by Clark Williams-Derry
Transportation costs are affecting home prices in U.S. suburbs. It seems to be a trend: the press is noticing that rising transportation costs are starting to erode the value of housing prices in far-flung suburbs. See, e.g., this Olympian article, and this article from the LA Times.
On the one hand, this is perfectly consistent with what I'd expect. As gas prices rise, living in far-flung neighborhoods gets more and more expensive, while housing that's close to transit, stores, and jobs seems more affordable. If Econ 101 is any guide, those forces will undermine suburban housing prices, and could even ease the "drive 'til you qualify" phenomenon into reverse.
On the other hand, the real estate market is just now recovering from a prolonged state of extreme wackiness -- and I'm sure that it's possible to find examples to support just about any point you'd want to make about real estate values. Perhaps the press happen to be cherry-picking a few good examples that support their story lines, while ignoring other, contradictory evidence.
So if anyone out there in blog-land has the time or inclination, please point me in the direction of any actual studies on the issue -- say, credible academics who've compared real estate trends in both sprawling and less-sprawling neighborhoods, or mortgage industry analysts who are advising lenders about where to focus their lending. I'd love to know whether falling land values in suburbia is a genuine trend, or just a media fad.
This is also something that I've also been expecting for quite a while, but the hype of the real estate bubble had long nulled out the correlation between transport costs and housing choice. Now that the bubble is bursting *and* gas prices have risen so precipitously, I believe that this correlation is reasserting itself with a vengeance. There's plenty of anecdotal evidence, but more solid research is *just now* starting to come out. The best reference I've found is here:
This still doesn't *explicitly* make the connection between commuting distances, gas prices, and house values -- but it does unambiguously show that it is the suburbs that are tanking, while denser multi-use areas are doing far better at holding their real estate values.
James Kunstler has some good points on this he brings up on his blog abou peak oil called 'Clusterfuck Nation'. He brings up solid analysis of current market data to support some of his theories. His site can be found at:
Take a look at the resources of the Metropolitan Institute at Virginia Tech.
This article from Atlantic may be helpful:
I can't speak to direct studies but I can take a look at my own neighborhood. We moved out to Queen Creek, Az in October, into a home and subdivision that was built just two years ago and where homes are still being finished because it is cheaper for the builders to do that than walk away (or at least that's what I've been told). In fact we are such a far-flung suburb of the Metro Phoenix area that we are no longer in the same county. This area was suppose to be the next boom part of The Valley just 9 months ago but now it's dead, the growth has stopped, no new subdivisions or businesses are coming in and only building that has been started is still happening, and the feel of stress and depression by the residents and businesses here is palpable. A short walk shows you 5 foreclosures that even the real estate agents have given up on and some homes that are lived in have become neglected despite the rules and fines by the HOA. Homes have weeds that go half way up the garage and are dried out because of arid hot summers here creating a fire hazard to add to the concerns already faced.
With the drastic reduction is jobs, and even fewer that are closer to this area or allow telecommuting, and the low pay and benefits by the ones that are out there at any distance most can't get a new job and with rising fuel costs and food prices they're no longer able to make it on what they get. It's become a cycle of hardship that seems impossible to escape.
My husband and I are one of the rare exceptions. We work from home all the time and have little need to "go into to town". While we now consider a short trip to be 20 miles we don't have to do it very often, less than once a month.
It's easy to brush off the issues of those who moved out here on sub prime loans lured by real estate agents and home builders driving their SUVs with the belief that this was their piece of the American Dream, that it will only get better. However what can easily be missed is how completely these people were lied to and deceived even by others who believed the lies they were selling. They were told by builders, by lenders, by real estate agents, and by car dealers what they saw echoed on the news stated by over confident and too often deceptive economists, that the real estate market will always grow because people will always need places to live and that those who stated oil prices and gas prices will climb and climb were fear mongers. They trusted those people not only because they wanted to but because they saw no reason not to. It all seems so obvious looking back but, at least for most, it wasn't then.
I strongly this area won't recover, not for the next 20-30 years at least, because we are too far out and prices will not go back to the way they were and home values will continue to decline because, as I said, we are too far out. We have no public transportation and it is unrealistic to expect that it will change anytime soon. These subdivisions will become ghost towns. Most of these families will be displaced and much poorer than they were. Without strong action and support those that live here now, whether they leave or not, will become even more cynical and distrustful, people will become much more reluctant to spend, and consumerism, which should not be as out of control as it was, is still a key component to any strong and healthy economy.
I guess I am just saying that what I'm seeing echos what is being said in those articles and to please try and remember to have compassion for those that came out to places so far flung believing that prosperity lay here despite the evidence that now seems so obvious.