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October 8, 2011

Back to the Land, Reluctantly

By SUSAN GREGORY THOMAS

Susan Gregory Thomas is the author of “In Spite of Everything: A Memoir.”

I’M not interested in being hip or a hippie. Nor does my happiness particularly hinge on artisanal cheese. (Odd, perhaps, given that I grew up a stone fruit’s throw away from Chez Panisse in Berkeley, Calif.)

As a 42-year-old Brooklyn mother of three, what I care about is lunch, and feeding my family on a tenuous and unpredictable income. And so I have 20 fresh-egg-producing hens and a little garden that yields everything from blackberries to butternut squash to burdock root.

My turn with spade and hoe started a few years ago when I found myself divorced and flat broke. My livelihood as a freelance writer went out the window when the economy tanked. I literally could afford beans, the dried kind, which I’d thought were for school art projects or teaching elementary math. And I didn’t know how to cook.

Luckily, my late father had hammered into me that grit was more important than talent. So, when I couldn’t afford fancy food — never mind paraben-free shampoo — for my babies, I figured, if peasants in 11th-century Sicily did all this, how hard could it be?

 I researched how to raise hens from chicks so we could get our omega-3-filled eggs. I learned to stretch a single piece of cheap meat into nearly a week’s worth of dinners. I made my own cleaning products. Not because I liked it. Because it was cheap.

My goal was to have healthy, unprocessed food for $10 or less a day. Cereal was the first thing to go. It dawned on me that making granola was a matter of tossing oatmeal and nuts into a bowl with a little oil, honey and spices — and then baking until brown. No more $14 boxes of fancy grains with pomegranate antioxidants.

Bread wasn’t hard either; it was just a drawn-out procedure. Yeast, water, a little honey, salt, whole wheat flour, and assorted seeds. Mix; wait for rising; knead; wait; knead; wait; bake. I made batches and froze them. So long, Eli Zabar’s 10-buck Health Loaf. Hi there, homemade loaf for less than $1. I soon realized that it’s not necessary to follow every recipe to a T, particularly if it calls for expensive items. For example, if a recipe called for red wine, I used diluted balsamic vinegar, or even apple cider vinegar and a wee bit of honey mixed with water. If the recipe called for saffron I used turmeric, which is cheap in bulk at Patel Brothers in Jackson Heights, Queens. And I always added twice as much garlic to everything.

With all the fetishizing about terroirs and concerns about lead in urban soil in the eco-foodie blogosphere, I was scared to grow vegetables, period. But my kids and I planted seeds, bulbs and rhizomes inside in midwinter in little cups; we started a universe oftomatoes, squash, green beans, kale, beets, garlic and standard herbs. They were ready for planting by spring.

We quelled concerns about lead in the soil by hammering together boards to make a raised bed, and made “good” dirt from compost of decaying leaves and coffee grounds and the cheap soil at Home Depot. It quickly became obvious that anyone with a rectangle of sunny ground outside can grow stuff; you just need to think about what grows up and what grows sideways so that you can get it all in there properly.

We lived off the land all summer, supplementing our diet with dried beans, nuts, baking basics, dairy products, olive oil, and the occasional long-lasting protein (pork shoulder, chicken, canned anchovies and sardines). The children snipped off the fixings for homemade pizza, pasta, tarts and Mediterranean-like bean salads. I made yogurt and even got the hang of making ricotta and mozzarella by heating up milk in a pot and squirting a little animal rennet in it. And it was not a hassle. Plus, homemade ricotta, with a little olive oil, honey and fresh basil for dessert? Homemade frozen yogurt pops with just-plucked blackberries? Crazy. We were locavore, organic kings.

I had to be sold on the chicken idea, two years later. It seemed like a lot of work, flies and yucky upkeep. But an out-of-work antiques restorer (who later became my boyfriend and is now my husband) persuaded me to do it. We ordered 2-day-old peeping chicks for $2.75 apiece by mail and kept them under heat lamps in a Pack ’n Play in my daughters’ room for about a month, and they became the coolest pets and science lesson ever. Five months later, we had a coop and four hens.

Today, we eat a mostly vegetarian diet, with plenty of protein. My cleaning products are distilled white vinegar for wiping and baking soda for scouring (and also for tooth brushing). Our soap and shampoo is Castile mixed with olive oil. We live this way for $100 a week. And I’m still the sole breadwinner.

IT is a lot of work. You have to be organized and able to improvise on your feet. But, frankly, it’s awesome. Before we embarked on this Waldenesque life, the only thing I had ever used my hands for was picking up a book or typing on my keyboard; today, my family and I are living our own scrappy take on President Obama’s promise of “Yes, we can!”

Even if things turn around financially, I don’t think I could stomach going to Whole Foods (except maybe for olive oil) because my biggest revelation in terms of self-sufficiency is this: It is no big deal. You can tell yourself anything is too difficult, or you can just do it. And you do not need to reconstruct your worldview or take issue with others.

You just need to be hungry.

MORE IN OPINION (1 OF 16 ARTICLES)

Op-Ed Contributor: No More Adventures in Wonderland

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Why Cash Is the New Plastic

by AnnaMaria Andriotis
Tuesday, November 9, 2010

Consumers are spending again, but gone are the days of swiping and signing for everything from lattes to lawn furniture. Shoppers are reaching for paper money, and as they do, stores and even credit card issuers are increasingly ready to reward them -- with more cash.

Already customers are showing a strong preference for cash. Consumer spending is up 2.2% so far this year, but none of the four major credit-card companies have benefitted from the increase. Visa (NYSE: V - News) credit-card transactions were down 1.2% in the first half of the year, compared with the same period in 2009, according to the Nilson Report, which tracks payment systems. MasterCards (NYSE: MA - News) were used for about 10.2% of all card transactions, also down. Discover (NYSE: DFS - News) transactions also dipped slightly; only American Express' (NYSE: AXP - News) business remains steady.

Instead, consumers appear to be spending money they currently have, paying for purchases with a debit card or actual cash. The dollar amount "charged" with debit cards has grown 15% this year (spending on credit cards was up just 1.9%). And debit-card transaction volume is expected to grow 8% to 12% annually, according to the TowerGroup, which tracks bank cards. "A lot of people are leery of credit cards and don't want to fall back into debt -- that's why you're seeing this migration," says James Brown, emeritus professor at the University of Wisconsin at Milwaukee and former director of the university's Center for Consumer Affairs.

Here are three more signs that cash is making a comeback.

Gift Cards Are Out

After nine consecutive years of gains, gift cards are on the wane. Sales of gift cards are expected to drop to $86.2 billion, an 11% decline from their peak in 2007, according to CardHub.com. Shoppers want to avoid pitfalls like expiration dates and inactivity fees that can quickly erode a card's value, says Kwame Kuadey, chief executive of GiftCardRescue.com, which buys and sells gift cards. Even if you use a portion of the gift card, these inactivity fees can kick in if the rest of the card remains unused for at least 12 months. However, the Card Act eliminated other loopholes, including extending expiration dates to at least five years after the gift card is issued. Before, expiration dates could kick in at any time and often did within one year.

[Riskiest Places For Social Security Numbers]

Meanwhile, more consumers are selling the gift cards they already possess for around 10% to 20% less than face value to third-party sites like GiftCards.com, CardHub.com, PlasticJungle.com and GiftCardRescue.com. Sales at GiftCardRescue.com are up 1,000% through October of this year compared to the same period in 2009, says Kuadey. PlasticJungle.com says sales have more than doubled through the middle of this year. "People would rather use the cash anywhere they like than be restricted to a specific store," says Dan Horne, professor of marketing who tracks the gift-card industry at Providence College. In turn, consumers who shop at specific stores can buy the cards at a discount; for example, GiftCards.com recently listed a SpaFinder gift card worth $100 for $86 and a $37 Home Depot card for $34.

Cash Discounts Are Coming

Within a few months, consumers could save up to 2.5% on most purchases by paying with cash. A clause in the financial reform bill allows merchants to discount items for shoppers who pay with dollars. And the Justice Department settlement last month with MasterCard and Visa allows retailers to discourage the use of rewards credit cards or other credit cards they deem expensive in order to avoid the high fees that card issuers charge when a store customer pays with plastic.

[New Ways Banks Are Spying on You]

The result could be a system of price tiers, where retailers offer different prices for each product based on method of payment -- with cash the cheapest, says Doug Kantor, counsel to the Merchants Payments Coalition, a coalition of retail trade groups. "They'd love to be able to offer discounts for cash," and that could soon happen, he says. So, consumers who pay with cash could, say, get a $200 coat for $195. Some might extend those lowest level prices to debit card purchases, he says. If you spend, say, $800 in cash on groceries each month -- about average for a middle-class family of four, according to the USDA -- that 2.5% savings could add up to $240 a year.

Even Credit Card Companies Know You Want Cash

To counter this shift to cash, credit-card companies are offering some of their own -- up to $100 -- to encourage consumers to sign up and make purchases, promotions not seen since 2007, says Odysseas Papadimitriou, CEO of CardHub.com, which tracks credit card offers. To qualify, consumers need a FICO credit score of at least 720. Of course, just like cash for checking account offers, banks expect to make thousands of dollars off these accounts. These cards are mainly offered to consumers who pay in full every month, represent a low risk of default, but who are heavy credit-card users who net credit-card issuers about 1% of the total purchase price each time they swipe their card -- fees that merchants pay the card companies, he says.

To get the $100 sign-up bonus, you'll have to give up cash, too, at least in the short term. With the Chase Freedom Visa card, consumers have to charge at least $799 in the first three months to get $100, and with the Discover More card, you'll have to charge at least $500 in the first three months for $100. And even then, most issuers post the money as a credit to your statement.

In Sour Home Market, Buying Often Now Beats Renting

By DAVID LEONHARDT

In much of the country, for much of the last decade, renting a home has usually been a better financial move than buying one. It’s been true in Southern California, San Francisco, Phoenix, Las Vegas and large parts of Florida, the Pacific Northwest and the Northeast.

Renting required you to suffer the scorn of many real estate agents and the skepticism of friends and relatives who believed that owning a home was almost always superior. But renting also would have typically saved you thousands of dollars a year.

Now, however, the situation is getting more complicated because the housing bust has been playing out unevenly across the country.

In some once bubbly markets, prices have fallen so far that buying a home appears to be a bargain, based on a New York Times analysis of prices and rents in 54 metropolitan areas. In South Florida, Phoenix and Las Vegas, house prices — relative to rents — are as low as in places that never experienced a bubble, like Indianapolis and St. Louis.

But in a handful of other areas, including San Francisco, Seattle and Portland, Ore., house prices remain significantly higher than they were before the bubble began. People who buy a home in these areas will face higher monthly costs than if they rented, even after taking tax deductions into account. As a result, buyers are effectively betting that prices will rise enough in future years to cover the difference.

The country’s two biggest metropolitan areas, New York and Los Angeles, are a microcosm of today’s more nuanced real estate market. Average house prices across both areas have fallen enough that buying may now be a good deal for many families. Yet there are still significant pockets where renting looks promising — including parts of Manhattan, the New York suburbs and Orange County, Calif.

The buy-versus-rent question is particularly relevant right now. To qualify for an expiring federal tax credit of up to $8,000, home buyers must sign a contract by April 30 and close on the house by June 30. Many economists also expect mortgage rates to rise in coming months.

Camela Witters, a 38-year-old trophy engraver in Las Vegas, plans to close on her first home purchase — a four-bedroom, $164,000 house nearly identical to the one she is now renting — in the next few days. She decided to buy, she said, when she found out she could save money by doing so. “I didn’t buy a house when everyone did,” said Ms. Witters, who lives with her companion and their children. “So I’m kind of taking advantage of all the foreclosures.”

The Times analysis is based on comparing the costs of buying and renting a similar home, using data from Moody’s Economy.com, a research firm, and from real estate agents. This kind of comparison can never tell someone for sure what the best financial move will be. But it does show whether a buyer will need a big jump in future prices to cover all the costs of owning — including the down payment, closing costs, property taxes, mortgage interest, repairs and co-op fees.

A simple way to do the comparison is to look at something called the rent ratio: the purchase price of a house divided by the annual cost of renting a similar one. The number 20 provides a useful rule of thumb. When you do the math, you discover that a ratio above 20 means you should at least consider renting, especially if you may move again in the next five years or so. When the ratio is well below 20, the case for buying becomes a lot stronger.

In many large metropolitan areas, including New York, Los Angeles, Chicago, Houston, Dallas, Atlanta and South Florida, the average ratio is now 16 or lower. It was more than 25 in several of these places at the peak of the bubble, about five years ago. With a ratio as low as 16 and interest rates as low as they are, the costs of owning can be less than the costs of renting — and buyers will end up worse off only if prices fall considerably more.

A two-bedroom Spanish-style condominium in Beverly Hills, Calif., for example, recently went on the market for $1.075 million, notes Don Heller of Prudential California Realty. Including taxes, condo fees and the tax deduction for mortgage interest, a typical buyer making a 20 percent down payment would face an effective monthly payment of about $6,000. Compare that with the monthly rent on a similar two-bedroom condo nearby — $7,600.

The math works out similarly in less costly areas, too, be it once booming cities like Phoenix and Orlando, Fla.; Midwestern cities like Minneapolis and Cleveland; or the outer-ring suburbs of most big cities. Much of New York’s outer boroughs appear to fall into this category.

The problem for potential buyers is that many real estate agents argue for buying even in places where the numbers don’t add up. In the Bay Area, the rent ratio remains around 30. In Seattle, it’s about 28. In parts of Manhattan, it appears to be about 25, according to current listings.

“In most markets, you’re better off buying,” Thomas Lys, an accounting professor at Northwestern University, says. “But once the ratio gets to 25 or 30, I’d say, ‘You know what? There may be a bubble.’”

The rent ratio has long been higher in New York and San Francisco than most places, perhaps because of zoning rules or because the cities are home to large numbers of affluent households willing to pay extra to own. So it’s possible that prices will not fall. But they are already high enough that the monthly costs of owning often exceed the cost of renting — even without taking into account the down payment or other one-time costs.

A big reason is that prices still haven’t fallen much in some places. In Rye, N.Y., the average per-square-foot sale price was only 9 percent lower early this year than at its 2007 peak, according to MDA DataQuick. Some similarly affluent parts of the Los Angeles, Miami and San Diego areas have experienced declines of 25 to 50 percent.

Obviously, owning a home brings benefits that are not strictly financial. It offers stability and, for many people, comfort. As I have written, I bought a house in 2008 (in part because the rent ratio in my area had fallen to about 16). Even in Manhattan, San Francisco or Seattle, a family confident that it will stay put for a decade or more may well be wise to buy today.

But it’s worth remembering that the advantages of homeownership are frequently exaggerated. The mortgage-interest tax deduction doesn’t eliminate the cost of borrowing money; it merely reduces it. The freedom to paint your house any color you wish comes with the responsibility of paying for a new roof when the time comes. The $15,000 or $30,000 or $50,000 that real estate agents’ fees add to the price of a house can wipe out a lot of other savings.

The most striking part of the current situation may be that despite everything that has happened in the last few years, there are still places where renting does not get enough respect.

Anti-Flippers Buy And Hold Cheap Homes

On Thursday March 18, 2010, 5:45 pm EDT

When Paul Gabrail and two partners snag a foreclosed home on the cheap, neighbors have good reason to cheer.

"We do brand-new everything: new roofs, new windows, new kitchens, new bathrooms, new plumbing," he said. "We put granite in some of the properties. These are areas that have probably never seen granite tops."

The partners of ADP Properties target Cleveland's inner-ring suburbs, which were hit hard by the subprime crisis.

Call these investors anti-flippers. Instead of buying homes to sell fast at a profit — as flippers did in the boom — they buy, hold and upgrade, improving blighted neighborhoods. Not dependent on ever-rising prices, they plan to ride out any value setbacks from future foreclosures.

Many homes along Cleveland streets have been boarded up and taken back by banks. Prices are down as much as 85% from the boom.

Pooling their cash, Gabrail's trio has bought nearly 60 homes since last March, at an average $12,000 to $13,000. Counting rehabs, the final tally reaches $35,000 to $40,000.

"Neighbors stop by and say, 'We love what you're doing to the place,'" Gabrail said.

Money By The Month

Gabrail, 28, and his young partners — Andrew Strigle and former Cleveland Browns tight end Darnell Sanders — have had no trouble finding renters to pony up more than $900 a month, giving them yearly returns of 14% to 16%.

The rental pool is full of ex-homeowners whose subprime mortgages escalated beyond their means, causing them to walk away or go through foreclosure. Most don't have the cash to buy and renovate even the most steeply discounted homes.

"We have a good leasing guy, and we really believe we have a very good product and that helps," Gabrail said. Tenants include cooks, nursing aides and students.

Anti-flippers are targeting some of the worst-hit markets, such as Cleveland, Detroit and Atlanta's West End district, the top U.S. ZIP code for bank fraud. There, ghost buyers used phony Social Security numbers and other means to get mortgages, never intending to make a payment.

Investors started eating away at Atlanta's bank-owned housing stock late last year, including the notorious West End ZIP code of 30310, says Scott Askew, owner of Fourteen West Realtors in Atlanta.

"Investors are the first ones into the market when it first starts to heal, and then they are followed by others," he said.

Though prices have risen in recent months in Detroit, Cleveland, Atlanta and other troubled markets, they're still far below their peak values, and still lower than pre-boom days. So investor-buyers are in no hurry to sell, until they can profit. Meantime, they enjoy rental income, with returns often topping 10%.

"If in five years we can sell, great," Gabrail said. "If we have to hold them for 15 years, great."

Buyer interest in Detroit and Cleveland is rising, says Ken Shuman, spokesman for real estate search engine Trulia.com. He says Detroit was the 36th most-searched city last month vs. 45th a year earlier. Cleveland went from No. 246 in 2009 to No. 160. Atlanta inched up to 15th place from 17th.

"Search behavior is the crystal ball for us. It gives us an idea where markets are heating up," Shuman said.

The boom-bust California markets of Riverside, Stockton and Corona are much less searched this year vs. a year ago, he says. The same goes for Fort Myers and Lehigh Acres in Florida, suggesting "a lot of vultures have already handpicked over them and have moved on to other places."

In deeply discounted Detroit, brokers are working with investors from as far away as Australia.

Buyers are snapping up three-bedroom bungalows for between $2,000 (less than a car, some Motor City observers point out) and $70,000, depending on the area.

"The rental market in Detroit is exploding" with demand due to foreclosures, said Real Estate Dreams broker Mervet Barakat. "Investors are buying one or two homes."

An Aussie group buys 20 to 25 homes a month, capped at $50,000 each with renovations, says Tony Raffin, owner of ReMax Associates in St. Clair Shores, north of Detroit.

One local client spent $8,000 for a home, then $10,000 on hardwood floors and a new kitchen. Across from a hospital and near posh Grosse Pointe, it quickly rented for $1,000 a month.

"Where are you going to make $1,000 a month on $18,000?" Raffin asked.

The jobless rate remains stubbornly high, "but you still have people who are responsible and pay their bills," Gabrail said.

Strength In Numbers

With investor interest picking up, home values have been rising in many hard-hit markets.

Cleveland home prices fell as much as 76% from the winter 2005-06 market peak to the trough last spring, Clear Capital data show. But in the four months ended Feb. 22, they were up 1.8% vs. a year earlier. In Detroit, home prices rose 4.7% and in Atlanta, 2.4%.

A new foreclosure wave would suit buy-and-hold investors just fine. After all, competition for bargains has been intensifying.

"We'll have more opportunities to get good houses," Gabrail said.

On Shoring

Caterpillar Joins 'Onshoring' Trend

by Kris Maher and Bob Tita
Friday, March 12, 2010

provided by

Caterpillar Inc. is considering relocating some heavy-equipment overseas production to a new U.S. plant, part of a growing movement among manufacturers to bring more operations back home -- a shift that will likely spark fierce competition among states for new manufacturing jobs.

The trend, known as onshoring or reshoring, is gaining momentum as a weak U.S. dollar makes it costlier to import products from overseas. Manufacturers are also counting on White House jobs incentives, as well as their ability to negotiate lower prices from U.S. suppliers who were hurt by the downturn and willing to bargain.

After a decade of rapid globalization, economists say companies are seeing disadvantages of offshore production, including shipping costs, complicated logistics, and quality issues. Political unrest and theft of intellectual property pose additional risks.

"If you want to keep your supply chain tight it's hard to do that with a 16-hour plane ride from Shanghai to Ohio," said Cliff Waldman, an economist with the Manufacturers Alliance/MAPI, a public policy and economics research group in Arlington, Va.

General Electric Co. said last June it would move production of some water heaters from China to its facility in Louisville, Ky., starting in 2011. A GE spokeswoman said a 2005 labor agreement under which new employees would be paid $13 an hour, from nearly $20 an hour, "enabled us to be more competitive."

Last year, U.S. Block Windows Inc. purchased a company with a China-based molding operation. After studying logistics, which included shipping raw materials to China before finished products came back to the U.S, the company decided to move production from China to its headquarters in Pensacola, Fla.

"When we started looking at the costs and complexities of the inventory and lead times, there really wasn't any savings," said Block Windows' president, Roger Murphy. The company added 10 workers, increasing employment to 120, and can keep inventory levels lower because shipping times have been cut.

U.S-based suppliers are also seeing an opportunity to push manufacturers to source parts domestically. Three manufacturing groups, the National Tooling and Machining Association, the Precision Metalforming Association and the Association for Manufacturing Technology, will host a supplier fair in May for manufacturers to see what suppliers can offer.

"For the first time ever, we're asking them to bring back their offshored work," said Harry Moser, a former machine tool company executive and member of the National Tooling group, who conceived the idea for the fair.

Still, some groups play down the impact that recent reshoring moves have had to jobs and overall industrial production.

"I would call it a trickle. Every little bit helps but the net result is that we're still offshoring more than we're onshoring," said Scott Paul, executive director of a lobbying group Alliance for American Manufacturing.

Caterpillar said Thursday it could triple its domestic output of construction excavators by consolidating production from an existing factory in Akashi, Japan, and one near Chicago to a new U.S. plant whose location is yet to be determined.

The company doesn't anticipate any negative job impact at the Akashi plant, said Jim Dugan, a Caterpillar spokesman.

By combining the production of most Caterpillar excavator models at a new domestic plant, the Akashi plant would have more capacity to supply excavators to growing markets in the Asia-Pacific region, the company said. In recent years, Caterpillar also has invested in excavator production capacity in China.

For the other plant, in Aurora, Ill., which builds wheel loaders and other machinery, "it's too early to know if there would be any job losses. We would hope to find positions within that facility," said Mr. Dugan. There are about 250 employees in Aurora engaged in excavator production out of a total work force in the plant of about 2,300.

Meeting anticipated demand in the U.S. will outweigh other considerations, like the strength of the U.S. dollar, Mr. Dugan said. "It really is a long-term look at where we think this market and this product is going globally and how can we best get ourselves positioned," he said.

Caterpillar's possible move will likely attract a blizzard of site proposals from state economic development agencies, analysts said.

"Who wouldn't want a big industrial business in their state?" said Frank Manfredi, an equipment market consultant from Mundelein, Ill. "The jobs are good and they pay well."

The U.S. manufacturing sector has been devastated by the economic recession. Industrial companies have lowered overhead by slashing their U.S. work forces, idling factories or relocating manufacturing to low-cost locations overseas.

Caterpillar has slashed about 20,000 U.S. jobs from its payroll since late 2008 as demand for its construction equipment plunged following years of record sales and profit. In 2009, the company's world-wide employment dropped 17% to 93,813.