Tawei Liao

If you live in the desert…

If you live in the desert, why don’t you live like you are in the desert?  Why do you try to change the desert into something else?  That question can be asked of places in the United States like Las Vegas or Phoenix and also of places like Dubai in the UAE.

Green lawns, backyard swimming pools, golf courses, McMansions.  How much fresh water is being wasted here?  This is a picture of McMansions in Las Vegas built around the Las Vegas County Club.

Las Vegas County Club McMansions

And here are some of pictures of McMansions in Dubai.  They are taken from this great Marketplace story.

Dubai McMansions

Dubai McMansions

We should not be asking whether or not to invest in gray water recycling technology to water the lawns and golf courses.  Las Vegas and Dubai already use gray water for that purpose.  The question we should be asking is this one:  why have lawns and golf courses and backyard swimming pools in the desert in the first place?

The Las Vegas Valley Water District site shows rates as low as $1.16 per 1000 gallons.  That is not the true cost of the water.  The federal government paid for the water system currently in place.  Lake Mead, for example, was formed by the construction of Hoover Dam.  The dam was paid for by the federal government.

The story is the same in Dubai.  The desalination plants necessary to turn Dubai into a city of high rise condos, McMansions, and shopping malls were paid for by the government.  The plants’ true costs are not passed onto the end users.

The price of water should be the indicator of its value.  Water should be priced as the life sustaining resource that it is.  If we price tap water at the same rate as bottled water (about $1 a gallon) there would be no lawns and no backyard swimming pools.  And playing golf in the desert would be a very expensive hobby (as it should be).

Water demand is elastic up to a certain point.  It is a basic necessity after all.  The cost of water should not be a regressive tax.  For low income residents, this cost can be subsidized based on income in very much the same way as Section 8 housing and food stamps.

Water is life.  The only way to stop waste is to raise prices.

Ginkgo Seedlings

Ginkgo trees in Tokyo

I love ginkgo trees.  Especially in the fall when their leaves turn into gold.  This is a picture from a street in Tokyo that I grabbed from Flickr.

I love the tree so much that I have more than fifty (yes fifty!) little ginkgo trees growing in containers in my backyard.  I hope to find a permanent home for them in the near future.

I grow the trees from seed.  And the seeds come from female ginkgo trees of course.  Most people find the smell of ginkgo fruits quite unpleasant.  I happen to like the distinct smell.

The Ginkgo Pages is a site in the Neatherlands that has a lot of information about the history and methods of growing the tree.  I learned how to grow the tree from seed from that site.  This is a picture of my seedlings when they just sprouted.

Ginkgo seedling

The process of growing ginkgo trees from seed is not complicated but it is a little labor intensive if you grow as many as I do.  Separating the fruit from the seed is the hardest part. The seeds can also be eaten.  I love to add them to rice porridge.  The texture of the seeds makes porridge taste even better.

Sun Dried Persimmons

Persimmons are in season.  We have a big persimmon tree, a “hachiya” variety tree.  The fruit ripens completely soft.  You have to wait until it is completely soft otherwise it will taste very astringent.  They are very sweet!

This year we will try something different.   We are in the process of sun drying about 25 persimmons.  This is a very old traditional preserving process in Japan.  I found some information about it here on slowfoodusa.org

Sun Dried Persimmons

From the slow food web site  you can find a link to the Otow Orchard in Granite Bay, CA.  They specialize in these “Hoshigaki”  sun dried persimmons.

Sun drying fruits is a lot easier during the summer than during winter.  Persimmons ripen during October, November, December.  We will have to do our best with the winter sunshine.  At night we bring the hanging fruits into the house and keep them next to the heating vents.  That way the drying process continues even during the night.

If this experiment is successful, we will sun dry a bigger batch next year.

Jason Bradford over at The Oil Drum has written a few articles on food preservation.  This article is one of them.  Sun drying is less labor intensive than canning.  And it also uses less water and energy.  There is no need to boil water and the energy comes directly from the sun.

Persimmon Sun Dry

Picture of our persimmons hanging on a cloth rack enjoying the sun.

How To Prevent Another Housing Bubble

There is a very simple way to prevent housing bubbles.  This idea is not mine and it certainly is not new.  In fact, this was the way most real estate transaction occurred prior to the 1980s.  We will visit the reasons why things changed in the 1980s in another article. First, let’s talk about underwriting.

Underwriting is the process by which a loan gets qualified.  The underwriters have a checklist of conditions that they go through.  One of the most important condition is the verification of the buyer’s income, debt, and employment.  Or at least they are supposed to verify income and debt and employment prior to the advent of “NINJA” loans.  Most of this process has been computerized.  If you want to find out more about computerized underwriting try searching for “Fannie Mae Desktop Underwriter”.  Whether it is done manually or with the help of a computer, the end goal is the same:  underwriting should be the gatekeeper on preventing bad loans from getting approved.

The DTI (Debt-To-Income) ratio criteria should be 28% front-end and 36% back-end.   What that means is that your total housing expense (mortgage plus property tax plus insurance) must not exceed 28% of your total monthly income.  And your total debt obligation (all housing plus credit card debt or alimony or child support etc) must not exceed 36% of your total monthly income. And the down payment must be 20%.  No exceptions.

Here is an example using data for Cupertino, California.  According to the Census Bureau, the median family income in Cupertino in 2008 is $139,254.  The mean is higher at $165,798.  These numbers are estimates from the Census Bureau. For 2009, the income figures are probably lower given the high rate of unemployment in California. Let’s assume a 30 year fixed rate mortgage at 5%.  Property taxes at $8,000 and homeowner’s insurance at $1,000.  And the family has no other debt. These are very low estimates; actual numbers are likely much higher as we shall see later when we look at the actual median price of a home in Cupertino.

Cupertino 2008 Median Income

Using Yahoo Real Estate’s  “How much house can I afford?” calculator, I arrive at the following numbers.   For the down payment I deliberately put in zero.  I want to calculate the maximum mortgage amount without the down payment.

Cupertino Median Income Mortgage

The no more housing bubble underwriting criteria is that the DTI ratio must be the lower of either the front-end ratio (28%) or the back-end ratio (36%).  For the median income family, that means that the total housing expense must be $3,249 per month or lower in this scenario. Using 5% interest and a monthly payment of $3,249, the maximum mortgage allowed is $465,566.

With a 20% down payment, the maximum purchase price is $581,958.  Let’s round this to $582K.  Our median income family must save at least $116,400 (20% of 582K) in order to buy the house at $582K and carry a mortgage of $465,600.

That is the no more housing bubble, old school underwriting criteria. But back in bubble country, the data shows something quite startling.  According to Trulia.com, the median sales price for a home in Cupertino is $895,000 from August through October 2009.  It is down more than $100K compared to 2008.

Cupertino Median Home Price Oct 2009

Our median income family must have won the lottery in order to come up with the $400,000+ down payment.  Or not.  How about if our family got a windfall in stock options?  Maybe. The median income figures already account for the stock sales and bonuses of the city’s residents.

The real reasons why Cupertino is still in bubble territory are the following:

1. Lenders are not enforcing the 28%/36% DTI ratio.
2. The purchases are made by move-up buyers, not first-time buyers. Our median income family sold their existing starter home that they purchased years ago and used the proceeds as down payment for the more expensive home.

The housing bubble has burst.  The low and mid-priced homes always falls first.  Its effects will slowly work its way up to the high end homes.  These high prices in Cupertino are only sustainable if there are buyers propping up the low and mid-priced homes AND the lenders choosing not to enforce strict DTI ratios.

I highly doubt that the buyers of $895K homes have a mortgage of $465K. If they did, the median price wouldn’t be $895K and we would not have had this gigantic housing bubble.