Where Does It Make Sense to Build?
The housing recession brought unparalleled choice to consumers. Buyers who had been priced out of the best school districts and neighborhoods, or forced to endure long commutes, could suddenly get in line to buy short sales or foreclosures. As buyers voted with their feet, builders and developers shut down far-flung master plan communities in favor of infill and even urban locations.
But what happens once close-in inventory returns to more normal levels? Will an inexpensive home on a big lot on the suburban fringe look more attractive then? Already, unsold existing-home inventory is down to only 4 million, 20 percent below historical averages, according to data from the National Association of Realtors (NAR). And data from the Mortgage Bankers Association shows the rate of new foreclosures is declining nationally, though banks still need to work off a large inventory of homes in the pipeline.
The suburbs are more popular than many urban planning critics want to believe. Kotkin likes to point to the National Survey on Communities done for Smart Growth America and the NAR that shows that more than half of Americans would prefer to live in a suburban setting, whether it’s close in or far away. The next most popular response? A rural setting (35 percent). The city finishes last at 13 percent.
“If the suburbs are so bad, how come people prefer to live there?” asks Kotkin, who argues that the same aspirations are held by newcomers to this country. The evidence is that immigrants, instead of locating in urban centers, are now moving directly to the suburbs, often the first-rung. More than 50 percent of foreign-born residents now live in large metropolitan suburbs, up from 44 percent in 1980. “People don’t come from Hong Kong so that they can live in a box in America. The [immigrant] desire for space is very strong.”
Kotkin trots out other data developed by Wendell Cox of Demographia, a research and advocacy firm, indicating that most jobs in metropolitan areas are not in the city. In Phoenix, for example, only 2 percent of jobs are in the central business district. In Los Angeles, the figure is only slightly higher—2.5 percent. Among major metro areas, New York (20.1 percent) and Washington, D.C. (18.7 percent) have the highest percent of jobs downtown. “That also happens to be where the media has the largest megaphones,” he quips.
A continued rise in telecommuting, Kotkin predicts, will give more Americans the opportunity to live where they choose. Forrester Research forecasts that the ranks of telecommuters will swell from 34 million in 2009 to 63 million in 2016, stimulating more demand for home offices. The exodus will be fueled by continued broadband adoption, even better work collaboration tools, and growing management experience with a dispersed workforce.
But the jury is still out on whether development patterns will shift in favor of the suburbs. McIlwain believes that close-in locations will continue to grow in popularity because they are more convenient. Buyers, he says, are increasingly looking at the “cost of place,” a calculation that includes the cost of commutes, errands, and picking up kids. “We don’t want to live in our homes. We want to live out of our homes.”
Then there’s the question of where young people really want to live. Surveys of Gen Yers and Xers done by RCLCO, a research and consulting firm that works with land developers and builders, indicate a strong preference for urban living—77 percent of Gen Yers, in particular, plan to live in an urban core. This desire is especially strong among WINKS—women with incomes and no kids. In coming years, WINKS “will dominate the urban landscape,” says Charlie Hewlett, managing director of RCLCO.
Gen Y women, better educated than their male counterparts, who are in turn better educated than previous generations, are already out-earning males. Most demographers believe that given their financial success these young females may delay marriage and child-bearing. They may establish careers and even homes before they do that. As a result, they may live alone in locations closer to work longer than previous generations.