Creative Class

I’ve seen a number of articles and reports lately about how home prices in suburbia are quickly eroding thanks to the recent rise in gas prices. Cash-strapped suburbanites are finding it impossible to commute 60, 90 minutes, even two hours to their job now that gas has hit $4.00 per gallon, and they are forced from their dream home.

This is a little simplistic.

There is actually a combination of factors at play, all of which are combining to inflict hardship on suburbia.

First, exotic mortgages became common, and lending standards fell, opening the possibility of home ownership to a new segment of the population.

Second, in their quest to find affordable housing during the recent explosion of home values, families were forced to look increasingly further from the central city, where home prices decreased with each mile from the metro core. People increasingly considered living in distant places like Allentown, PA and commuting to New York.

Third, investors saw a new demand created by these two conditions and sensed an opportunity to develop cheap outlying land, often unencumbered by development restrictions.

The result was often instant subdivisions with over-inflated home values, populated by residents who could barely afford their new home even under the most rosy economic circumstances.

Mid-2008 now finds many of these suburban homes plummeting in value, mostly because these were the locales which showed the greatest inflation in home prices since 2000. The places which displayed the greatest price increases are those which are the most volatile, and those which are now readjusting to values more indicative of their inherent desirability.

Many of these creative (some say predatory) mortgages are due to reset at a higher interest rate, often pushing home ownership from precarious to unaffordable. When you add rising gas prices and higher unemployment to this mix, it’s a ‘perfect storm’ which now makes suburbia the scene of many broken homes.

But I will predict that high energy prices, in the long run, will change how and where we live, in ways much greater than we can foresee.

I believe telecommuting will become commonplace. Workplaces will start opening offices where the employees are located, rather than expecting them to commute. Flexible hours and a four-day work week will be more available. Smaller towns and communities, once absorbed by larger metros, could once again reemerge as local residents look for nearby shops, restaurants, and services.

There is every possibility that a new localism will appear that will bring new life and vibrancy to presently barren bedroom communities. Perhaps suburbia, as we now know it, will die only to be reborn in a new form.

What are your thoughts? Are suburbia’s days numbered, as some are suggesting? Will more fuel-efficient vehicles make a notable difference? What will we see 20 months, and 20 years from now?

This entry was posted on Tuesday, August 12th, 2008 at 5:34 am and is filed under Lifestyle, Play, Wages, Income & Prosperity. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.