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You think the suburban craze is over? Not so fast

Excelsior Group
People are increasingly shunning suburbs — or not automatically choosing them — and moving to the city or to more city-like environments, like the West End.

The suburbs are so over.

That ‘s been the news coming in from a number of scholars. Among them are Alan Ehrenhalt, whose book “The Great Inversion” (which I wrote about last year), posited that the great outward migration of the affluent from cities was coming to an end. That was followed by a study from demographer William Frey of the Brookings Institution, who analyzed Census data and found that cities were growing faster than suburbs. (Also wrote about that — I tell you just so you know that you haven’t been left out of the loop.)

What’s causing the change?

One: People are increasingly shunning suburbs — or not automatically choosing them — and moving to the city or to more city-like environments, like the West End or Excelsior on Grand in St. Louis Park, to be near stores, restaurants and the like.

Two: The X, Y and Millennial generations — adults under age 40 — having witnessed the collapse of the housing market, view homeownership as a financial risk they don’t want to jump into. So they’re staying in city apartments. (I would add that many of them are so weighed down by student loans that they are understandably reluctant to take on more debt.)

Three: Commuting to far-flung suburbs where housing is affordable has become so burdensome that many people feel that they barely have time to enjoy their big houses and back yards when they finally arrive there after work.  

Different take

Just in is a vastly different take on the cities-rising-from-the-ashes theory from Jed Kolko, chief economist at Trulia, the real estate listing website. Kolko wanted to find out which areas, cities or suburbs, were growing and where housing markets were recovering faster. Interestingly, he found that, well, maybe the suburbs aren’t so over after all.

To answer his own question, he tossed into the analytic blender last year’s gains in median price per square foot among non-foreclosure properties listed on Trulia. To that he added population growth in the year ending in mid-June, based on the U.S. Postal Service’s count of occupied households in each ZIP code. And, he categorized neighborhoods according to the type of housing they had, regardless of their borders. So, those with townhomes, apartments and condos went into the urban category, while areas with predominantly detached, single-family houses were classed as suburban.

He put it all together and got a mixed picture. Urban neighborhoods had faster price growth in the past year, while suburban neighborhoods had higher population growth. The median asking price per square foot was up 11.3 percent in urban neighborhoods, versus 10.2 percent in suburban neighborhoods. (The overall national increase, including urban and suburban neighborhoods, was 10.5 percent.)

But despite faster price growth in cities, the suburbs are where people are still moving: suburban neighborhoods had faster population growth than urban neighborhoods did, 0.56 percent versus 0.31 percent.

Now, you’d think that if more people were moving to the suburbs, they would push up housing prices. But Kolko argues that adding new housing in low-density suburbs is cheaper and easier than in crowded cities; so prices in outlying areas tend to rise more slowly. I would also theorize that even though Kolko excluded foreclosures from his study, there are more of them in suburbs, and their very existence puts downward pressure on prices.

Then Kolko took a closer look at the housing price data from the 20 major metros tracked in the S&P/Case-Shiller Index. And they show — drum roll — that in the Twin Cities people still have a pretty strong preference for traditional single-family suburban housing. Let that be a warning to developers who are putting up rental buildings downtown as fast as their backhoes, cranes and hardhats will let them.

U.S. Metro*

Urban home price change, year-over-year

Suburban home price change, year-over-Year

Difference: urban minus suburban

Detroit

28.8%

22.0%

6.8%

Phoenix

27.2%

22.1%

5.1%

Miami

18.1%

13.1%

5.0%

New York

7.3%

2.7%

4.6%

Boston

10.1%

6.1%

4.0%

Las Vegas

33.8%

30.0%

3.8%

San Diego

20.8%

17.3%

3.5%

Los Angeles

20.6%

17.6%

3.0%

Cleveland

7.8%

5.0%

2.8%

Tampa

15.1%

12.4%

2.7%

Portland

15.7%

13.1%

2.5%

Chicago

8.8%

6.6%

2.2%

Atlanta

20.2%

18.1%

2.1%

Washington DC

7.7%

6.8%

0.9%

Denver

11.6%

11.1%

0.6%

Charlotte

9.5%

9.0%

0.5%

Seattle

12.8%

13.2%

-0.5%

Dallas

9.3%

11.2%

-2.0%

San Francisco

18.9%

21.4%

-2.5%

Minneapolis

9.1%

11.7%

-2.7%

Source: Trulia.com

Of course, what’s bad for developers could be a bonanza for renters. In Washington, D.C., for example, which has also undergone a building boom in rental apartments downtown, about a third are sitting empty, according Erica Champion, an analyst with CoStar. Landlords are luring new renters by offering them an average of 18 days of free rent. After thousands more new units are expected to come on line in the next year, she predicts that “renters will be likely signing leases that offer a full week more of free rent than currently given today.”

Kolko notes that neighborhoods with high-rise buildings of more than 50 units enjoyed the biggest price gains in the last year, about 11.9 percent over last year, compared with the average urban increase of 11.3 percent. Ethnically diverse city nabes did even better, racking up increases of 14.3 percent.

Hottest price increase

But hottest of all in price appreciation are what Kolko calls “gayborhoods.” He writes: “Neighborhoods where same-sex male couples account for more than 1 percent of all households (that’s three times the national average) had price increases, on average, of 13.8 percent. In neighborhoods where same-sex female couples account for more than 1 percent of all households, prices increased by 16.5 percent — more than one-and-a-half times the national increase.”

Whether gay people simply choose neighborhoods that are already desirable and expensive or whether their presence boosts residential values remains an open question. As the academics would say, “More research is needed.”

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Comments (17)

  1. Submitted by Christopher Williams on 06/28/2013 - 09:57 am.

    I’ve never understood this….

    As a gen x’er myself, I’ve never understood all these predictions that my age group would come running back to the cities. The argument seems to be: Commuting Sucks, Everything is close by in the City, and The city has unique things whereas suburbia is cookie cutter.

    Now sure, when I was in my 20’s being located in and around uptown was great (before it was so gentrified). That’s where you met people of the opposite sex, had a beer, spent the little bit of money you had from your first real job, had everything in walking distance since gas costs so much and your beat up old car was on it’s last legs. Yes, under those circumstances it was appealing.

    Now though, in my 30’s, I’m not looking to go out socializing every single night. I can afford a tank of gas. My car is reliable enough that I’m comfortable driving it everywhere. Yes, commuting sucks, but with a supportive boss I’m able to start work and leave work about an hour before rush hour so I’ve really only got a 20 minute commute. The things I’m looking for now aren’t bars within walkable distance, it’s a school with a low student to teacher ratio. I’m not looking for indie coffee houses filled with hipsters, I’m looking for big playfields for little league, I’m not looking for a small playground that might have a swingset and a slide, I’m looking for a community center with a playground and water park with a full trained staff and clean facility. Now that I’m older, I realize that eating out every night isn’t good for my waistline or my budget and I’m more responsible with both. Having a back yard to grill and relax is way better than doing it on an apartment balcony or trying to find a public park with an available grill and picnic table. If there is a ‘must see’ restaurant I can drive into the city for the few times we eat out. The whole “cookie cutter suburbia” is really not a bad thing. Having easy access to something that generally pleases everyone is good enough for all except the foodies.

    I think the whole proposal of people moving back to the city is just a pipe dream for land developers. They think all we want to do is drink and shop, and being in closer proximity to that is what we want. I disagree. As I get older and have a family those things matter less. And besides, Amazon has everything and delivers everywhere.

    • Submitted by Michael Liquori on 06/28/2013 - 12:39 pm.

      I think you are missing the real argument. The ones that you presented are nothing new, so of course it makes no sense that they would suddenly be more persuasive. What is new and increasing with each new generation is:
      – more people concerned with the environment (reducing carbon footprint, also good for your waistline and budget as gas prices continue to rise quickly)
      – lower birth rates (not as concerned about schools or large parks)
      – Want to live in a progressive environment, not just because they might be ‘foodies’ but also because they may be GLBT or vegan and need frequent access to not just restaurants but all kinds of places and services that are more geared to their lifestyle.

      So, sure, the suburbs will still be ideal for a lot of people, especially those with traditional lifestyles and preferences, but alternative preferences are growing with each generation. It is not going be like suddenly everyone wants to live in the city, but clearly there is a steadily growing trend of people who do, and that is why the developers are building things. Rental occupancy rates are extremely high in many Mpls neighborhoods, and it is not just people in their 20s.

      There are also people who don’t see the appeal of the suburbs for raising kids as you do, because we grew up in them and hated it. I was one kid who would much rather have been able to go to a small park with lots of kids then a huge park with only a few kids because everyone lives too far apart. Always being dependent on parents to drive us everywhere instead of being able to ride bikes or take buses to see friends was bad for both kids and parents.

      And Minneapolis, unlike some cities, actually has very good schools in urban areas, which makes it very appealing, including specialized magnet schools such as language immersion, another growing trend.

  2. Submitted by Steven Prince on 06/28/2013 - 10:10 am.

    suburbs don’t really compete with urban neighborhoods

    New construction in these two types of neighborhoods is easily distinguished: one is for families with kids (suburbs) the other is not. A real urban renaissance would include families with school-aged children, in Minneapolis new development does not include kids.

    Look at the rentals being built around town, almost all near the amenities of downtown or uptown. No building amenities or units sized for families with school-age kids. This is mostly housing for young people or wealthy empty-nesters.

    When the young people renting these new units have kids, they will move on. A few will have the wherewithal to buy Minneapolis homes, but not many.

    I suspect a data set that shows k-5 aged children in the same neighborhoods you survey for price changes (at least in the Twin Cities) would show that the “urban” zipcodes with new construction are not zipcodes adding school-aged kids. So what we get is not so much a trend to urbanism, but a trend to increased demographic segregation.

  3. Submitted by Stephen Dent on 06/28/2013 - 11:53 am.

    Our gayborhood

    For more than 22 years, my partner and I lived in downtown Minneapolis in high-rise condominiums – both Loring Green and Grant Park. Two years ago we purchased a mid-century in the lovely suburb of Golden Valley and have never looked back. “First I was afraid…then I was petrified…” using the lyrics of an old Donna Summer’s song, describing my feelings about living in the suburbs, but I have been proven wrong. Golden Valley has one of the highest preportions of single-sex households per-capita in the nation, rivaling West Hollywood, CA (Los Angeles) and Wilton Manor, FL, (Ft. Lauderdale) friendly businesses and neighbors, plenty of parks and green spaces, and enough services close by to never have to go into the city. Can Golden Valley do better…you betcha. It’s been stuck in the 1970’s mindset since, well, 1970, but things are changing. With a new, energetic and forward thinking mayor and council members, and with some of the old guard not running again (thank goodness), Golden Valley is on the move. We may even have our first gay council member in the upcoming election, something we’ve long needed to help beautify this dowdy, aging inner-ring suburb. While I love Minneapolis, I now appreciate and love my little golden retreat here, a mere six miles from my North Loop office. Life is good.

  4. Submitted by David Peterson on 06/28/2013 - 12:15 pm.

    Suburbs in the city

    Most of Minneapolis’ density is suburban in nature. I’d say there are only 2 pockets of real urban density outside of the Downtown core and the border neighborhoods. The UMN Campus, the East Calhoun to Lyndale between Franklin and 36th. The rest of North and South is mostly the classic “street-car suburb and NE is just… a messy mix of all kinds of things.

    I do not agree with Steven in that most people with kids in Minneapolis ARE hoping to stay in the city, or at least close to the amenities it provides. Just try and buy a house in South Minneapolis right now and see how that goes. However, it would be nice if this supposed “urban” boom actually increased the infill density of the entire city. Creating some more rowhomes, townhomes and other mid-level urban development so people with families actually do have a choice between “condo” or single-family home. As a current SFH owner, I’d love to go in the middle, but there are maybe 300-400 units of that nature in the entire city. Maybe the street cars will help spur some of this, but until then, it’s pretty much the three urban areas mentioned above, versus inner ring/street car suburb, versus big box suburb versus exurb in the Twin Cities.

  5. Submitted by jody rooney on 06/28/2013 - 02:11 pm.

    I think that location depends on where you are in your life

    When you live in a metro area you have lots of choices.

    The biggest factor in selecting the suburbs is probably children unless you are committed to private schools.

    Selecting a good school and neighborhood in the city for children is tricky. Friends of ours that were teachers moved back to the cities to complete their doctorates and work at the U. They took a good look at the the high schools when selecting a location to target their home search. Their evaluation; live in the St. Paul Central neighborhoods. But they had the tools and knowledge to evaluate areas on a “good place to raise smart kids” that the rest of us don’t have.

    Again we tend to think of Cities like Minneapolis and St. Paul as one large entity but they aren’t they are collections of neighborhoods as are suburbs. Old White Bear Lake is as distinct from the Sunrise Park additions as Brichwood and Dellwood. Falcon Heights is not St. Paul but probably has more in common with the St. Paul neighborhoods around the university then Highland Park does.

    I think we think too big when we look at areas and that often results in inaction and misplaced policies. But that is another discussion.

    I am curious is where the published data is on gender specific couples by geographic location.

    • Submitted by Susan McNerney on 06/28/2013 - 11:10 pm.

      “unless you are committed to private schools”

      Not sure where you’re getting that, given the turnaround in Minneapolis public schools enrollment in the last few years. Maybe the people you hang out with prefer private schools, but obviously the vast majority aren’t making that choice. Private schools are actually a very unusual choice in the grand scheme of things, particularly in Minnesota, where many public schools – yes, including some Minneapolis public schools – have great programs.

      Remember, most of the flight of kids out of minnepolis back in the day happened a) when crime rates were much higher than they are now and b) were the result of “white flight” which is exactly what it sounds like. Times have changed, and the younger generation is drastically more diverse. The choice of where to live is more complex than it used to be.

      • Submitted by craig furguson on 06/29/2013 - 07:56 am.

        Minneapols Public vs Private Schools

        There might be a turnaround in enrollment at Minneapolis Public Schools, but I wouldn’t credit quality. I suspect the economy,location and affordability (free) education has more to do with the increase in enrollment. People can’t afford private schools and their kids go back to Minneapolis. Minneapolis is bleeding kids to neighboring districts. That is if the parents have the means to do the transport.

        Many, but not all, of my younger friends move out of Minneapolis when confronted with the challenges of educating their kids.

        Overall, this talk of an urban renaissance is just talk. Some areas are certainly more livable than they were a couple of decades ago, but Minneapolis population is not even close to approaching anything they had in years past.

  6. Submitted by Matthew Brillhart on 06/28/2013 - 05:27 pm.

    Y? There is no Y

    Without getting into a whole thing, the so called “Generation Y” and Millennial Generation are one and the same. Gen Y was a lazy moniker that people came up with, simply because it came after Gen X. It should have been temporary nomenclature, but I guess some people just can’t stop using it.

    Source: I am an elder Millennial (b. 1982)

  7. Submitted by Ray Schoch on 06/28/2013 - 06:35 pm.

    Too many generalizations

    …as Jody Rooney suggests, but of the responses, the one that comes closest to my own is Steven Prince’s.

    Nothing I’ve seen in downtown in my 4 years here suggests “family living.” It’s simply not a child-friendly, and thus not a “family-friendly” environment, unless the family consists of two adults without children. A big deal is being made because Whole Foods is going to open a (single, expensive) grocery store downtown, so it’s apparently not just my own Shingle Creek Neighborhood that lacks many of the amenities that are supposed to accompany urban living — and compensate, to some degree, for the noise, dirt, crowding, etc. that characterize urban life.

    Single-family homes are not, it is true, as environmentally-friendly as apartments and condos. Density has many benefits if it’s done right, and I really think true environmentalists live in cities, not far-flung exurbs, but there are cities and then there are cities. What I’m seeing built in Minneapolis (I claim no knowledge of St. Paul) are multi-story structures, whether rental or condo, that are exclusively advertised as “luxury.” I understand that, like auto manufacturers, the profit margin on the high-end model is much greater than that on the basic, no-frills one, but when most of the housing (I’d say “all,” but somewhere there must be an exception to this) I’m seeing is aimed at the upper end of the market, what it says about the city, its master plan, its builders and its planning department, is not very flattering.

    All the suburbs in which I’ve lived over several decades were more “urban” in terms of convenience and amenities than the actual city in which I now live. They also seem, in retrospect, to have been more “sustainable.” In all of them, I could meet some, even many, of my needs with a 10-minute walk. The single exception in this comparison of suburb and city — and it’s not trivial — is the Minneapolis park system, which is first-rate, and far better than that of any community in which I’ve lived previously. Beyond the park system, however, a 10-minute walk gets me nowhere. I can’t say I’m especially impressed with this, my first ever experience at living inside a central city.

    • Submitted by Tom Anderson on 07/02/2013 - 09:34 pm.

      And how many native trees, plants, and flowers

      Are at your apartment or condo? Does the runoff from the parking lot and sidewalk and street run into a raingarden? How much food does the apartment garden produce?

      By living in a suburb, many people live less than a few miles from their place of employment (amazingly enough, not all employers are in the big city) and can easily walk or bike to work.

      I agree that there are too many generalizations.

  8. Submitted by Paul Udstrand on 06/29/2013 - 09:46 am.

    Clueless analysis.

    First, you listen to economist at your own risk. It still amazes me after their obviously dismal and clueless pre-bubble performance people still listen to the same guys who predicted that housing prices would never drop, and then “expected” prices to recover in the next six months for the next five years. These same economists now “expect” housing prices to return to bubble levels despite all common sense and economic reality.

    Look: if you want to know why people are moving into or away from certain locations, you don’t do what Kolko is doing, you don’t look at sales stats. If you want to know what’s motivating people you have to ask them, i.e. you do a survey. The only reason Kolko is doing this statistical analysis is it’s easy because the data’s already there. All that data is telling you is what’s selling where and for how much, you cannot infer motivations from that data, nor can you predict future trends based on that data alone. The best Kolko can do with that data is give you a snapshot of current market behavior. If you want data on motivations, you have to do a survey, you have to ask. I’m sure Kolko is a nice person, but economist, especially real estate economists are the last people on earth you want to get your predictions from.

    Beyond that people here seem to commenting with a lot of basic misconceptions in mind. First, everyone seems to be thinking with a bubble mentality. Things have changed, the economy has changed, probably permanently. Look, cities are not hostile to children and families. Parents are raising children in cities all over the world, and in the US. Those big multi bedroom houses in the burbs are not necessary for families, and they cost a lot more than urban properties. The post war baby boom took place in houses like the one I’m sitting in right now- a post war three bedroom box in St. Louis Park. The largest generations in US history grew up in these “little” houses with one car garages and no sidewalks. It’s not physically impossible to raise a family in a two bedroom house or an apartment. People will have and raise children in the West End if they want to.

    The problem with realtors is they think that people buy houses regardless of income for some reason. Household income in the US is still falling and has been flat for decades now. During the bubble people took on mortgages they couldn’t afford because they never intended to actually live with those mortgages, they planned to sell the house for a profit after a year or so. That was stupid behavior encouraged by economists like Kolko. Now people are have to buy property they can actually afford, and live where they can afford. Furthermore attitudes about debt have changed dramatically. I’ve never thought affordable housing was bad for the economy but there you have it. The discussion here seems to assume that everything BUT affordability drives housing decisions. That assumption leads to a counter-intuitive conclusion that people will move into areas where housing prices are increasing at a faster rate than some other area. In fact, given flat and declining household incomes one would expect people to move in areas with declining (or flat) values because they’re more affordable. Prices are NOT determined by sales alone, just because property is selling doesn’t mean prices will increase. If people are limiting their debt, they will only pay what they can afford and that can limit prices. If that’s the current environment, Kolko’s data will be junk. In this new economy housing prices cannot function independently from income. Sellers will tell you you can put whatever price you want on your house, but it will only sell for the price someone is will to pay.

    You raise your family wherever you live, and you live where you can afford to live. People aren’t going to stop having children because they don’t live in a suburb. The post war suburban housing boom was fueled by a huge post war increase in household income and wages. You can’t expect the same trend in an era of declining or flat incomes or wages.

    Add to all this the transportation problems and waste of exo-burban living and you could very well get a return to the cities and the first ring suburbs. Kolko’s analysis gives us no real insight into any of this.

    I know in my neighborhood in St. Louis Park people are settling down. During the bubble these were “starter” homes (yet another fabricated artificial production of the real estate industry). Now people are staying put, digging in and making these houses homes. The number of children on my block has quadrupled in the last 2 years and people are raising their kids here whereas before they moved into bigger houses.

  9. Submitted by Steven Prince on 07/01/2013 - 09:43 am.

    Raising kids in urban area is not just about housing

    This is an reoccurring discussion here at Minn Post, here is a link to comments from 2011 that discuss Minneapolis’ family challenge. Nothing has changed in two years concerning Minneapolis policy, I see that Ray and I continue to read from the same hymnal. Ray, we gotta get coffee some time.

    http://www.minnpost.com/cityscape/2011/04/minneapolis-census-data-uncover-bipolar-city

    I will take one issue with Ray’s comments above. Yes, the Minneapolis Parks are amazing, but they are much more amazing for adults then for kids. See the 2011 thread for a more detailed discussion.

    I think Paul’s economic critique misses the point here: whether the present construction boom makes any sense or not, the high value apartments being built right now are not set up for Minneapolis families, who often need more than 2 bedrooms. Of course that begs the questions of programs and amenities for kids, and how to make the Minneapolis public schools attractive for families who can (like Paul) move to St. Louis Park. Minneapolis is not a kid friendly place, so unless you are rich (and can afford to live in an amenity rich neighborhood) or you are poor (and cannot afford to move to a suburb), City policies make it very clear you are not welcome. No matter how hard the School Board works on this their efforts are at conflict with City policies.

  10. Submitted by Bill Lindeke on 07/01/2013 - 03:25 pm.

    what year(s) of data are in that chart?

    it’s not adequately labeled… is that 2011 – 2012 only?

  11. Submitted by Paul Udstrand on 07/01/2013 - 04:50 pm.

    Not kid freindly?

    Literally millions of people have grown up in Minneapolis, what do you mean it’s not “kid freindly”?
    You might be able to say that Downtown is not kid friendly, but business districts in any city not known for their playgrounds.

    All I’m saying is we had a generation of parents who decided you can’t possibly raise a family in less than 2000 square feet of space, that’s not based in any physical, financial, or social reality. There were a lot of kids living in the Aquila Park apartments by my house when I grew up, and I was jealous of them because THEY had a big pool. Parental attitudes and expectations change over time, and I think they’re likely changing right now. Some of those changes are driven by economic realities. Sooner or later some generation is going to decide that keeping their kids in a bubble constantly and as long as possible is unnecessarily expensive and kind of unhealthy. In other words the whole notion of what is and isn’t “kid friendly” changes, as well as the demand for a given level of perceived friendliness. I know a single father who lived next door, moved to a mcmansion in Minnetonka, and now lives over by Grand Ave in South MPLS, and he’s happier in MPLS than he was here or in Minnetonka. He thought Minnetonka was his dream house, it wasn’t. His idea of kid friendly may not be the same as yours. Kid friendliness may not just be about playgrounds, space, and safety, it might have something to with neighbors, unstructured play time, and walk and bikeability. My neighbor eventually decided that proximity to a Chuckycheese wasn’t the priority he thought it was.

  12. Submitted by Paul Udstrand on 07/01/2013 - 05:00 pm.

    What is a suburb anyways?

    We do have this ongoing conversation here and one thing I’ve noticed is a distinct lack of clear definitions as what really is the demarcation between the city and the suburbs? Some people treat first ring suburbs like St. Louis Park as if it’s more of an urban location. In fact, except for the age of the houses and sidewalks it doesn’t look a lot different than many neighborhoods in MPLS, the lots are a little bigger as a general rule but that’s about it. It’s very very different than complexes in Chaska or Eden Prairie for instance. Then you have the West end which is often described as an urban development, but it’s no more urban than downtown Hopkins which is never described as an urban development.

  13. Submitted by Christopher Williams on 07/03/2013 - 01:55 pm.

    Interesting comment Paul with your comparison between the new “urban” west end and downtown hopkins. You are correct that there is a need for some definitions.

    I grew up on the east side of Saint Paul (near Beaver Lake) and I guess I never considered us as “living in the city”. I mean, of course we were in a city, but we lived in a house with a backyard in neat little blocks with parks and a lake nearby. I guess when I hear “city living” and “urban renewal” these stories are always about filling out a hollowed out downtown core. That’s the point of view my initial post came from. And I don’t see families flocking to the downtown core.

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