Some bad economic news was reported yesterday. According to the New York Times article new home sales dropped by 33% in May:
The new housing market has never been this bad, at least not since the government started tracking such things in 1963.”
New homes declined by a record amount in May to a new low.”
In a separate report, New Urban News reviewed William Lucy’s new book, Foreclosing the Dream: How America’s Housing Crisis Is Reshaping Our Cities and Suburbs. Mr. Lucy is a professor of urban and environmental planning at the University of Virginia.
According to New Urban News, Lucy’s analysis of data he collected suggests:
• “As the percentage of households with children declines, and that of singles, empty-nesters, and elderly increases, housing demand will increase in cities and inner suburbs, and demand in outer suburbs and exurbs will level off or decline nationally.”
• “Suburban decline will accelerate in middle-aged housing, but that won’t be uniform; demand for housing in some inner suburbs will rise.”
• “Demand will increase for transit serving more areas more frequently.”
• “Demand for more mixed use and walkable neighborhoods will increase, and prices in these areas will escalate as supply lags behind demand.”
He (Lucy) rejects the idea that rapid, continuing, outward development is inevitable because of the nation’s growing population and a scarcity of room for development in cities. If we choose to make it happen, he says, “a tremendously high proportion of our future growth as a nation could easily occur within already developed areas: in, or on the edges of, big-city downtowns; on busy corners of city streets away from downtown; and in new urban villages close to high-speed transit stations in suburbs.”
How each region responds to the challenges of transit and development will vary, producing contrasting results. Greater Atlanta and greater Washington, DC, illustrate the two extremes, in Lucy’s view. “Washington, DC, and some suburban cities and counties planned for transit-oriented development, and use of transit rose to the second-highest level in the United States,” he notes. “Atlanta’s transit use lagged, which may be one reason why Atlanta has the most declining suburbs in the country.”
The gap between city and suburban growth has narrowed dramatically. From Foreclosing the American Dream: How America’s Housing Crisis is Reshaping Our Cities and Suburbs
I don’t think the decline in new-home sales is a total anomaly. New home builders, particularly those that build single family homes in new suburban and exurban communities are going to have a difficult time going forward. Real estate developers that focus on infill and mixed use development as well as TOD should perform better. We are reaching the tipping point; people are leaving the suburbs and returning to the cities.