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[The Hall Monitor] The Future of Suburbia

Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal and housing issues. …Jonathan Miller

The pendulum has swung away from “Conspicuous Consumption” toward “Sustainable Living”. “Consumerism” is out and “Green” is in. A quick visit to the New York Times website and the words sustainable living typed into the search engine brought me links to 1,840 articles, 25 of which were published in the last 30 days. Have Americans made a conscious decision to reject our materialistic, “keep up with the Jones’s” way of living and embrace a simpler life with less stuff? Have we really turned against our Hummers and Starter Castles? Or are we simply feeling less wealthy given the recent downturn in the markets? It’s likely that both these things are true, to varying degrees.

Leaving aside the subjective value judgments however, there are demographic realities that suggest the future will not be kind to the more recently built outer-ring suburbs which are located further away from centers of employment, shopping and other amenities, and are thus more heavily dependent on the automobile as the primary means of transportation.

An article in The Real Estate section of the Times from December 28, 2008, Housing Inventories on the Rise [1], cites a report prepared by Jeffrey Otteau [2] of the Otteau Valuation Group in Old Bridge, New Jersey.

From the Times article:

“Right now we are all focusing on how bad it is,” he said, “but what we are also seeing is a historic reversal of home-buying demand away from suburban and rural areas to cities and inner-ring suburbs that are more walkable than driveable.”

Mr. Otteau says the shift was partly because of higher energy prices. But the dominant reason is that the number of households with children living at home is on a persistent decline.

“In 1985,” he said, “50 percent of households had children at home. In 2000, that was down to 33 percent. Today it is 29 percent, headed to 25 percent.

“That means that 75 percent of homebuyers over the next 15 years will have childless households and within that group are empty-nester baby-boomers, or couples or singles buying a first house. And that means three out of four homebuyers will have no interest in a house in the suburbs with a good school system, which is pretty much what we’ve created over the last 50 years.”

Mr. Otteau’s reference to 1985 and the 50 percent of households with children at home points to the fact that baby-boomers at that time were smack-dab in the middle of the child-rearing phase of their lives. Well, the “pig in the python”, as the boomers are sometimes called, is about done with that part of their lives and this helps explain the decline in the number of households with children.

As Mr. Otteau makes clear, nearly everything we’ve built over the last 50 years was in response to this aging demographic, whose own future needs will not even be met by the very housing model created expressly for them, to say nothing about the appropriateness of the status quo for generations that follow.

Appraisers are trained to analyze the functional utility of improvements and various forms of obsolescence, as they relate to highest and best use. Just for fun, let’s consider the existing “suburban environment” as the subject. What are some of the factors on which its future viability depends?

  1. Transportation: There can be no arguing that the automobile is central to the success of the built suburban landscape. In 1956 under President Eisenhower we began construction on the Interstate Highway System, without which the development patterns of the last fifty years would not have been possible. Keep in mind that the U.S. population was 169,000,000 in 1956. It is now 305,000,000 and is projected to grow to 400,000,000 by 2039. Even if you believe the existing network of roads, bridges, and parking is adequate to serve our current needs, can it possibly be expanded to meet the needs of an automobile reliant population 30% greater than ours thirty years hence? I, for one, think not.
  2. Energy: The current low price of oil notwithstanding, it is unlikely that future oil production will be able to keep pace with worldwide demand as China and India continue to grow their economies. The viability of our suburban model is only possible because of the availability of cheap and abundant energy. The fact that, with only a few minor interruptions, we’ve had access to all the energy we’ve needed up until now is no guarantee that this trend will continue into the future.
  3. Environmental Awareness: Detached single family houses on large lots in sub-divisions not located near jobs or shopping are the antithesis of the desire to “go green” – which seems to be more than just the latest fashion. As Mr. Otteau describes in the Times article, the move toward greater density and mixed use development, new urbanism, walkable communities whatever you wish to call it is already happening.

Ultimately however, it all comes back to the “Pig in the Python” [3]. Boomers are getting on in years and the landscape that for fifty years was first built for them, and in more recent years by them, faces a stern test. For fifty years it’s worked pretty well, I think most people would agree with that. The question is will it work for the next fifty years?

Personally, I think we need to start making other arrangements.