Friday, August 01, 2008

Urban Sprawl—DOA…and other musings

Two or three years ago the phrase “drive till you qualify” made a lot of sense. People couldn’t afford houses close into the city centers and the further they drove out, the less expensive the housing became. So it made sense to trade off a long commute with more house for the money. No more!

Today’s high gas prices have turned that equation on its ear and the worst collapses in housing prices are occurring in the further out suburbs of major cities, especially in CA, AZ, NV and FL. Those towns were dependent upon developing as a bedroom community, a long term recipe for disaster in all of our research. That’s why our research for BoomtownUSA was not centered on the suburbs but rather upon stand-alone communities that were creating new jobs and opportunities for their citizens. And, it is why we continue to see job creation and economic development activities as so critical for long term success in any town.

John Burns puts out a great weekly ezine on housing markets around the country. He tracks job growth, housing starts, housing affordability and other key statistics from around the country. This past week’s ezine showed that the concerns about job creation are largely confined to the states that had the greatest run-up in housing prices and ultimately also the biggest collapse. The states of CA, AZ, NV and FL have collectively lost almost 200,000 jobs in the past year. Other states like DE, MI, MO (St. Louis only), NJ, OH, RI, and WI have also seen a loss in jobs.

But surprise! If you total up those states, you’ll only get to eleven, which means that there are 39 other states that have grown their jobs in the past year.

All of the data shows that the housing crisis that has gripped the country for past year is beginning to bottom. It will be a couple of years before things return to normal, but the continuing massive declines in both sales and prices has slowed and is stabilizing. Granted, it will still take a couple of years to work off the huge inventory of unsold homes, but that is the normal consequence of an asset based bubble popping. From there is will probably take five to nine years for prices to return to levels seen in 2007, but they will also eventually come back as inventory is reduced and memories of the collapse fade.

Bottom line for me is long commutes are going to die, towns that create their own jobs are the long term winners, job growth isn’t as bad as the media would have us believe and the housing crisis will eventually turn around. Have a great weekend!

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