Michael Walch

Suburban by Design: The 30-year Fixed Mortgage

Posted in Economics, General Architecture by michaelwalch on 16 January, 2011

The set-street of Edward Scissor Hands.

First, a few links:

“Who Wants a 30-Year Mortgage?” an op-ed article by Bethany McLean for the NYTimes.  Bethany McLean and Joe Nocera are the authors of the book All the Devils Are Here: The Hidden History of the Financial Crisis which is a history of Fannie Mae and Freddie Mac.

“The Frankenstein Mortgage” NPR’s Planet Money’s January 14th podcast, where the team interviews McLean and Nocera and gives a concise history of Fannie and Freddie, from Federal agency to private company and back.

McLean and Nocera’s book is next on my reading list.  This is fascinating stuff.  In a way-oversimplified nutshell, one of the primary ways that the U.S. got out of the Great Depression, and avoided crisis after the World Wars, was through mass-produced housing.  Before the invention of Fannie and Freddie, home loans had much the same terms as, say, a car loan – you would expect to put close to 50% down, and have 10-15 years to pay the loan.  That all changed through Fannie and Freddie and the Federal Housing Authority which now guaranteed individual home loans.  What does this financial history mean to architects and urban designers?

As the guarantor of these “frankenstein” loans, the FHA exercised significant control over the design of the houses themselves.  The FHA heavily favored detached suburban houses in new developments over multiple-unit properties in an urban context.  The benign sounding policy belies some intrinsic biases, including outright racism, as well as the FHA’s political goal to produce construction jobs and clear inner city slums.  Simultaneously, a market was created for suburban housing while the previously unemployed created an industry to produce these houses.  Before government-backed housing loans, houses were generally one-off designs and often employed some level of ingenuity in sourcing building materials.  Particularly after the World Wars, an industrial approach to construction was implemented to meet the demand for the truly mass housing market created through various Federal programs.

The McLean and Nocera op-ed is a good reminder of the consistent government involvement in the housing industry in the U.S., a fact that conflicts with American’s self-sufficiency myth and is therefore convenient to forget.  As architects, we should be very interested in how the financing programs shaped American urbanism, with its strong social ramifications.  The housing built under these programs is now critiqued for being both environmentally and socially unsustainable, but real progress toward more sustainable development – to now ‘fix the suburbs’ as it is often described – will have to address these economic issues.

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NYTimes Infographic – A Better Cafeteria

Posted in Economics, General Architecture by michaelwalch on 22 October, 2010

Things I love seeing and discussing:

  • Drawings
  • Infographics
  • Food choices
  • Retail design
  • Economics

The New York Times rolled them all into one very interesting Flash interaction today.  It’s just an isometric line drawing of a cafeteria and a few rollovers, but it explains some (design?) concepts of how to lay out school cafeterias and lunch lines to encourage healthier choices without being didactic.  It’s a very clear presentation of some simple but potentially very effective ideas.  Check it out.

I do have a critique of the feasibility of even these simple-seeming challenges.  Firstly, it shouldn’t be assumed that people running school cafeterias can choose what they serve to kids – despite some laudable activism from parents, teachers, and others, cafeteria menus are generally dictated by USDA guidelines and programs, which are heavily influenced by fast food and agri-business lobbyists.  Similarly, I think there are a lot of people working in schools who really care about these issues and would support this type of change, but there are powerful economic factors at play too.  Removing vending machines from schools (or even altering their selection) has repeatedly failed because the vendors – Coca-Cola, Pepsi, etc. – often give substantial donations to the cash-strapped schools in exchange for access to campus and the student body.

The strength of these ideas is their simplicity.  Changing the way food (and ‘food-like products’ to borrow from Michael Pollan) is displayed in a cafeteria is exactly analogous to every grocery store aisle in the world.  Unfortunately, the healthy meal options tend to have lower margins (less processing and packaging), and the marketing studies are never done, let alone implemented as they try to compete for prominence on the supermarket – or school cafeteria – shelf.  I love the idea that good marketing and retail design informed by common sense can finally be used to guide kids to better, instead of worse, choices.  Good luck!

I Didn’t Win the Nobel Prize in Economics

Posted in Economics by michaelwalch on 12 October, 2010

I didn’t win the Nobel Prize in Economics, but Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides won it for elegantly stating what all recent MArch graduates (and our peers in other fields) know all too well.  It’s tough finding a job in a recession.  The prize was awarded for research which went beyond the simple supply and demand model of jobs where labor is a commodity like any other with suppliers (employees or employment-seekers) and and consumers (employers).  (The analogy could be thought of the other way around where employers supply jobs to applicants, but then the producer is paying the customer to take the commodity… anyway have fun with the wording.)  The research focused on the actual “search frictions” involved in getting qualified applicants to available positions.  This approach offers insights into the troubles of under-employment and unemployment  – why it’s so difficult to efficiently employ everyone in a population (say the United States).

Like nearly all economics, it doesn’t offer a laundry-list of policy recommendations, but it at least can provide us job-seekers with a theoretical understanding of how it can be that there seem to be jobs out there, we’re qualified and applying, and yet we still end up watching TV and reading books day after day.

Here’s a really good NY Times article about not only the prize-winning research, but the work that informed it: The Work Behind the Nobel Prize

In the meantime, since I *am* an architect…

The data is old, (Mar 2009) but look at the building-related trades there in the bright red.

From the Guardian Data Blog.

Last but not least, make this posting less relevant by hiring me!  Take a look at my resume and bio online.

The ‘Flash Crash’ of May 6th – Yes, it was a Single Algorithmic Sale

Posted in Economics, Network City by michaelwalch on 1 October, 2010

In my book for Kazys Varnelis’ Network Architecture course at Columbia GSAPP, I focused on the landscape of data centers, especially those with ties to high-frequency trading and stock exchanges, in the New York City area.  One catalyst for this research was the ‘Flash Crash’ of the afternoon of May 6th where the Dow lost 600 points in minutes, and then regained it nearly as quickly.  This was due to a huge volume of algorithmic trading, redoubling the demand for regulation of high-frequency traders, and undoubtedly catching an unaware public off-guard with a troubling display of uncertainty.  Normally high-frequency traders are interested in more volatile, cheaper stocks, but this sale had two really unusual aspects which caused the crash – first it was selling futures related to the S&P 500 index itself, and it also executed its huge sale – $4.1 billion – very quickly.  Even this huge sale might not have affected the market itself, but as all the other algorithmic traders (‘black boxes’) saw this sale, a cascade of automated sell orders started.

To call these agents ‘traders’ is a stretch – these are not people but computers, all connected through fiber-optic data lines directly to the exchanges – this network is what I spent time mapping for the Fiber Finance book.  These transactions are processed in microseconds without any real human involvement.  Interestingly, once the Dow started in a downward spiral, electronic trading was stopped.  Suddenly the shouting traders at the Stock Exchange floor on Wall Street took back the exchange, to slow it down.  The NYSE building in Lower Manhattan is always represented by frantic men shouting buy and sell orders but Fort Knox might be a more appropriate image to its function as a human slowdown machine.  The fast-acting trades are happening silently in Northern New Jersey.

Read the New York Times Article: A Single Sale Worth $4.1 Billion Led to the ‘Flash Crash’

Housing Collapse – An Aerial View

Posted in Economics, General Architecture by michaelwalch on 22 September, 2010

Firstly, to be my friend or read my blog you must listen to NPR’s Planet Money.  Last week, the Planet Money team was tracing the origins of Toxie, the ‘toxic asset’ (mortgage-backed security) that they bought a while back in order to experience first-hand the major story of the economic downturn.  Toxie is essentially a bundle of home mortgages, so while perhaps no other investor has thought to do this, the NPR team has been looking for the actual houses associated with their complex financial instrument – which brought them to Florida, where they discovered not only the houses they were looking for, but entire neighborhoods from a previous housing bubble in Florida.  Read the blog post and listen to the podcast, then compare the maps below:

LAND BOOM AND BUST:

Lehigh Acres, FL

This is the area mentioned in the podcast.  You can find out lots more about it at the website of Spikowski Planning Associates, who have done extensive planning for reusing the abandoned lots.  “[Lehigh Acres] was subdivided into about 135,000 lots, over 121,500 of which remain vacant.” – from Spikowski, W. M. and Stroubd, H. B. “Planning in the Wake of Florida Land Scams” available as a PDF on their website.

Salton City, CA

This was posted in the comments on the blog page, and looks to be a similar story to the Florida example.

These neighborhoods were built as land investments (from around the 1970s) so streets were built (and named) but not houses.  The land was cleared but was never built upon, and in most areas has grown back.  This is in sharp contrast to neighborhoods of foreclosed homes, where houses were built but then abandoned (or, as the podcast reports, no one ever moved in in the first place).  The question of what to do with this land is huge in every dimension – the sheer amount of vacant space within (albeit suburban/rural) cities, their value not only to the local owners and/or municipalities but to the world economy through the various financial instruments that caused their associated booms in the first place, and their environmental impact (one point emphasized in the podcast was the array of animals who had moved in to the abandoned houses).

HOUSING BOOM-AND-BUST:

I’m working on a comparable map insert for the more recent foreclosure crisis.  This is largely a more subtle, on-the-street issue where you see unmaintained yards and homes – it’s more abstract in an aerial view.  One place to start is the HotPads Foreclosure search map.

Cape Coral, Florida:

Check out the live map at HotPads.com

Las Vegas, Nevada:

Check out the live map at HotPads.com

NYSE Data Center in Mahwah, NJ

Posted in Economics, Network City by michaelwalch on 9 June, 2010

Thank you again, Planet Money!  Their most recent podcast from 6/8/10

Anyone who read my Fiber Finance book for Kazys Varnelis’ Network City class knows that Mahwah is the new Wall St.  But they did a great job of keeping its location under wraps!  The Planet Money team interviewed local Mahwahns (dwellers of Mahwah – I’m happy to correct that to however it ought to read) and visited the site itself.  Conveniently, they named the street in Mahwah where the data center is located – MacArthur Blvd – and a few neighbors.  So, with the smallest time investment on Google maps, I think I can say with some confidence that the data center is at 1600 MacArthur Blvd, Mahwah, NJ.  Check out the Google street view of the building under construction too!

This American Life: NUMMI

Posted in Economics by michaelwalch on 28 March, 2010

I grew up in Fremont, CA.  The East Bay suburb doesn’t have many claims to fame, but the reason you’ll read about this town in practically any international business textbook is the New United Motors Inc. plant, a joint-venture opened in the 80s by General Motors and Toyota in south Fremont.  After a run of over twenty years, the plant is closing on April 1st.  This American Life covered the story in their March 28, 2010 show, which you can listen to for free on iTunes.

This American Life: NUMMI.

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