Tuesday, June 03, 2008

The Last Days Of The American Suburb: A Few Thoughts On The Housing Bubble

At first it was hard to discern, but the fallout pattern of the housing bubble is starting to take shape leaving evidence even the main stream media can see. For the last 6-7 years in NYC, the cities insane real estate prices brought talk of a crash. So now, the bombs gone off and a funny thing has happened. It turns out that "Alpha City" urban real estate is still close to bullet proof and instead we are seeing the worst effects shaking suburban and exurban markets.

Yesterday's Times took a look at the market in Greensboro, North Carolina.

"To make matters worse, these outlying suburbs were built on the premise of cheap gasoline, says Keith G. Debbage, a geography professor at the University of North Carolina at Greensboro who tracks the local economy. With gas at $4 a gallon, he says, “travel costs are now a serious consideration.” Oak Ridge and Summerfield are bedroom communities, he notes, and many commuters drive 30 to 45 minutes each way to jobs in Greensboro and Winston-Salem. “People are doing a serious rethinking of where they live,” he adds.

Now reality has caught up with the hopes that animated so many real estate markets around the country. When the Tillmans moved down to Greensboro from Cortlandt Manor, N.Y., four years ago and discovered these fast-growing suburbs, Mrs. Tillman says, “we thought we’d be flipping homes. Now there’s just so much inventory out there.”"

The article also mentions people hopefully awaiting lower gas prices. Perhaps they went to public schools and don't know the size of India and China? Gas is still cheap!!!

Earlier, The Atlantic Monthly laid out a grimmer and more complete painting of just how archaic and poorly positioned the average suburb is to deal with the needs of an aging population and the effects of rising energy prices.It's called, "The Next Slum?"

"The decline of places like Windy Ridge and Franklin Reserve is usually attributed to the subprime-mortgage crisis, with its wave of foreclosures. And the crisis has indeed catalyzed or intensified social problems in many communities. But the story of vacant suburban homes and declining suburban neighborhoods did not begin with the crisis, and will not end with it. A structural change is under way in the housing market—a major shift in the way many Americans want to live and work. It has shaped the current downturn, steering some of the worst problems away from the cities and toward the suburban fringes. And its effects will be felt more strongly, and more broadly, as the years pass. Its ultimate impact on the suburbs, and the cities, will be profound.

Arthur C. Nelson, director of the Metropolitan Institute at Virginia Tech, has looked carefully at trends in American demographics, construction, house prices, and consumer preferences. In 2006, using recent consumer research, housing supply data, and population growth rates, he modeled future demand for various types of housing. The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today."

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