The latest housing price numbers reinforce the image of relative strength among the primary global gateway markets and the continuing weakness of formerly hot growth areas, many of which showed the largest population gains in the 2010 census. Values are stable to down less in the large 24-hour, but slower-growing coastal cities. Only two markets in the just released Standard & Poors/Case-Shiller Index—Washington D.C. and Seattle--showed housing price increases—not surprisingly these both rank as important U.S. gateways.
Among the cities now at their lowest home price levels in nearly four years and suffering some of the sharpest recent declines are: Atlanta, Charlotte, Las Vegas, Miami, Phoenix, and Tampa. All have been housing hot beds over the past two decades as ballooning populations have been drawn to a combination of relatively affordable pricing and warm weather. Other hot growth meccas—Dallas and Denver among them—also show recent deterioration and may hit new post housing bust lows in coming months, according to forecasters.
Coastal metropolitan areas with barriers to entry and higher price points, meanwhile, continue to fare better. Examples include San Francisco, San Diego, Los Angeles, and Boston. New York fits on this list too, although the nation’s pre-eminent gateway registered declines in the latest S&P report.
It’s no coincidence that the 24-hour powerhouses concentrate big business and affluent Americans drawn to their multi-faceted environs and convenient international jumping off points. There are more than enough high powered, well-paid corporate execs; monied entrepreneurs, and well-heeled folks to undergird these metros’ prosperity. It doesn’t hurt either that they draw the lion’s share of tourist and business travel through their major airport hubs.
On the other hand, the mushrooming Sunbelt suburban agglomerations have attracted more middle class and retirees living on fixed incomes—relocating out of northern industrial areas where blue collar jobs have been in decline and/or looking for sunnier climes in more economical places. The Sunbelt areas have also been magnets for generally-poorer Hispanic immigrant populations, hoping to make a start, especially in construction related jobs. These groups have been among the hardest hit by recession, high unemployment, and the credit crisis. In addition, they have been the most exposed to the mortgage debacle and declining home prices, now about 33% off their 2007 peaks nationally.
While growth generally equates with good things, the hot growth enabled by cheap credit and slapped up subdivisions on inexpensive land isn’t turning out so well. Home builders and developers will continue on an extended hiatus as these markets struggle to absorb all the foreclosed real estate. Other home owners see their house values continue to slide, losing wealth and security in the bargain. Commercial owners and investors, meanwhile, face a long drawn out recovery with problematic prospects.
That gets us back to the 2010 census data which tracked the continued population explosion in Sunbelt suburbs from east of Los Angeles through Phoenix, Dallas, and Houston and across to Atlanta, the Carolinas and Florida. Will that suburban-oriented growth resume in the pre-2007 patterns, which so influenced much of the Census data? Or will its character change dramatically as a result of recent reversals to more apartment style living in areas closer to urban and suburban commercial districts? Will more people delay or reconsider moves into these Sunbelt housing morasses? And will investors re-evaluate their prospects for hot growth market plays as a result of getting burned again in chronically see-sawing markets?
In fact, the just completed Census may be already irrelevant.
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
