An article in the Wall Street Journal, it was reported that despite the mortgage crisis and falling house prices, downtown properties have seemed to be unaffected by the housing downturn.
The article explains that in the bigger cities, the closer that residential properties are to the center of the city, the better they are maintaining their value. Of the three metro areas the article examines, all show resilience to tumbling prices and may serve as a great option for those buyers who are looking for an investment that is already gaining value and sure to surge even more once the economy begins to recover.
What are the reasons for this phenomenon? Many speculate that gas prices have something to do with it. Yesterday, CNN reported that according to AAA, the national average of gas is up 9 percent from a month ago and 19 percent from a year ago. Yesterday, the nationwide average for regular unleaded hit $4 a gallon.
As the price of crude oil continues to affect the price Americans are paying at the pump, it is also having a direct affect on the charm of living in the suburbs. In the Washington, D.C. area, like many other metropolitan areas, the average house price has plummeted. While the average of the area is an 11 percent decrease, the price decrease in parts of the housing bubble magnet, Ashburn, Va. of Loudoun County, has seen a much steeper plunge. Ashburn’s 40-mile distance from the center of D.C. is a good reason that foreclosed houses in northern Virginia and the Maryland suburbs of D.C. are not getting many bidders for auctioned homes.
In addition, NPR reported that the median home price for inside the city of Washington is actually up 3.5 percent from a year ago. Economists are seeing this trend in others cities as well, such as Los Angeles, San Francisco, New York, Chicago, Miami, and Boston.
According to CEOs for Cities, a Chicago-based pro-urban nonprofit, the price of gas tends to get overlooked as a factor when evaluating the reasons behind the mortgage crisis. In their recent report, Driven to the Brink, the decline of home prices have been more severe in the metropolitan and suburbs that require lengthy commutes, and where there is a lack of public transportation alternatives. The same conclusion was drawn from ULI's report on U.S. infrastructure investment, Infrastructure 2008: A Competitive Advantage.
What this means to buyers and investors is that gas prices are changing the urban housing market. Now, people are not only looking at where a house is located, but they are also taking the price of gas, commute time, and the amount of lost time of driving into consideration before purchasing. No longer will buyers be taking their commutes for granted as living further out from the city has become an additional expense rather than a luxury.
One way for city planners to deal with this problem is merge land use planning with transportation investing in order to create master-planned communities that offer a mix of retail, office, and housing that is close to transit stations. This will allow residents to cut down on both commute times gas money instead of spending both driving on highways. The 2005 ULI publication, Developing Around Transit, offers advice and examples for community planners to help cut down on growth and sprawl and retain the attractiveness of their residential neighborhoods.
Among the other factors that are driving people to downtown areas are the array of amenities, retail, restaurants, arts and culture, and fast-paced lifestyle that downtowns offer. This is not only attractive to younger generations, but also empty nesters and baby boomers who are beginning to retire that make a person feel young, despite your age.
Whatever your reason for wanting to live downtown. Contact the City Living Team at Real Living, Inc. and let the pros help you make the big move to downtown Cleveland... After all, we are your future neighbors.
Scott Phillips is a licensed Realtor with Real Living, Inc. Equal Opportunity Housing.
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