Monday, February 06, 2012

Taking a Long View of the Housing Market

The current recession has had a tremendous impact on the nation’s psyche and on its economic future. Americans have learned to invest more cautiously, to not expect perpetual growth or guaranteed returns, and to appreciate more the employment opportunities that they have. On an economic front, the recession has insured that, even as unemployment figures continue to fall, it will be years if not decades before many corporations higher at their previous rates. Even as home sales begin to stabilize and rise, it will be a long time before many American buy a home that they cannot afford and expect its value to double during the term of ownership.

On that last note, the housing market is where the recession’s impact will likely be most visibly and permanently felt. Foreclosure signs show no indication of going away. Developments will continue to sit vacant. And residential construction projects will probably happen only in trickles and spurts. There’s no question about it: as far as housing is concerned, the recession stands to literally change the national landscape for years to come.

On a micro and economic scale, this change means tighter mortgage restrictions, lower rates of home ownership, and more conservative real estate investments. But the impact on the physical landscape also means changes on a more societal level – changes of which any long-term investor or home owner should be aware.

Here are the biggest of these overarching changes and trends:

-Unpredictability on the coasts. When the next housing bubble grows and then inevitably pops, its impact will likely be largest felt in the Sunbelt and in the coastal metropolitan regions of the country. These are the places that rose the highest and fell the hardest over the past several years. For those who invest in homes in places like St. Louis, Kansas City, and Minneapolis, returns over time can be much more predictably positive.

-Metropolitan areas are looking inwards. On a metropolitan level, urban residential parcels have far outpaced suburban and exurban developments in value and resale strength during the recession. Although downtown condos have suffered alongside suburban housing developments, the former has more successfully weathered the downturn in all but a few cities. This reflects the importance of surrounding infrastructure and amenities in tampering the effects of a dismal market.

-Transportation matters. On a similar note, experts have long predicted that growing cities and populations would, over time, increasingly favor residences with good transit access. We saw this play out over the past few years, as developments and neighborhoods with less convenient train and highway access have seen their values suffer more. We can only expect this discrepancy to be greater during future economic downturns.

These are just a few of the main ways in which the current housing market reflects – and predicts – long term trends in America’s built landscape. While homeowners across the country have seen their investments lose value over the past few years, not all areas are created alike. It’s a lesson best kept in mind as we recover from last decade’s bubble and begin to move forward.

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