Study Predicts “Resilient Walkable” Places Will Lead the Housing Recovery

This morning, a Minnesota Public Radio host asked me if the exurbs, whose growth rate flattened when the recession hit, are going to come back. Lots of people from far-distant suburbs like Blaine and Farmington called in, saying they like the way of life out there – they like having acres of trees buffering them from their nearest neighbor — and people won’t want to stop living in communities like that.

Source: ## Demand Institute##

The data suggests otherwise, though. Earlier this week, the Demand Institute (a think tank created by the Conference Board — “a global, independent business membership and research association” — and Nielsen — yeah, the TV ratings people) released a report on the housing recovery. They say the worst of the housing crash is over and glimmers of recovery are on the horizon. But hope isn’t spread out uniformly across these United States. Those exurbs like Blaine and Farmington, Minnesota? They’re not coming back so fast.

Urban areas didn’t lose as much value during the recession. Home prices didn’t crash so hard. Not so many people found themselves under water, owing more on their mortgages than their homes are worth. And urban areas are bouncing back faster. The Demand Institute calls these places “Resilient Walkables.” Only 15 percent of the U.S. population lives there.

The report bases its prognosis for recovery on seven factors: population size, walkability, severity of the crash, current affordability, unemployment, foreclosure inventory, and foreclosure policy. The Institute found what Angie noted earlier: Walk Score is positively correlated with strong housing prices. The Institute’s analysis of almost 1,700 U.S. cities showed that walkable cities had more positive price growth.

And it found that these “Resilient Walkables” were resilient indeed, with house prices projected to rise three percent next year and five percent a year for the four years after that.

Compare that to the places the Institute calls “Slow and Steady” – where more than a third of Americans live and where double-digit housing declines destabilized the market. Economic indicators are gloomy for these areas, but the authors find the planning solid, so the future is relatively bright. These are places like Charlotte, NC, Dallas and semi-urban D.C. suburbs like Gaithersburg, MD, and the study forecasts three percent growth starting in two years.

Then there are the “Damaged But Hopeful” areas – a category that encompasses big but depressed cities like Chicago and smaller ones like Stamford, CT. Thirty percent of Americans live in these places, too many of them fighting foreclosure. It will take them a little longer to get to three percent growth but from 2017 onward, the Demand Institute predicts that they’ll beat the national average.

And then there are the exurbs and small suburbs. Twenty percent of Americans live there, but perhaps not for long. The report classifies them as “Weighed Down” – by precipitous price drops and high foreclosure rates. “The fact that housing is relatively cheap compared to the national average will not greatly assist recovery,” the report states. “Indeed, long-term prospects are most uncertain. We do not expect price rises to reach the national average even by 2017.”

The relative cheapness of land was the big draw out to new suburbs over the past few decades. The report seems to be foretelling the end of “drive till you qualify.”

The authors also predict the rental market will grow faster than the homebuyer market, and they say house size will shrink, as necessitated by the mass gravitation to a denser development pattern. Houses are already smaller now than their peak of 2,500 square feet in 2007, and the study forecasts they will shrink by another 10 percent by 2015 to about 2,150 square feet – still plenty of space.

So, while some people are content with the wide-roads-and-big-yards way of exurban life, many more are getting out – as soon as they can sell their house, which for many, won’t be anytime soon. Those who can are fleeing the toxicity of foreclosure, the soul-sucking commutes at $4+ a gallon, the dead street life.

And young families, who in the last decade fueled outward growth with their zeal for big houses with small price tags, are pulling back now. When they move out of their parents’ basements they’ll be looking to rent instead of buy. Home ownership rates among people in their early twenties has gone down 17.5 percent, while the home ownership rate for all age groups is down less than three percent.

It’s all part of a pendulum swing back from the mass drive out to the suburbs in the postwar period. According to this research, the growth is now in cities and close-in suburbs that offer a mix of uses within easy and pleasant walking distance. Transit plays a role too, as one major amenity being sought in urban areas is access to public transportation, “a significant advantage as traffic pressure in major metropolitan areas worsens owing to limited investment in road infrastructure,” the report says.

Some of the callers this morning made their outer-ring lifestyles sound lovely and bucolic. One of them said he and his wife both worked from home, so one of the major downsides of the exurbs – the commute – was a moot point for them. That may be, but they are increasingly isolated in their decision to live in that kind of place. As Chris Leinberger has noted, the places that were supposed to be a refuge from urban crime are finding that big-city problems have followed them. Nothing destabilizes a neighborhood like a vacant house – even if that house is a McMansion.

10 thoughts on Study Predicts “Resilient Walkable” Places Will Lead the Housing Recovery

  1. Lots of people like having large homes set far back from their neighbors.  Except for the country estates of the very wealthy, there really only 2 ways to create this kind of living arrangement.  One is in small, rural towns, and the other is in outer ring suburbs and exurbs.  Small towns in America have been dying for a long time, and even if they were to come back can only support a small number of people.  Far flung (aka sprawl) burbs are only viable if people can commute to jobs in cities or larger metropolitan areas.

    There are exceptions, like the people who can work from home, but these will always be a vanishingly small minority.  The reality is that a lot of people are going to have to figure out how to deal with living closer to their neighbors, and in denser communities, than they have over the past couple decades. 

    Sprawling suburbs are expensive, and their expansion was a type of ponzi scheme.  Each successive ring of outlying suburbs was attracting capital investment and creating jobs to pay for the ring before it.  But at some point, you get as far out as you can feasibly go given the constraints on various resources, and that is when we collectively realized that we had over-invested in suburban housing and the infrastructure to support it.

    There are a lot of “communities” in places like Florida and Arizona where property values may never recover, in real terms, from the post-bubble declines.

  2. A big problem with measuring housing recovery is the fact that “new housing starts” is used as a barometer. This implies the only worthwhile type of recovery is building brand new homes, presumably mostly in the middle of nowehere.  Sales of existing homes should count far more.

    @J_12:disqus Even if everyone who lived in sprawling suburbs telecommuted, the per capita cost of building suburban infrastructure means the resulting homes would be far beyond the reach of the middle class if not for the indirect subsidies from denser areas. You’re correct that people will have to learn to live closer to their neighbors. If you ask me, that’s a good thing. I think a lot of the anti-social behavior which has become increasingly common is due to people living in their own private suburban bubbles where everything is under their control. I could even extend this to be the cause of “me first” politics where people are unwilling to contribute anything towards the common good.

  3. I live in the NY Metro area.  Some of my friends bought in NYC (Manhattan and Brooklyn) before the housing crash.  Others (like me) bought in the suburbs, with commuter rail and not much else.  

    The jury came back.  Those who bought in the city won big-time.  

  4. So the lesson we can learn from the exurbs is that it’s nice to have trees outside your window because it acts as a visual and sound barrier.

    So NYC, keep on planting those trees! Out in the street, in our backyards, in between buildings, and especially in neighborhoods that have less.

  5. Although that is what they are most known for as a company, Nielsen is much more than TV ratings.  It is the world’s largest consumer insights firm with operations in over 100 countries.  The company has the most complete understanding of what consumers Watch and Buy.  Two-thirds of their business is measuring what consumers buy in stores, and they talk with over 16 million consumers each year as part of a wide range of research.  

  6. The trick to keep making the cities desirable is yes, livable streets, but also jobs and decent schools. A city like Chicago is quickly becoming far more bikable and walkable, but the schools are pretty lousy. NYC, unfortunately, has the same conundrum. So my family isn’t keen on moving out of New York, especially with improving livable streets…but where will our daughter go to school when she gets older?

  7. “He and his wife both worked from home in the exurbs”. This sounds like a nightmare to me for several reasons.

  8. Ben Kintisch:

    You are correct that the relative attraction of living in a city vs. suburb has to do with more than just how you get around and run your daily errands.  But improving one aspect of life can create a virtuous cycle that improves other aspects. 

    It may just be the case that marginal improvements in street life and transit are the low-hanging fruit in terms of improving overall quality of life in the cities.  This, in turn, would lead to a few more people with the option of moving to the suburbs to instead stay in the city.  This, in turn, can help stabilize the tax base and lead to improvements in the school system and other public services.

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