The U.S. housing market is on track to lose another $1.7 trillion in value this year, according to estimates by the real estate site Zillow.com — 63 percent more than the $1 trillion lost in 2009. All told, the U.S. housing market has lost a staggering $9 trillion in value since its peak in 2006, according to Congressional Research Service estimates.

The chart above shows Zillow’s calculations of lost housing values for a sample of the largest U.S. metros this past year. Of course, some metros are much bigger than others and had higher values to begin with; $36 billion is a much bigger hit for Phoenix than $103.7 billion is for New York. Though they are all trending downward, values vary widely across the United States.

The second chart shows the percentage of housing values lost over the past year, which provides a more realistic picture of the geographically uneven nature of the crisis. While the overall U.S. market lost 5 percent of its value, several markets – Miami, Atlanta, Detroit, Phoenix, and Atlanta – posted losses of more than 10 percent. Baltimore, Tampa, Minneapolis-St. Paul, Chicago, and Philly’s losses were worse than the national average as well. On the other hand, four markets – San Diego, Riverside, L.A., and Boston – saw their housing values increase on a percentage basis, while San Francisco, Dallas, D.C., and New York suffered only slight declines.

The great housing reset is far from over; the U.S. housing market will continue to adjust for years to come. Recall that the housing market took the better part of two decades to recover after the Great Depression. But the reset is geographically uneven, with values stabilizing and even recovering in some cities while they continue to slide in others.

The great economic reset we are in the midst of extends even to Americans’ choices of places to live. The popularity of sprawling auto-dependent suburbs is waning. A majority of Americans – six in 10 – say they would prefer to live in walkable neighborhoods, in both cities and suburbs, if they could. Writing in The Wall Street Journal a few months ago, I noted how changes in our economy and demography are altering “the texture of suburban life in favor of denser, more walkable, mixed-use communities.” Christopher Leinberger has shown the positive effects of walkability in cities, towns, and suburbs; the architects Ellen Dunham Jones and June Williamson have detailed ways that older car-oriented suburbs can be retrofitted into more people-friendly, mixed-use, walkable communities. And walkability pays. According to research by Joe Cortright, housing prices have held up better in more walkable communities.Walkscore.com, the online group that rates walkable neighborhoods, provides detailed data on walkability for 2,500 cities and 6,000 neighborhoods across the United States. Nate Berg of planetizen used their data to come up with a new way to rate and rank America’s most walkable cities and metros. The chart below shows his results. The first column shows how metros stack up on walkscore.com’s overall walkability index. The second lists Berg’s calculation based on the number of neighborhoods in these metros that have above-average walk scores. (Details on Berg’s methodology are here.)

Most Walkable Metros

Source: Nate Berg of planetizen, based on walkscore.com data.

Either way you slice it, San Francisco tops the list, followed by the East Coast communities of the Bos-Wash corridor: NYC, Boston, Philly, and D.C. Seattle and Portland do well, as does Chicago. Somewhat surprisingly, L.A. scores reasonably highly on both metrics.

With the steady statistical hand of my colleague Charlotta Mellander, we examined the correlations between this new walkability data and key economics and demographics of metro areas.

Source: Bureau of Labor Statistics, U.S. Census, American Community Survey, and Nate Berg of planetizen, based on walkscore.com data.

As before, we found significant associations. Walkable metros had higher levels of highly educated people (.44) and of the creative class (.46). Perhaps more significantly, they also had higher incomes (.64) and higher housing values (.55), more high-tech companies (.58), and greater levels of innovation (.4).

Walkability is more than an attractive amenity — it’s a magnet for attracting and retaining the highly innovative businesses and highly skilled people that drive economic growth, raising housing values and generating higher incomes.

My interview yesterday on CNN International’s Urban Planet Series:

Here’s the clip of my recent appearance with Yale University’s Robert Shiller on The Agenda with Steve Paikin.

Here’s the longer, unedited version of my column published in today’s The Daily Beast – It Wasn’t About the Economy, Stupid.

The conventional wisdom among pundits, pollsters, and political analysts is that the Republican victory in the midterms represents a referendum on – and a stunning of repudiation of – the Obama administration’s stewardship of the economy. “U.S. registered voters choose economic conditions by nearly a 2-to-1 margin over any of four other key election issues as the most important to their vote for Congress,” according to a Gallup organization analysis, a result that held “across all partisan groups.”

But the geographic patterns of Tuesday’s historic election results reveal a curious paradox. While the economy was clearly the voters’ number one concern, economic conditions alone cannot explain why they cast their ballots as they did. A Wall Street Journal analysis of House races found that Democrats held onto their seats in congressional districts that were feeling the recession the worst. “Of the 25 congressional districts hit hardest by the recession—measured by joblessness, poverty rates, and housing prices—16 are currently represented by Democrats. Fourteen of them won re-election despite the Republican tide.”

Economic factors did not drive state-wide races for Senate or governor either. Democrats, for instance, held onto governorships in the blue states of New York, Massachusetts, and Maryland, and they won a victory in California even though it has taken a tremendous economic hit. Despite the massive Republican pickup in the House and smaller gains in the Senate and governors races, the American electoral map continues to reflect its long-held red versus blue shading.

Columbia University’s Andrew Gelman’s influential book Red State, Blue State, Rich State, Poor State sheds light on this conundrum. Rich voters trend Republican, Gelman and his colleagues found, while rich states trend Democratic. My own earlier analysis of polling data suggested that short-term economic factors like the unemployment rate or changes in housing values provided little explanation of state favorites for Senate or governor, while more deep-seated structural factors like income, social class, attitudes toward religion, and openness toward immigrants as well as gays and lesbians were more likely to hold sway.

With the help of my colleague Charlotta Mellander, I took a close look at factors associated with the recession’s impact – like the change in unemployment and in housing prices since the onset of the crisis — that might have influenced voters. We also looked at income and several other structural variables. In The Emerging Democratic Majority, John Judis and Ruy Teixeira argued that Democrats have gained an advantage by adding the wealthier knowledge workers who cluster in urban centers to their historic base among poorer populations and minority groups. On the red side of the divide, blue-collar working class voters have been shifting into the Republican column. Taking this into account, we examined the relations of work and class and partisan choice. Following Ronald Inglehart’s lead, we also looked at the relations between religious values, tolerance, and political preferences. Confining our analysis to state-wide Senate and gubernatorial races, we conducted a basic correlation analysis and compared the results for the current midterm. We also compared the midterm pattern to the state-by-state vote for Obama and McCain in the 2008 presidential race.  As always, we caution readers not to make too much of these findings. The size of the sample is small, and our analysis can only identify relationships among variables, and in no way implies causation. Still, a number of very interesting patterns emerge.

Despite all the hubbub about the economy, we found no evidence at all that short-term economic factors – unemployment and housing prices – significantly shaped state-wide voting patterns for either party. This is not to say that short-term economic factors did not matter at the margin: Clearly, election returns and exit polls showed that many individuals shifted their 2008 Democratic vote to a Republican one in the midterms. But, at the state level, deeper-seated factors remained by far the dominant factor.

Income and class remain important, but less so than in the ‘08 presidential race. Higher-income states went for Obama, while lower-income states went for McCain. This trend continued to hold for Senate races, with higher-income states voting Democrat and lower-incomes states trending Republican, but not for gubernatorial races.

Class also continues to play a role, though its relation was less evident than it was in ‘08.  Obama took states where knowledge workers and the creative class – which makes up roughly  a third of the workforce and includes workers in science and technology; business and management; law; arts, culture, media, and entertainment; health care and education – comprise a larger share of the workforce, while McCain took blue-collar working class states. The creative class was more split in the midterms, and significant segments of it shifted from Obama and the Democrats to the Republicans. While a considerable change from ‘08, it is not surprising, as many creative class voters tend to be independent and more candidate-centered. While the correlation between creative class states and Democrats remained positive, it was not statistically significant. Blue-collar working class states were positively associated with Republican Senate votes and negatively associated with votes for Senate Democrats.

Religious orientation remains a key pivot point in America’s cultural and political divide.  In 2008, more religious states went for McCain and less religious states went for Obama. This pattern continues to hold for the Senate, though not for governors’ races. Religion is positively associated with both Republican votes for Senate and negatively associated with Democrat votes for Senate. (Our religion variable is from Gallup polls that ask individuals if religion is an important part of their everyday life.)

From Tom Tancredo in Colorado to Carl Paladino in New York, we’re constantly reminded that immigration and gay rights remain significant wedge issues in American politics. (We used the percentage of immigrants and gays and lesbians in states as proxy measures for openness). Salient in 2008, openness toward gays and lesbians and toward immigrants were again among the most important factors in state partisan patterns. States with higher percentages of gays and lesbians and higher percentages of immigrants went for Obama in 2008 while those with lower percentages went for McCain, and these trends also continue to hold. Immigrants appear to have a more substantial relation with votes in Democratic states, while gay and lesbians have a more noticeable association with Republican states. States with larger percentages of immigrants were more likely to vote Democratic in both Senate and governor races. The percentage of immigrants was negatively associated with Republican votes for Senate but not significantly associated with Republican votes for governor.  The percentage of gay and lesbian residents in a state was negatively associated with Republican votes for both Senate and governor, and it was positively associated with the Democratic votes for Senate but not significantly associated with Democratic votes for governor

But, the strongest factor of all in our analysis was the red-blue pattern itself. States that voted for Obama in ‘08 tended to elect Democrats to Senate and governor, while those that went for McCain again went for Republicans. The correlations were significant for both Senate and governor races across both parties, though they were about twice as powerful for Senate races.

The upshot of this could not be clearer. We witnessed no massive realigning of the electoral map; instead, America remains divided along the same political, cultural, and economic axes. Richer states are still more likely to be Democratic and poorer ones Republican. But it’s about more than just money. The creative class might have split its vote to some degree, but working class states continue to trend red, while states with higher percentages of immigrants and especially gays and lesbians continue to tack Democratic.

Of course economic conditions do play a role in elections and this one is no exception. Obama benefited strongly from the support of the creative class in 2008; economic conditions have considerably tempered their enthusiasm this time around. And “throw the bums out” inevitably takes a greater toll on the party in power.

But a discernible political pattern remains, one that is etched in a deep class divide that is rooted in the very structure of our economy. It’s not just that more educated, higher income, knowledge workers prefer to live in denser cities and metro areas on the coasts. The logic of an idea-driven economy generates innovation and productivity by concentrating them there. But just as the economy benefits from the concentration of human capital and the creative class in tighter, spikier geographic locations, our political system penalizes it, as evidenced by the big swaths of red in the less densely populated states and the smaller specks of blue on America’s new electoral map.

And this political reality handicaps the nation’s ability to address the very serious economic problems it faces. In previous periods of economic crisis and transformation, like the Long Depression of the late 19th century and the Great Depression of the 1930s, America benefited from the “critical realignments” that were long ago identified by Walter Dean Burnham, which recast the electorate to create more stable governing and policy coalitions. These political realignments shift the power balance between the parties and, in doing so, provide the political underpinnings for the major changes in public policy that are needed to help the nation adjust to structural economic change.

Though our economy is currently in the midst of a similar great reset today, our politics reflect what Burnham called an “unstable equilibrium.” In fact, the overlay of class and geographic divides, combined with Washington’s inability to get much done, creates an especially volatile backlash-gridlock-backlash partisan cycle. Democratic anger at Bush motivated massive voter enthusiasm in the ‘06 and ‘08 cycles among Democrat-leaning groups. The same kind of mobilization was apparent not just in the Tea Party but in Republican-leaning groups this cycle.  According to a November 2 Gallup poll, 63 percent of Republicans surveyed reported that they were more enthusiastic than usual about voting — an all-time high. Americans are most enthusiastic about voting when they feel the least empowered – it is hardly an inspiring picture.  This backlash cycle is chronically unstable. No sooner is a new administration or a new congressional majority in place than anger begins to mount on the other side and the cycle begins again. To match our unstable economy, we have an unstable political system.

The consequences of this backlash-gridlock cycle extend far beyond politics, paralyzing America’s ability to deal with the deep and fundamental economic issues it faces. Just when the United States needs bold, forward-looking leadership which can develop broad efforts to renew the economy, upgrade jobs, spur innovations, and address mounting inequality, it is stymied by a volatile political system propelled by anger and backlash, leaving it with gridlock and inertia.

With the midterm elections only two weeks away and the Democrats in jeopardy, the prevailing wisdom is that the election will be a referendum on the Obama administration’s stewardship of the economy. A large fraction of 2008 Obama voters now cite the economy and jobs as the key reason they will vote Republican this year, according to an October 17 AP poll. “The president must zero in on the economy if he wants to help himself and his party,” writes Eleanor Clift. The basic notion here, promulgated by pundits and political analysts, is that the current political environment turns on the vagaries of the economy. This amounts to a cyclical theory of American politics. And, in fact, several decades ago, the political scientist Douglas Hibbs advanced his seminal theory of the “political business cycle” which argues that economic movements have a sizable effect on American elections.

But another line of thinking suggests that American politics turns on deeper structural changes in economy and society. In the influential Red State, Blue State, Rich State, Poor State, Columbia University’s Andrew Gelman and his colleagues uncovered a paradox that both confirms and defies the conventional wisdom about American elections. While rich voters trend Republican, rich states trend Democratic, he found. The opposite holds as well. Though poor and minority voters overwhelmingly pull the lever for Democrats, poor states consistently end up in the Republican column. A second version of the structural approach comes from John Judis and Ruy Teixeira, who argue in The Emerging Democratic Majority that the rise of the post-industrial economy has tilted the playing field toward Democrats who gain advantage in wealthier urban “ideopolises” while holding onto the votes of the poor and minorities. A third perspective comes from Ronald Inglehart of the University of Michigan, whose detailed World Values Surveys identify a shift in political culture from the more traditional, religious, and materialist orientations of the industrial age to post-materialist values of self-expression, openness to diversity, secularism, and broad public goods like concern for the environment.

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This juxtaposition thus mirrors the debate over the economy: Will shorter-term cyclical factors determine the outcomes of the mid-terms or are deeper structural factors at play?

With the help of my colleague Charlotta Mellander, I decided to take an empirical look at this question. On the one hand, we considered a series of key cyclical variables such as the unemployment rate and its change since the economic crisis began, and also housing prices and their change since the bubble burst. And, on the other hand, we considered key structural factors, such as income a la Gelman, post-industrialism a la Judis and Teixeira (measuring the prevalence of creative class jobs versus working class jobs), and post-materialist political values a la Inglehart, including the prevalence of religion and openness to both immigrants and gays and lesbians. We confined our analysis to the state level, using pooled polling data for both Senate and governor races across the country, which we drew from Nate Silver’s FiveThirtyEight election forecasts at The New York Times. We conducted a basic correlation analysis and compare the results for the current midterm to those for Obama and McCain in the 2008 presidential race. (The graph below summarizes the key findings). This kind of analysis can only point to associations between factors and does not identify any causal pattern, and of course other factors may come into play. Polling data covers a much smaller number of observations than election returns and suffers from other problems. For these reasons, we caution against drawing overly broad conclusions from this exercise. Still, the patterns it points to are quite interesting.

Despite all the “it’s the economy, stupid” hub-bub among the chattering classes, our analysis finds little empirical support for the cyclical view. There was no statistical association at all between the share of voters leaning Democrat or Republican for either Senate and governor races and our key cyclical factors – the unemployment rate, the change in the unemployment rate, housing values, or change in housing values. This is not to say that these factors do not matter at the margin, as polling data clearly tell us that  many individuals are shifting their 2008 Democratic vote to a Republican vote in these midterms.

But it’s structural factors on which this election is much more likely to turn. We find significant statistical associations between most of the structural variables in our analysis and the share of voters leaning Democrat or Republican in both Senate and governor races, as detailed below.

Income: Higher income states went for Obama in 2008 while lower income states went for McCain. The trend continues, even in light of the ongoing economic malaise. Income is positively associated with Democratic share for Senate (.4) and governor (.36) races. And it is negatively associated with Republican share for Senate (-.54) and governor races (-.38). These associations have weakened more on the Democratic side (.52 for Obama) than for the Republicans (.-51 for McCain).

Class: Class played a role in the 2008 presidential election and it continues to do so in the midterms. Creative class states went for Obama in 2008 and working class states went for McCain, and this holds up for the midterms as well. The creative class is positively associated with Democratic share in both Senate (.34) and governor (.36) races, and negatively associated with Republican share in each (-.38 for Senate and -.52 for governor). These associations have again weakened more for the Democrats (.52 for Obama) than for the GOP (-.46 for McCain) in 2008.

Working class states voted overwhelmingly for McCain in 2008 and this remains the pattern today. The working class is positively associated with both Republican share for governor (.46) and Senate (.48) and negatively associated with Democrat share for both (-.34 for governor and -.38 for Senate). The results are slightly weaker than for the 2008 contest (.64 for McCain, -.64 for Obama). While many creative class members vote Republican and many working class members vote for Democrats, the state-level patterns show the continuing salience of class for American politics.

Post-materialism: The shift from traditional, religious to more secular values is a hallmark of post-materialist political culture. In 2008, more religious states went for McCain (.63) and less religious states went for Obama (-.59), and this patterns continues to hold. (Our religion variable is from Gallup polls which ask individuals if religion is an important part of their everyday life.) Religion is positively associated with both Republican share for governor (.37) and Senate (.55), and negatively associated with Democrat share for Senate (-.46), though the correlation for Democrat share for Senate (-.22) is not significant. The patterns are also weaker than in the 2008 presidential election, especially on the Democratic side (.63 for McCain and -.59 for Obama).

From Tom Tancredo in Colorado to Carl Palladino in New York, we’re constantly reminded that immigration and gay rights remain significant wedge issues in American politics. We employ openness to immigrants and gays and lesbians (based on share of adult population) as proxy measures for opennesss – another key marker of post-materialism. States with higher percentages of gays and lesbians and higher percentages of immigrants went for Obama in 2008 while those with lower percentages went for McCain, and these trends also continue to hold. The percentage of foreign-born residents is positively associated with Democratic share in both Senate (.38) and governor (.36) races, and negatively associated with the Republican share in each (-.27 governor, -.5 Senate). These associations have weakened more on the Democratic side (.52 for Obama) than for the Republicans (.-51 for McCain).

The percentage of gay and lesbian residents is positively associated with the Democratic share in both Senate (.58) and gubernatorial (.47) races, and negatively associated with Republican share (-.68 for Senate, -.46 for governor). These associations are comparable for 2008 (.57 for Obama, -.57 for McCain) and among the strongest of any in our analysis. Clearly, openness remains a key factor in state-level politics.

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Despite all the attention that has been paid to the effect of current economic conditions on the upcoming midterm elections, structural factors remain the central axis upon which American politics turns. Yes, richer states are more likely to be Democratic and poorer ones Republican. But it’s more than money. States that have transitioned to more knowledge-driven creative class economies are more likely to be blue, while working class states are more likely to be red, echoing former Republican Congressman Tom Davis’s blunt statement: “Economic development works” – meaning that it tends to turn places to more open-minded, liberal bastions. In line with this and with Inglehart’s notion of the shift toward post-materialist values and cultures, states with higher percentages of immigrants and especially gays and lesbians continue to tack Democratic.

Cyclical factors do play a role in elections and this one is no exception. If Obama benefited from the enthusiasm of creative class voters in 2008, economic conditions have undoubtedly tempered this somewhat this time around. Gays and lesbians have been vocally disappointed with Obama’s failure to act on Don’t Ask, Don’t Tell — a frustration that may well turn out to be discernible in lower turnouts. And, of course, anti-incumbent sentiment is at an all-time high. And “throw the bums out” inevitably takes a greater toll on the party in power.

American politics is periodically recast by “critical realignments” long ago identified by Walter Dean Burnham, like the elections of 1896 and 1932. These political realignments shift the power balance between the parties and, in doing so, provide the political underpinnings for major public policy change which helps the nation better adjust to structural  economic change. Though our economy is currently in the midst of a similar great reset today, whether or not our politics realigns remains an open question.

The connection between creative class states and the Democrats, and working class states with the Republicans is a clear break from the old pattern of the New Deal and post World War II. But it’s equally clear that both parties are constrained by their connections to long-held special interests. By paying excessive deference to the social conservatism and extreme anti-statism of its right fringe, the Republicans are unable to attract the creative class broadly, even though many of its members are drawn to its individualist ethos and fiscal conservatism. Democrats, meanwhile, remain captive to the housing-finance-auto industrial complex which literally defined the old order. As the Cato Institute’s Brink Lindsey quipped some years ago, “Here, in the first decade of the 21st century, the rival ideologies of left and right are both pining for the ’50s. The only difference is that liberals want to work there, while conservatives want to go home there.” A sustained political realignment will only come about when one or the other of the two major parties is able to shuck off the interests that tie it to the past and develop an agenda that is in line with the future.

Unless and until that happens, the United States is likely to remain stalled at its current impasse, lurching between economic and political cycles, while failing to address the deep structural challenges it faces – and unable to develop the much-needed reforms, new economic policies, and broad infrastructure investments required for a new round of sustained prosperity.

This is the longer, unedited version of my column in today’s Wall Street Journal.

Remaking our sprawling suburbs, with their enormous footprints, shoddy construction, hastily put up infrastructure, and dying malls, is shaping up to be the biggest urban revitalization challenge of modern times—far larger in scale, scope and cost than the revitalization of our inner cities.

What a dramatic shift. Just a couple of decades ago, the suburbs were the locus of the American Dream. More than their sprawling, large-lot homes and big wide lawns, their shopping malls, industrial parks, and office campuses accounted for a growing percentage of the nation’s economic output.  A good many of them formed into Edge Cities—satellite centers where people could live, work, and shop without ever having to set foot in the center city.

With millions of homes underwater or in foreclosure, our suburbs and exurbs have taken some of the most visible hits from the great recession. In a stunning reversal, big cities like New York, Boston, Washington, D.C., Chicago, San Francisco, and Seattle have become talent magnets at the same time, drawing ambitious people, empty-nesters, young-families, and even a growing number of offices back to their downtown cores. As inner city neighborhoods are being gentrified, blight and intransigent poverty are moving out to the suburbs, where one third of the nation’s poor now reside—1.5 million more than in cities, according to a Brookings study. And suburban poverty populations are growing at five times the rate of those in cities.

I myself am a card-carrying, dyed-in-the-wool urbanist; I’ve lived in inner-cities for most of my adult life. But I believe my urbanist fellow travelers are making a big mistake when they impugn suburbanization wholesale. Suburbs don’t always grow at the expense of cities; suburbanization and urbanization alike are parts of a larger process. Studies reveal that, counterintuitively, suburbs don’t draw most of their populations from the inner city, but grow by attracting people from small towns and rural areas further out, as well as immigrants from foreign countries, more than 50 percent of whom bypass cities and settle directly in the suburbs of larger metro areas, according to research by Brookings’ Audrey Singer.

Great metropolitan areas are like economic suns; their gravitational appeal is irresistible. Suburbs and cities are mutually dependent; they blur into each other at the margins. And the most successful suburbs share many attributes with the best urban neighborhoods: walkability, vibrant street life, density, diversity.

Density, the clustering of people and firms, is a basic engine of economic life—for cities, suburbs, and nations. When interesting people rub against each other, they spark new ideas; the clustering of economic assets and activities accelerates the formation of new entrepreneurial enterprises and dramatically increases overall productivity.

The idea that such clustering only happens in Manhattan-style urban centers is shortsighted and parochial—it’s characteristic of Silicon Valley too, and Nashville, whose cluster of musicians, composers, studios, publishers, and record companies has made it the most concentrated center of commercial music-making in the world. But we need more of it and too many of our suburbs and exurbs don’t have much of it at all. The key to our suburbs’ renewal is not beautification but densification. As our suburbs become more clustered, they’ll become more economically energetic—with benefits for us all.

Renewing our suburbs is part and parcel of broader economic recovery. The very act of restoring them—of retrofitting them for the new ways of living and working that our emerging new economic order requires–will help bring back prosperity overall.

Sources: Map by Zara Matheson of the Martin Prosperity Institute. Data from Christopher Leinberger.

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Though some of our most stressed suburbs might have passed the tipping point— like those brand new unsaleable houses on the far-out fringes of L.A. that were bulldozed to the ground not too long ago, double-paned windows, granite countertops, whirlpool baths, and all—most of them aren’t going to fade away. Just over half of Americans live in the suburbs, and the great majority of them are content to stay. More than two-thirds (68 percent) of suburbanites are “satisfied” or “very satisfied” with where they live; 57 percent rated their communities as the “best” or “near-best,” according to a survey I conducted with the Gallup Organization and report in my book Who’s Your City? A separate Pew survey identified the group of Americans that is most satisfied with their living choices as college-educated suburbanites–62 percent of whom said there was no better place for them to live.

Even before the recession, our changing demography had begun to alter the texture of suburban life in favor of denser, more walkable, mixed-use communities. Ozzie and Harriet stereotypes notwithstanding, the average age of marriage has been rising, households have gotten smaller, and single people now outnumber marrieds. Only about one in five American households consists of two parents with children living at home, according to data from the U.S. Census Bureau. Many baby boomers who are in their empty-nester phase are looking to downsize, and younger Americans faced with a stagnant economy are putting off having families a little longer and are staying put in their apartments or moving home with mom and dad.

The recession accelerated this process of change. Much has been made of the shift to a so-called “new normal” where consumers scale back on debt, purchase less material things, spend more time with family and friends, and seek greater meaning in their lives. It may sound like the wishful thinking of crunchy granola, ivory tower pundits —only it really is happening. Even builders and realtors have taken notice. According to an eye-opening 2009 survey commissioned by Builder magazine, home buyers are no longer willing to drive to the furthest edges of developments to buy the biggest house they can afford. In fact those are precisely the kinds of homes that are not selling.  Real estate development expert Arthur C. Nelson predicts that we will have a surplus of as many as 22 million large-lot homes by the year 2025.

Today’s buyers—surprising numbers of them single women— are looking for smaller houses closer-in, with access to parks and cultural amenities. There is a rapidly growing market for super-energy efficient homes under 1,300 square feet – quite a departure from the 5,000-6,000 square foot McMansions of just a few years past. “We are entering a new era of home building, where buyers look for spiritual satisfaction rather than material gain,” the Builder study concludes. Not the kind of language we’re used to hearing from the construction industry.

While most suburbanites are happy with where they live, growing numbers are increasingly unhappy with how much time they’ve been spending in their cars. More than half of Americans would prefer to walk more and drive less, a 2003 national survey reported, and more than a third would prefer to live in walkable communities, according to research by Jonathan Levine of the University of Michigan and his collaborators. Commuting by car is not only time-consuming and expensive, according to research by the Nobel prize winning economist Daniel Kahneman, it is also one of life’s least enjoyable activities. Most suburbanites don’t want to move to the city; they’d like the best aspects of city life—its liveliness, its amenities, its walkability—to come to them.

Sources: Analysis by Patrick Adler; graphics by Michelle Hopgood of the Martin Prosperity Institute. List of walkable suburbs from Christopher Leinberger. Human capital refers to adults with a bachelor’s degree or more; travel time to work is one-way travel from work to home. Human capital, income, and travel time to work data from the U.S. Census Bureau.

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Walkable suburbs are some of America’s best places to live; they provide a model for renewal for their sprawling, spread-out siblings. Relatively dense commercial districts, with shops, restaurants, and movie theaters, as well as a wide variety of housing types, have always been a feature of the older suburbs that grew up along the streetcar lines of big metro areas. A 2007 study by suburban redevelopment expert Christopher Leinberger found more than 150 walkable places in America’s 30 largest metro regions–places like Hoboken, Montclair, Maplewood, and Princeton in New Jersey; Stamford and Greenwich, Connecticut; Brookline, Massachusetts; Bryn Mawr, Pennsylvania; and Royal Oak and Birmingham, Michigan, outside Detroit. Newer versions of walkable suburbs can be found in regions that developed later, like Palo Alto in the heart of Silicon Valley; Santa Monica; Boulder, Colorado; Coral Gables, Florida; Decatur outside Atlanta; and Clayton near St. Louis.

These are the places where Americans are clamoring to live, where housing prices have held up even in the face of one of the greatest real estate collapses in modern memory, as Leinberger documents in his book, The Option of Urbanism. The desire for walkability can be measured in dollars and cents. Houses in walkable neighborhoods command higher prices than houses in more distant, less dense locations. A recent study by urbanist Joe Cortright for CEOs for Cities analyzed the sales of 90,000 homes in 15 major metros. In 12 out of 15 of them, walkability commanded a premium—sometimes of hundreds of thousands of dollars in places like the D.C. suburbs.

With help from my colleague Charlotta Mellander, I examined the economic relations of walkability (as ranked in Leinberger’s research and by the walkscore index) across 40 or so other U.S. metropolitan regions. We found that metros with walkable suburbs had greater economic output, higher incomes, and higher housing prices; higher levels of human capital, higher membership in the creative class; higher levels of patented innovations and of high-tech industries and employees; not to mention higher levels of happiness.

It goes both ways. On the one hand, skilled, affluent people prefer walkable neighborhoods, especially when they have young families. Many move from denser city neighborhoods, like Georgetown or Adams Morgan or Capitol Hill, to places like Bethesda, or from Manhattan or Brooklyn to Montclair or Westport or Greenwich, because they can gain security and access to good schools without having to give up amenities they left behind in the city. Whether they move to these suburbs specifically because of their walkability, their urban virtues of mixed use and generally medium-scale density ensure that the innovation and productivity-enhancing effects of clustering continue to be available to them. Just as they did in the city, people bump into each other in coffee shops and other such Third Places; they discuss projects and make deals. This sort of thing is legendary, from Silicon Valley to Nashville’s Music Row.

If America’s oldest suburbs have been its most resilient, they are not its most typical. Many of the inner-ring suburbs that boomed after World War II started out with more modest endowments of human and physical capital; some of them have since lapsed into significant disrepair. But as the metro areas continued to expand, many of these places have seen their land values rebound because they’re closer in. Ferndale, Michigan, just outside of Detroit, has gone far to revitalize itself by promoting its art scene, building affordable housing, and by marketing itself as gay friendly. Arlington, Virginia, has added density by building mixed-use high-rise complexes at its 11 Metrorail stations while encouraging the development of independent businesses in its older neighborhoods. It is a place of exhilarating contrasts, with funky coffee shops, vintage clothing stores, and places to hear indie bands close upon gleaming office towers and chain restaurants. Bellevue, Washington, just across from Seattle which has been retrofitting  and adding density and mixed-land use to its downtown for some time, recently launched a major core-building initiative, the “Bel-Red Area Transformation,” a 900-acre urban infill project that will bring mixed-use development, light rail, new streets, parks, and open spaces to a disused stretch of highway.

But not all of America’s suburbs have the option of developing compact cores along streetcar lines or transit; not all are filled with old, wonderful housing stock that is ripe for gentrification, not all of them are filled with the kinds of mega-talented techies and visionaries who are flocking to Silicon Valley. Many are sprawling, relatively characterless places, with spread out  populations living in cookie-cutter houses on large lots, who commute long distances to work. These suburbs have to rebuild from the bottom up.

In Phoenix, Arizona, three abandoned strip malls, clustered at the corner of 40th and Campbell Streets, have been converted into a restaurant, an upscale grocery, a chic bakery, and a cocktail bar. It’s called Le Grande Orange and it has become a huge attraction, both for customers and local home buyers, who want to live within walking distance of it.

National Harbor, a mix of hotels, residential units, marinas, parks, stores, and indoor and outdoor entertainment venues, is being built on the footings of two previous failed projects in Prince George’s County, Maryland. When completed, it will extend along a mile and a quarter of the Potomac.

Two professors of urban design and architecture, Ellen Dunham-Jones of Georgia Tech and June Williamson of City College of New York, have literally written the book on the challenges and opportunities that our failing suburbs present—Retrofitting Suburbia: Urban Design Solutions for Redesigning Suburbs. Documenting strategies of redevelopment, re-inhabitation, and re-greening, they focus on what to do with superannuated or abandoned malls and suburban office and industrial parks.

As Americans take their business to larger and larger “mega-malls,” the smaller, older ones are left to languish. A 2001 PricewaterhouseCoopers study found that one in five malls were dead or dying – 7 percent were effectively dead and another 12 percent were vulnerable and likely to fail in the near future. But these troubled malls have become the sites of a wave of renewal. Outside of St. Paul, the parking lot that surrounded a dead shopping center built on land fill was turned back into wetlands—which in turn attracted new “lakefront” townhome development. In Lakewood, a suburb of Denver, Colorado, a dead mall on a single 103-acre superblock is being transformed into Belmar—22 urban blocks with parks, bus lines, restaurants, stores, and 1,300 new households—the downtown that Lakewood never had. Eight of the 13 regional malls in the Denver area are now planning or have completed makeovers.

But perhaps the biggest retrofit of all is happening in Tysons Corner, Virginia, the virtual archetype of an auto-dependent, sprawling edge city. Located near the junctions of three major highways, it boasts 25 million square feet of office space and four million square feet of retail space (including one of the largest malls on the East Coast). Though only 18,500 people live there, its population swells to 120,000 every day. Decades ago, developers hailed it as the wave of the future—one of hundreds of new stretched out, auto-dependent satellite centers that would render our old downtown commercial centers obsolete.  But for all the jobs it supports, stores it houses, and tax revenue it generates, Tysons Corner has been losing out of late. Its perpetual traffic gridlock and its lack of human energy have caused homebuyers to choose other places; some of the companies that were headquartered there have even moved back into the District of Columbia.

But now a major retrofit is in motion, led by its major developers and land-owners who seek to make it more walkeable, denser with a more integrated mix of uses, and more connected to the city via transit. When the D.C. Metro announced plans to build an extension to Dulles Airport that would pass through Tysons Corner, the biggest debate was not about whether or not it was needed, but whether or not to bury it underground – an expensive proposition, but one that would free up land for even more integrated mixed-use development. On June 22, 2010, the Fairfax County Board of Supervisors adopted a comprehensive plan that would transform the town from “a sprawling suburban office park” to a “24-hour urban center where people live, work, and play.” There is a certain irony in this. America’s archetypal Edge City is seeking to reinvent itself as a place whose hallmarks will be walkability, green construction, access to public transportation, and abundant public amenities, like parks and bicycle trails—something that sounds very much like a real city. And, what’s also pretty astonishing is it has competition. Nearby edge cities in Crystal City and White Flint have proposed similar transit-based retrofits of hundreds of acres. It is something that needs to happen—and that is starting to happen—across more and more of our suburbs.

There are countless other opportunities for reclamation, all across America. Disused golf courses can be transformed into parks and nature sanctuaries; abandoned car dealerships can be landscaped and developed as new, mixed-use neighborhoods. Whole commercial corridors, as Dunham-Jones and Williamson put it, “are being retrofitted in ways that integrate rather than isolate uses and regenerate underperforming asphalt into urban neighborhoods.” Developers are decking over the parking lots at commuter rail stations and building high- and mid-rise office/commercial/residential complexes atop them; they are cutting streets through formerly walled-off corporate campuses and adding restaurants, stores, and public spaces. While the recession has slowed down most of the suburban renewal projects, it’s provided further impetus for community service and regreening efforts. Abandoned big-box stores are being made over into senior centers and schools and libraries—amenities that are just as essential for neighborhoods as eateries and boutiques. Most of these retrofits, of course, are a far cry from the organic authenticity of “real cities,” Dunham-Jones and Williamson note, but they build community and lay the groundwork for still further redevelopment. Writ large and multiplied across hundreds of other metros, they are remaking the way Americans live and laying the groundwork for future economic prosperity. This type of strip commercial redevelopment will be the major development feature of the next generation.

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The drive to renew our far-flung suburbs may seem like a tall order for a recession-weary nation, but it’s a lot less farfetched than someone in 1950 saying that those old decrepit urban warehouse and factory districts would turn into some of America’s most vibrant and expensive neighborhoods someday. Not to mention that remaking the suburbs, where so many Americans live, is far, far more important to our overall economic recovery and broader quality of life.

Historically, America’s economic growth has hinged on its ability to create new development patterns, new economic landscapes that simultaneously expand space and intensify our use of it. Our rebound after the panic and long depression of 1873 was forged by our transition from an agricultural economy to an urban-industrial one organized around great cities and their early streetcar suburbs. Our recovery from the Great Depression saw the rise of massive metropolitan complexes of cities and suburbs. The drive to remake our suburbs today, to turn them into more vibrant, livable, people-friendly communities—and, most important, to create the strategically located pockets of density required for innovation and productivity growth—may provide our own troubled era with the fix that it so desperately needs.

Have a gander at this mind-boggling chart put together by Mike Mandel.

It shows the share of real growth of private fixed assets – stuff like machinery, factories, technological equipment, and, yep, housing. Or, as Mandel puts it: “All the privately owned productive assets of the country – for the decade spanning 1999 to 2009.”

That decade, Mandel points out, saw the slowest growth of any decade of the post-war period. What’s worse, more than half of it was made up of housing. Technology broadly accounted for just 14 percent of the increase. ”[T]he net real increase in housing fixed assets was more than triple the net real increase in IT fixed assets,” Mandel concludes. “That may help explain why we are in such dire straits now — plenty of new homes, not enough investment in IT.”

And that is why we need to Reset the economy away from housing – which played its role in driving the old industrial economy – and toward new technology, knowledge, skills accumulation, and broad human capital development required to drive the emerging creative economy.

Forget the stimulus: This is broad structural adjustment that begs for Washington’s attention.

Video of Richard Florida’s talk at yesterday’s The Economist Ideas Economy event in NYC.