Suburbia at the Tipping Point?

f
(Image from Business Week; data from Zillow.com).

Check out this image and more tracking the variation in housing prices within regions from Business Week based on data from Zillow.com.  Business Week's Prashant Gopal discusses them and more in this story on the "unravelling of the suburban fringe:"

BusinessWeek.com asked Zillow.com, which provides online home valuations, to analyze how home values have been holding up in large cities across the county compared to both inner and outer suburbs. The results are fascinating. Annual price changes in most of the largest metro areas, including New York, Los Angeles, Chicago, Miami, San Francisco, Seattle, Baltimore, Washington D.C., and Philadelphia, followed a similar pattern: Values were most stable within a 10-mile radius of the center of the city, but generally worsened with each successive radius ring as far as 50 miles from the center of the city.

Not all cities kept precisely to the pattern, in part because of the complications of geography. In Washington D.C., for example, prices started improving in the 40-mile and 50-mile rings, most likely because the area intersects with Baltimore and its immediate suburbs. Some cities, such as Boston, Cincinnati, Denver, San Diego, St. Louis, and Phoenix, did not seem to have any discernible pattern. And in other areas—Detroit, Cleveland, Dallas, Atlanta, and Reno, Nev.—the opposite phenomenon seems to be in play, with real estate values actually improving away from the city.

This seems to suggest a new spatial fix in the making, with consolidation and concentration and higher real estate values in the core areas of mega-regions and especially their hub cities, and  less reconcentration and a more general decline in real estate values in second and their tier cities, alongside more general real estate stagnation or decline in both urban and suburban locations. The pattern in Boston is intriguing: Why is it different than that for other metros in the Bos-Wash mega?  These pattern is complicated, a bit unclear, and emergent - it's still early in the game - but these data suggest it's worth further examination.

Any other thoughts?

Comments

[Steve]

These type of price movements are fairly typical of the real estate cycle. In real estate downturns, the value of suburban homes usually falls first with urban values taking a hit later in the cycle. Similarly, in upturns, prices usually recover first at the centre, where supply is more inflexible, before spreading to the suburban fringes, where most new development takes place.

Consequently, we really need to look more closely at the data to support the thesis of a anti-suburban shift. Anecdotally, there are lots of recent stories about this shift. It is certainly not surprising that the increased cost of gas would be reflected in the price that those working in the city core would be prepared to pay for a house in the suburbs. But for others, lower suburban house prices will represent good value. Most of these houses are not going to disappear. Someone will live in them. Any shift to core is not going to happen overnight.

[NYC Theater Guy]

Boston is a very old (by North American standards) city surrounded by very old towns and villages. They may be suburbs now, but they were never settled as such. These towns (like Concord or Boxford, MA, for example) have a more organic structure and will hold their value more than purpose-built suburbs that are really farmland that was cleared for cheap housing. Part of the attraction of living in a city is a sense of community and place, "soul" for lack of a better word. The real crash will happen in "soulless" suburbs and exurbs; as the economics of energy change, $200,000 four-bedroom homes in the middle of nowhere don't look so cheap anymore.

Washington is an odd case. It was really a sleepy little town surrounded by farmland until the 20th century. It may have an old pedigree, but in terms of growth it's not much older than Los Angeles.

The real test of my thesis would be to compare other colonial-era towns that have since become suburbs, for example, towns in Westchester County.

[Whitney Gunderson]

Quote: "And in other areas—Detroit, Cleveland, Dallas, Atlanta, and Reno, Nev. — the opposite phenomenon seems to be in play, with real estate values actually improving away from the city."

Lower quality neighborhoods and more foreclosures closer to the city perhaps?

[Michael Wells]

Why Boston is different.

The Boston suburbs, as NYTG says, are many older small towns, with their own downtowns and cultural activities. Years ago I lived in Maynard, out near Concord, and everything was pretty self sufficient. Many of the closer in suburbs are served by rail, so the commuting costs aren't auto related -- and driving in downtown Boston is a pain.

There are an extraordinary number of colleges in the Greater Boston region, supporting a creative class outside the city.

The high tech rings along Routes 128 and 495 are similar to Silicon Valley, again supporting a creative class that can live near work.

[Tim]

Penturbia, a 1990 book by Jack Lessinger, a professor emeritus of real estate and urban development at U. of Washington, made some astonishing predictions about the return of older communities with architectural and social character. He outlines five historical migration patterns in the U.S., the latest of which now involves a flight from suburbia to older communities with character. The book, first published in 1990, is out of print now, but can still be found. County by county he shows where the stock of older homes is and where Penturbia is likely to occur. Great stuff!

[Tim]

Penturbia, a 1990 book by Jack Lessinger, a professor emeritus of real estate and urban development at U. of Washington, made some astonishing predictions about the return of older communities with architectural and social character. He outlines five historical migration patterns in the U.S., the latest of which now involves a flight from suburbia to older communities with character. The book, first published in 1990, is out of print now, but can still be found. County by county he shows where the stock of older homes is and where Penturbia is likely to occur. Great stuff!