Shiller: The Suburbs are not coming back!

[paramount]

Well, maybe…but this doesn’t sound good for Temecula type exurbs.

As economists and housing insiders continue to analyze every grain of housing data, most would agree that housing will continue to drag down the overall economic recovery in the near future. Many young people are choosing to live at home for a longer period of time instead of buying. Moreover, would-be homebuyers are settling into modern apartments and condominiums, further hindering a housing rally. Shiller says the shift toward renting and city living could mean “that we will never in our lifetime see a rebound in these prices in the suburbs.”
A perpetually sluggish housing market, which Shiller believes has become “more and more political,” might push the country in a “Japan-like slump that will go on for years and years.”

http://finance.yahoo.com/blogs/daily-ticker/shiller-housing-chance-bottom-suburban-prices-may-not-161914444.html

[flyer]

I’m no expert on this, and I’m sure the realtors here will offer far more in-depth thoughts on this speculation, but it is for the reasons you have cited that we have suggested to the young people in our family who have good jobs, and are buying real estate, that they do so near centers of employment, with excellent schools, shopping, restaurants, etc., etc.

A couple of our kids who have purchased homes in the Carmel Valley and Del Sur areas which have all of the above going for them, have mentioned that families seem to be moving in at a very brisk pace lately. It seems they all love the fact that everything they want and need is literally right out their front door.

On that basis, I guess one could speculate that over the next few years there will be “pockets” of real estate that will be in high demand, and other areas that will literally languish forever. JMHO.

[Jazzman]

You’d expect gas prices may be influencing buyers as well,

[svelte]

A few things to consider here.

1. The more times gas prices spike (like they have the last few years), the less likely people are to buy someplace where their commute is long. I know we factored that in to our decision.

2. More and more cities, even in the suburbs, are building with a town center concept. This too will minimize driving and will make the ‘burbs that have this feature more appealing.

3. Each year it gets easier and more acceptable to telecommute. More and more people will be doing their work in their pjs while petting the dog…which can be done just as easily from a suburban ranch house as from a downtown loft.

4. Some of us just need space around us. I don’t see that changing.

[ocrenter]

I’m still not convinced.

As long as there’s land and as long as we do not see Asian style population density, i just don’t see the end of suburbs.

Personally I do think overall it is better for the earth to be in a crowded city environment. Better for ones health too as there will be more reliance on walking. But I doubt that’s going to happen any time soon.

Especially with the way SD is structured and the way people are telecommuting. The survey on commute was very telling, Almost 75% had commutes less than 20 minutes. And I don’t think piggs are all concentrated in the core of the city. Rather a huge reason is the telecommuting and the proximity of high tech jobs in the suburbs.

http://piggington.com/how_long_is_your_commute

[The-Shoveler]

SoCal is one big Burb for the most part.
I think it is every environmentalist dream that the remaining people in the world, move to high density cities, and impose some constraint on population growth as well.

But I don’t see that happening at least not in SoCal. Also cities once they become very dense are their own worst enemy as if you really do need to grow a business it is very hard to scale in crowed expensive cities. Telecommuting is not just for work anymore as well, more and more schooling is being be done via telecommute as well.

Gas will be less an issue with 100MPG and Nat-Gas cars (which are coming), someday there may even be some convent mass transit who knows. Look around, every time the city or utility needs to replace a Truck or car, it usually is with a Nat Gas vehicle these days.

As the economy improves the burbs will get back to cost to build+5-20% or so fairly quickly.
With inflation eventually the price will get back to peak nominal price, but that will probably be a while yet.

[(former)FormerSanDiegan]

[quote=The-Shoveler]SoCal is one big Burb for the most part.
[/quote]

This is a myth. Consider Los Angeles-Long Beach-ANaheim urban area. To many folks, this is the definition of suburban sprawl.

But, guess what ? That urban area has the highest population density in the country.

http://la.curbed.com/archives/2012/03/los_angeles_is_the_most_densely_populated_urban_area_in_the_us.php

[Jazzman]

Are you comparing apples with apples. Urban areas with metropolitan centers? I doubt it.

[(former)FormerSanDiegan]

As for SHiller …

I tend to agree (mostly) with him. I think demographic trends favor the urban areas o=ver suburban. But I wouldn’t say the suburbs are NEVER coming back. For two reasons:

1. There might be economic factors that make living in the suburbs opr exurbs more favorable in the future (e.g. high prices in the urban core. We saw this with many people moving to Riverside County in the early 2000’s. Technologies such as efficient vehicles or acceptance of virtual workplaces could also impact costs to live away from urban centers.

2. Generational tastes change – Each generation tends to buck things that the previous generation favors. Right now it is desirable to live in urban areas. In 20 years, kids that grew up in densely populated areas might want to spread out more and live differently than they grew up. Tastes and trends can change a lot over 20 years.

[(former)FormerSanDiegan]

[quote=Jazzman]Are you comparing apples with apples. Urban areas with metropolitan centers? I doubt it.[/quote]

Yes I probably did not compare apples to apples.

I guess the statistics can be skewed by defining the areas differently.

But still, I thought it was interesting that what I thought was the most sprawling place in the country is actually the most dense, by some metrics. WHo knew ?

[bearishgurl]

I saw these two articles recently in my “First Tuesday” subscription which both suggest that far-flung suburbs and exurbs will be the “last choice” of the biggest immediate-future homebuyer-group (Gen Y).

http://firsttuesdayjournal.com/suburban-demographics-refute-city-growth/

http://firsttuesdayjournal.com/poverty-hits-home-with-suburban-poor/

The first article touches on and the second one discusses in depth the premise that these suburbs/exurbs are sought after by the poor due to lower prices to rent/buy in. In this case, affordability trumps desirability….

[an]

[quote=bearishgurl]I saw these two articles recently in my “First Tuesday” subscription which both suggest that far-flung suburbs and exurbs will be the “last choice” of the biggest immediate-future homebuyer-group (Gen Y).

http://firsttuesdayjournal.com/suburban-demographics-refute-city-growth/

http://firsttuesdayjournal.com/poverty-hits-home-with-suburban-poor/

The first article touches on and the second one discusses in depth the premise that these suburbs/exurbs are sought after by the poor due to lower prices to rent/buy in. In this case, affordability trumps desirability….[/quote]
I wonder how many of these people even know and hang out with Gen Y. I know MANY Gen Y, and all of them say that once they have kids, they’re moving to the burbs. even ones who are current living in downtown and Hillcrest. I ask them why, and they said school and safety. They don’t want their kids to be able walk by a bar on their way to school. It would be cool to walk by a bar on your way to work, but not cool when you kids walk by one on the way to school. These are very educated Gen Y’er who put school quality a very high priority.

[ctr70]

This is a very good question, especially if you are looking at buying rental houses in far flung Riverside County where houses are super cheap right now. Will people still rent in Hemet, Victorville, Temecula, Menifee, Desert Hot Springs with $6 a gallon gas? Will high gas prices depress rents?

That is a good point about poor people moving out of inner cities to suburbs in CA too. I know that a lot of lower income folks have moved out of LA to places like Moreno Valley, Victorville, Perris, etc… probably b/c of the lower rents and less crime (less crime for now at least). The whole idea that ghetto areas are more likely in inner cities has changed with the low income migrations out to Riverside and San Benardino Counties (and Lancaster/Palmdale part of LA County too).

[bearishgurl]

AN, if you go to the bottom of the second article, its information is derived from this piece:

http://money.cnn.com/2011/09/23/news/economy/poverty_suburbs/index.htm?iid=HP_Highlight

Click on the link above and look at CA. You will notice it is referring to exurbs and *new* “suburbs” which sprung from longtime farmland.

It’s not referring to communities such as Mira Mesa, which is actually “urban” (or “1st-tier suburban”). YOU and your “Gen-Y friends” are close to major job centers. The (CA) communities the CNN article is referring to sprung up in the last decade out of well-known agricultural areas.

These are CA’s future ghost towns, IMHO.

A property costing $400K in MM would cost only $150K – $200K in the outskirts of Stockton (for a comparable property). This is where the “poor” from both in-state and out-of-state are flocking to. They can’t fit a family of five into a 1 br condo in MM for $1200 month.

[bearishgurl]

[quote=ctr70]This is a very good question, especially if you are looking at buying rental houses in far flung Riverside County where houses are super cheap right now. Will people still rent in Hemet, Victorville, Temecula, Menifee, Desert Hot Springs with $6 a gallon gas? Will high gas prices depress rents?

That is a good point about poor people moving out of inner cities to suburbs in CA too. I know that a lot of lower income folks have moved out of LA to places like Moreno Valley, Victorville, Perris, etc… probably b/c of the lower rents and less crime (less crime for now at least). The whole idea that ghetto areas are more likely in inner cities has changed with the low income migrations out to Riverside and San Benardino Counties (and Lancaster/Palmdale part of LA County too).[/quote]

I would agree that a well-built 1940’s 3-4 bedroom house in LA County’s Lakewood or Downey on a street with a grassy tree-lined median is highly preferable to a house of the same size in Moreno Valley …. for a WHOLE HOST of reasons, not the least of which is “neighborhood stability.”

And it’s worth 3+ times as much, as well. We must ask ourselves why this is so.

[Author]

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