mean nicer. if those nicer ones are rented in the meat of the competitive apartment market, it could be like coming to a knife fight with a gun. some of the others like river renaissance and park lafayette sit unfinished. those may ultimately be finished more like apartments. that might be a fairer fight.

i know this: it's harder than ever to figure out what condominium is worth buying. some, like the breakwater, are finding a measure of market (if not aesthetic) success even in this market. others, like park lafayette, have some meaningful but as yet undefined failure looming. mandel group and the broker may be the only folks to make any money at all at first place. it's hard to say with any level of comfort whether buyers there will realize investment returns. it's hard to even price condominiums, because credit has become so much more complicated. demand is down profoundly. supply is up profoundly. frankly, i think there may be "condominiums" with zero value: they're really just apartments waiting to happen, they just don't know it yet.

so in response to the question about the over-supply of condos, the answer could easily be that they will never be absorbed AS CONDOS. if they become apartments, they are no longer condos. the condartment is a chameleon, but it can't change its colors forever. at some point, it will need to become defined because financial realities prevent it from being both indefinitely. until we know which condos are really apartments, it's nearly impossible to project absorption accurately.

finally, the question about when another deal will ever happen is a good one. i think we can assume there will be condominium transactions every single year. a deal will happen when a developer thinks (and then achieves pre-sales to support it) that s/he can achieve the necessary market-share of those transactions to support their deal. the days of developer hubris and the "if you build it they will come" mentality are gone because the lenders won't play that game. once the scavengers pick the carcasses of failed deals clean, and once our macroeconomic realities improve, we will see deals again. realistically, i think it could be years away.

all of this, by the way, results imho from the fact that we have NEVER been in a state of market equilibrium in milwaukee for condominiums. until 2000, there were almost no condominiums. then, for the next 5 years we felt the seat pressing against our asses as the market accelerated at supernormal speeds. somewhere likely around 2004, we hit the apex of our growth curve and decisions were made to push forward on the deals that failed or are failing now. through 2006 we thought we were enjoying the ride. the speed was fun. transaction pace was exceptional. but, it was only because we lost sight of the horizon. that speed was actually a free fall: our ass was pressed to the seat, but we were nose down. since 2006, we actually have been pressed up against the ceiling as the market accelerated back to earth at those same speeds. now we're finally low enough to the ground that we see impacts, and craters, all around us. but the gun was fired years ago. the round is only hitting the ground now. the condartment is the bullet.

i got a new drug (~5 months ago)

this is the first time i've written in a while. i don't really know why it's taken me so long, other than the fact that there's so much craziness in the world around me. of course, maybe i'm just projecting...

my daughter rowan is unbelievably fun and rewarding. something about your child smiling is beyond therapeutic. it's the perfect amnesiac. in that moment, you instantly forget about things like, say, global recession, economic doom and financial market meltdowns. you forget the ship has hit the iceberg. you can't hear the band playing its final song. all the negative just slips away.

yes, i am saying that my child is the perfect drug. no hangover. not impeded when operating heavy machinery. total bliss when taken regularly. definitely performance enhancing. not regulated. don't need to go to a bad neighborhood to get it. don't need to hide it from loved ones. no intervention necessary. huey lewis got nothing on me.

when i look into her perfect eyes, and they dance with the smile when she sees me, i melt into a puddle of unconditional love and devotion. and it doesn't go away with poopy diapers. now THAT is a powerful drug.

front porch economics

2008 is gone. now what?

consumer confidence is at an all time low. bailouts for the big guys and the little guys are taking on water. the new president is exciting - but how quickly can change come? we haven't seen the tip of the iceberg on retail failures. commercial foreclosures loom. sellers and buyers of real estate aren't on the same page, and may not even be in the same book. individual consumers don't have room for confidence they're so full of fear.

i hope that we find a way to pull together in this scary time. i happen to be a real estate guy so i have a tendency to think in those terms. i'm also an amateur historian. as i sat and self-medicated with a pint a couple of nights ago with a friend, we talked about how important it will be to look backwards to understand what we may confront ahead of us. is it a recession? is it a depression? is it a Depression?

in order to gain context we must look to the recessions of the past to understand what we can do, and postulate what we should do. economists (http://www.nber.org/cycles/) explain that we have experienced 32 periods of economic contraction that qualify as recessions. of those in the 20th century, the Great Depression included 43 months of contraction. but, in the 10 cycles between 1945 and today, the average contraction was 10 months and the average expansion was 57 months.

but this one feels different than the oil shock, or the early 80's, or the tech bubble. so i think we need to look back farther. and i'm not really interested in the technical definition or even the impact on personal finance. i'm much more interested in how the recessionary environment impacts and changes the way people live together. the impact can be profound.

urban decay really started in the Great Depression. in the many decades prior, american cities thrived. they grew at incredible rates and culture flourished. lack of universally available effective personal transportation kept people close to the city and close together. granted, the spread between the haves and have nots was increasing, but infrastructure was built, development boomed and cities developed distinct communities and identities.

when the bottom fell out of the country's economic foundation, investment dollars disappeared. infrastructure went into an endless cycle of deferred maintenance. as FDR worked to pull us out of the despair, the country concentrated on building new kinds of infrastructure. the freeway was the great new way - forming the circulatory system for the country.

the freeway was originally envisioned as a tool to bring people TO the cities. a way to get goods to market more efficiently. a way to help regenerate a declining urban population. but it acted in just the reverse. that's not to say it wasn't a successful innovation. it did boost circulation and facilitated the delivery of goods by truck instead of the more cumbersome rail. but it also made it easy for folks to live outside of the cities. it spawned suburbia.

one of the scarier images i have in my head is the classic shot of 10 identical looking little boys bouncing identical balls in front of identical houses on a homogeneous street while their fathers pull away to work in identical cars. gives me goosebumps. i just feel like that life is all wrong.

but the suburbs became the american ideal. it was a way for people (mostly white people) to escape the evils of the city and to surround themselves with extremely similar people. it worked because people were largely afraid of the world. the cold war was real, and so was the nuclear threat. the cities became increasingly uncomfortable as the money left. the Great Depression was still in the collective memory.

but in many ways, the suburbs lacked critical community essence. cul de sac neighborhoods developed and filled quickly. as it turns out, many of those neighborhoods worked only when they were filled with a homogeneous group: when the neighborhood was FULL of kids. we are only realizing the problem now. as the original population filters out of those neighborhoods, and the community becomes more naturally diverse, those cul de sacs lose much of their value. where before they created low traffic environments with lots of back yards - the perfect stomping grounds for rampaging herds of kick the canners - they now isolate their inhabitants from each other and the rest of the world. Indeed, many of those disenchanted baby boomers have been fueling the urban renaissance that is threatened today.

in many respects, the suburbs reflected an american transformation from the front porch to the back patio. not only is that true architecturally, but also it is true emotionally. i believe this sea change profoundly impacted us to the negative.

the front porch is an openly social place. the casual passerby, the neighbor and friends all can stop by and engage. it offers a vantage point from which to view the outside world, and it offers outsiders a glimpse in. the house is alive.

the back patio is social and warm and private. there are no casual passersby. there's no view to the outside world (especially with a six foot privacy fence). there's no opportunity for engagement with a broader community. the house isn't vital to the rest of the world.

it is true that for the folks congregating in the there and now both porch and patio serve their purpose well. Laughing, talking, drinking, cooking out - all find a natural home on porch or patio. The problem is that the patio isn't weaved into a broader community. It's like talking to yourself outloud. Other people may hear, but they can't join in.

The front porch, though, helps define the community context. You can't help but see your neighbors regularly. There's more interaction. I believe social interaction leads to social knowledge which leads to social responsibility. In other words, the more we interact with the world around us, the more responsible we feel for it. It's one thing if your neighbor loses his job, it's another entirely if John loses his job, and you know Jane just had surgery and their 14-year-old daughter Jenny is having a tough time at school.

back to the point - is this a recession or a depression and what is next for us? ronald reagan famously quipped that "it's a recession when your neighbor loses his job and a depression when you lose yours." when it's john, you feel it more than if it's a nameless neighbor in a generic house down the cul de sac. when you know your neighbor, you might keep your job but still feel the deeper pain of a recession.

here's what i hope: this time around, we stop turning our backs to our neighbors. we recognize that while the strength of individual effort has come to define america's greatness, it is the mutual benefit of cooperative efforts that make us able to persevere. most simply, we are stronger together than we are apart.

the economy is like an ENORMOUS ship. it takes profound energy to shift its course. we can't attack it individually and expect to make a difference. but together we can improve our own lot. consumer confidence is a funny thing. i believe that consumer confidence leads the economy and not the other way. so let's not fix the economiy. let's work on our confidence.

now, that means we should engage more with the world outside our front door. we need to get out on the front porch. know your neighbors. if they are suffering, help how you can. gather together more. shop locally whenever you can. consume smartly. think green. be compassionate.

in short, the better we can make our own communities feel, the more confident we'll individually become. there's a lot of power in that confidence. and, that power is free. what better price is there to pay in a depression?