Sunday, March 2, 2008

The housing bubble: the beginning of a new era is already here

Sometimes you can just be too close to the flames to see the fire.

For several years now, doomsday theorists have been predicting the fall of suburbia as the "age of cheap oil comes to an end." The theory went that edge city housing stock in the exurbs would be the first to become devalued, as its only actual value relied on its newness and affordability for the original buyers, while still being within commuting distance to (most likely suburban) job centers.

However, this could already be happening. In an article by Christopher Leinberger brings to light the fallout of the subprime housing bubble. As housing values around the nation fall - and gas inches towards $4 a gallon - perhaps we have been too myopic: the predictions of the peak oil theorists may already be well in motion.

What connects the two is that housing values are falling the most in the outermost suburban ring - the latest tracts of land to be developed on the traditional suburban model. As has always been the case, suburban tract housing has been marketed to the middle class home buyer as the affordable housing option: big yards, big garages, lots of bedrooms.

It is unsurprising, then, that the subprime mortgage bubble - which helped those who were on the margins of being able to qualify for a mortgage, at best - would affect those most likely to purchase homes in these exurban areas.

By comparison, housing prices in centralized urban areas with actual employment centers have stayed much steadier. Portland and Seattle are the two leading cities in the USA for being the least hit by the bubble bursting - although we must not overestimate the degree to which "flippers" and speculative investment has played a part.

Although not very prevalent in Portland to nearly the degree as witnessed in other major cities, there has been an almost insane amount of appreciation in home values, particularly California. However, they are not facing the crash that the exurban areas are facing - there is still a massive demand for housing in this country, after all (the United States population is still increasing, after all).

credits to the Overhead Wire for the Atlantic story

1 comment:

Blithe said...

You write very well.