The collapse of America’s housing bubble—and its reverberations in financial markets—has obscured a tectonic shift in housing demand. Although housing prices are in decline almost everywhere, price declines are generally far more severe in far-flung suburbs and in metropolitan areas with weak close-in neighborhoods. The reason for this shift is rooted in the dramatic increase in gas prices over the past five years. Housing in cities and neighborhoods that require lengthy commutes and provide few transportation alternatives to the private vehicle are falling in value more precipitously than in more central, compact and accessible places [Joe Cortright, "Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs" (PDF format!), white paper, May 2008, p. 1]
Cortright says that government efforts to help struggling homeowners make their payments and to crack down on predatory lenders will ease the housing crisis, but gas prices will have a lasting effect on home values and urban/suburban development. He sees an opportunity for cities to make themselves more livable and affordable:
The new landscape of housing prices and high fuel costs has important implications for public policy. Cities that offer attractive urban living opportunities in close-in neighborhoods, enabling people to drive shorter distances and make convenient use of alternatives to car travel, are likely to be more affordable and economically successful than places that continue to follow sprawling development patterns. Working to promote land use patterns that enable mixed-use development and provide more bikeable, walkable neighborhoods served by transit will provide multiple benefits, including cutting gas bills, reducing the trade deficit and reducing global warming [Cortright, p. 2]
Have you seen all that downtown development in Sioux Falls? Phillips to the Falls? Downtown apartments? All those folks riding their bikes to work? Sounds like they've caught the wave of the future.
Back in 2003, when I was looking west from Wisconsin, the likelihood of rising gas prices was a factor in my decision about where to locate.
ReplyDeleteWith me, it's proximity to grocery stores, pharmacies, and recreational facilities (swimming pools especially) that matters most, because I work from home.
I saw a really cool house in Meeteetse, Wyoming. But I would have to drive 30 miles to Cody every day and 30 miles back again, just to go swimming (an activity to which, along with Diet Mountain Dew, I am addicted). Sixty miles a day, 420 miles a week ... you do the math.
Fortuntately, on the way back from Wyoming, my car broke down in Lead, South Dakota, and I had nothing to do for three days but look at houses and discover a local YMCA.
Now I can, if necessary, walk to almost everything I need. I still take Old No. 8 to load up on groceries, but I feel a little silly -- the round trip is all of six blocks. But it does consume a lot less gas than 60 miles.
Cory, you are onto something here. Gas prices will drive people's housing decisions, assuming most homebuyers are fundamentally sane. (H'mmm.)
A little off subject... But a little birdie in my pocket told me that the contractors working on the new swimming pool in Madison are not sorting out any of the iron for recycling.
ReplyDeleteI was wondering if you have heard any thing about that.
Seems rather silly to me considering the high price of scrap steel right now.
Rational actors in the marketplace -- oh Stan, that would make economists' jobs far too easy. ;-)
ReplyDeleteAnon, I hadn't heard about that... although from the way they dropped the trees wherever, it certainly didn't look like the crew was taking too much care to do a neat job. Again, rational actors: I would think the city wold see a benefit to getting all the value it could from the rubble. Plus, we could create a couple-three more jobs, paying some guys to sort that rubble.