The NY Post reports record foreclosures on high-rollers', high-end Hampton's properties:

Homeowners in the some of the toniest ZIP codes in the Hamptons are facing a frightening reality - they can't afford to foot the bill for their high-priced homes, The Post has learned. In the first three months of this year, banks have launched preliminary foreclosure actions - known as lis pendens proceedings - against a record 120 borrowers in East Hampton and Southampton towns.  Twenty percent of those borrowers live in homes that are worth more than $1 million, according to figures from the Suffolk County clerk.

My first reaction was too bad: We're talking about defaults and foreclosures on multi-million dollar loans.

But then I started thinking, why? It's clear as a bell that the tremendous run-up in housing prices in places like the Hamptons, Miami, Naples, Florida, or other similar high-end vacation spots had little to do with demand. We're talking speculation pure and simple.  My research on real estate prices shows that local wages make up about a fifth of local income in Naples, compared to around 90 percent in Silicon Valley.  What drove prices in these markets was "outsiders," certainly - outsiders trying to make real killings on flips and speculation. With these speculative gains wiped out and virtually no mortgage market for high-end loans to speak of,  real estate values in these places have a long, long way to fall.

But looking at local real estate listings many, indeed  most, of these properties including ones in lis pendens are listed at prices above what's owed on their hefty mortgages - that, is way above their current market value. Huh? The reason is simple, actually.  Facing foreclosure, those holding such huge mortgages have every incentive to hold out for their price rather than  cut it and then have to bring a big check to closing.

Of course markets work, eventually. Prices will start to come into line over the next year or two once large numbers of these speculative homes go back to the banks.  My best guess is that they are not even half-way to the bottom yet in these markets, and may well end up somewhere around 2001 price levels before the dust setlles.

Karin Fisher has this detailed report on partnerships between how smaller colleges adn their communities in the Chronicle of Higher Education:

Old mill towns and declining manufacturing centers, in the Rust Belt's former company towns and in the rural South, small, private liberal-arts institutions like King's are assuming a greater responsibility for community and economic development. They and their alumni are raising money to purchase abandoned buildings. They are relocating college facilities, like bookstores and residence halls, to buoy up urban cores. They are working to better connect faculty experts with local entrepreneurs ...

But unlike research universities and land-grant institutions, which have long viewed regional economic development as central to their missions, most liberal-arts colleges are relative newcomers to this work, and they face real constraints. In contrast to powerhouse institutions like the University of Pennsylvania, which is largely credited with remaking West Philadelphia, these smaller colleges may not have the wealth to make upfront investments or to absorb the risk incurred in such deals.

The modest size of their endowments ... mean that money spent on community projects must also benefit those on the campus. Faculty members are often expected to carry heavy teaching loads, leaving them with little time or inclination to engage in economic-development efforts. In addition, small colleges typically lack the administrative structure to support such efforts.

I'm a huge fan of Planetizen and of Bill Bishop, author of the fabulous new book, The Big Sort.  Click here for a Planetizen podcast of Bill and I with Nate Berg.

Writing in the NYTimes Magazine, Bill Galston and Pietro Nivola reflect on the sort:

You are less likely to live near someone whose politics differ from your own. Its well known that fewer states are competitive in presidential races than in decades past. We find similar results at the county level. In 1976, only 27 percent of voters lived in landslide counties where one candidate prevailed by 20 points or more. By 2004, 48 percent of voters lived in such counties.

What accounts for the decline of ideologically mixed localities? Bill Bishop, a journalist, and Robert Cushing, a sociologist, who have studied this issue, stress that the age of white flight to the suburbs is over. Instead, during the past two decades, many whites have moved to one group of cities and many blacks to another. Meanwhile, young people have deserted rural and older manufacturing areas for cities like Austin and Portland. Places with higher densities of college graduates attract even more, so that the gap between such communities and less-educated areas widens further. Zones of high education, in turn, produce more innovation and enjoy higher incomes, generating communities dominated by upper-middle-class tastes. Lower-educated regions, by contrast, tend to be more family-oriented and more faithful to traditional authority.

Not surprisingly, this demographic sorting correlates with a widening difference in political preferences. Whats more, according to Bishop and Cushing, once a tipping point is reached, majorities tend to become supermajorities.  ... Polarization feeds on itself.

From The Economist.

Fareed Zakaria in Newsweek:

"Generations from now, when historians write about these times, they might note that by the turn of the 21st century, the United States had succeeded in its great, historical missionglobalizing the world. We don't want them to write that along the way, we forgot to globalize ourselves."

A terrific new report by Joe Cortright for CEO's for Cities finds that:

high gas prices are not only implicated in the bursting of the housing bubble, but that the higher cost of commuting has already re-shaped the landscape of real estate value between cities and suburbs. Housing values are falling fastest in distant suburban and exurban neighborhoods where affordability depended directly on cheap gas.

The full report is here.

Harvard's Greg Mankiw writes in response to proposed plan by Massachusetts to impose a 2.5% annual tax on college endowments that exceed $1 billion.

If this were to pass, here is what I would consider:

1. Instead of expanding the university into Alston, Harvard could create a second campus in another state. Call it Harvard South. (Put it in a better climate than Boston, and I would be one of the first faculty to volunteer for the move.)

2. Transfer much of the endowment to Harvard South. Support Harvard North by slowly selling off land in Massachusetts.

3. Eventually, make Harvard South the main campus, and Harvard North the satellite. If Massachusetts state lawmakers remain hostile, close Harvard North down entirely.

I have often wondered what the efficient scale of a university is and, in particular, whether it would be better to create a second Harvard with the university's wealth than to expand the first one. Maybe the Massachusetts state legislature will give the powers-that-be at Harvard an incentive to consider more radical expansion plans.

And if states and cities are willing to pony up billions for convention centers and stadia, and hundreds of millions in industrial incentives for factories, how much do you think they much come up with for a Harvard, or MIT, or Stanford, or Oxford relocation. Universities are already setting up foreign campuses. Trust me, it's just a matter of time until this game gets big.

The video from my talk at the Silicon Valley Googleplex - which was recently broadcast on CSPAN's Book TV  - is now online, here.

According to this new study by the Harvard's Center for Housing Studies, the US housing crisis and mortgage market meltdown is having serious impact on rental housing as well (pointer via Planetizen).

The current mortgage turmoil reaches deep into rental markets.  New research on rental housing market dynamics from Harvard Universitys Joint Center for Housing Studies finds that the current housing debacle not only adds to the number of households competing for low-cost rentals but also threatens renters living in foreclosed properties with sudden eviction. 

That's the title of an intriguing new study by my former Carnegie Mellon colleague, Lowell Taylor along with Dan Black and Natalia Kolesnikova (h/t: Allison Kemper). (Black and Taylor collaborated with Gary Gates on the "gay index" studies). They find "an extremely large variation in female labor supply across metropolitan areas in the United States." Looking at employment trends of married, white, non-Hispanic women ages 25-55 with a high school level education, they show that more than three-quarters (79 percent) of such women are employed in Minneapolis versus less than half (49 percent) in New York.  And they find a major reason to be the cost of commuting.

Tyler Cowen counters that amenities and density would seem to matter:

"With all due respect to The Walker Art Center, if I wanted to be a kept woman I would not start my quest in Minneapolis.  High density, as you find in Manhattan, means lots of fun things to do in your copious free time as a kept woman and also a higher degree of income inequality and thus the hope of snaring a rich man.  There's a reason why they didn't set Sex in the City in Paramus and most of the women there will be working even when the traffic gets worse." 

The authors clearly know a lot about amenities and density. Amenities were at the center of their story about why gay men live in San Francisco. It was a over discussion of amenities and cities afterall that Gates and I met and decided to collaborate. And Kolesnikova took my PhD seminar on said while a doctoral student at CMU. 

Seems to me that Columbia University's Lena Edlund's work may also bear here. Edlund, puzzling over the consistent pattern where single women outnumber single me in large cities world-wide, suggests a main reason may be that men essentially have to "pay" women more for marriage in these locations - the costs of having and raising kids.  The study does look at the effects of highly educated power couples and concludes that such arguments don't really help explain labor force participation of married women varies so widely by location.

The extent of the divergence is indeed very interesting, and also consistent with the general sorting of the population on economic and demographic as well as psychological dimensions.

Your thoughts?