Thursday, February 16, 2012

Death of the Suburbs?

It seems that two of the largest demographic groups - Baby Boomers and Millennials - have something in common which is causing a profound shift in our country's structure. In a reversal of the trend which began in the 50's as cities emptied and suburbs boomed, both groups now show a remarkable preference for high-density, pedestrian-friendly neighborhoods of the center city and inner suburbs.

Anecdotally, I see evidence of this trend on a regular basis. Most of my friends and acquaintances are professionals in their late 20's and early 30's who, like me, live in apartments or town homes within 5 miles of downtown Dallas. Many of them openly claim that they will "never" move to the suburbs (meaning, in the case of DFW, moving outside the 635 loop to exurbs like Frisco and Lewisville). In addition, many of my Private Banking clients are retirees who are actively selling their mansions and purchasing smaller mansions or town homes in the city.

This, according to one recent editorial in the New York Times, was a major factor in the collapse of the car-dependent suburban fringe, which also contributed directly to the mortgage crisis.

Many drivable-fringe house prices are now below replacement value, meaning the land under the house has no value and the sticks and bricks are worth less than they would cost to replace. This means there is no financial incentive to maintain the house; the next dollar invested will not be recouped upon resale. Many of these houses will be converted to rentals, which are rarely as well maintained as owner-occupied housing. Add the fact that the houses were built with cheap materials and methods to begin with, and you see why many fringe suburbs are turning into slums, with abandoned housing and rising crime.

If you are single and childless, do you intend to move to the 'burbs when and if you start a family - or in order to be able to afford a bigger/better home for yourself? If you already live more than 15 miles from a city, do you plan to one day move closer to the urban center?

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