Monday, June 9, 2008

Exurbs in trouble

From the blog Calculated Risk:

Last week I mentioned that 15% of the homes in Temecula, CA were REO or in foreclosure. Temecula is a fairly isolated town (see map), and the city is very dependent on construction and/or long commutes. The combination of the housing bust, plus high oil prices, is hitting exurban towns like Temecula very hard.

From Bloomberg: Wealth Evaporates as Gas Prices Clobber McMansions, SUV Makers

``At $4 per gallon gas, $125 per barrel oil and $10 per million Btu natural gas, a lot of activity becomes uneconomical,'' says Mark Zandi, chief economist at Moody's ...

The lifestyle of the exurban commuter may be one casualty.

Emerging suburbs and exurbs -- commuter towns that lie beyond cities and their traditional suburbs -- grew about 15 percent from 2000 to 2006, nearly three times as fast as the U.S. population, as Americans moved further out in search of more affordable houses or the bigger ones that are sometimes derided as McMansions.

``It was drive until you qualify'' for a mortgage, says Robert Lang, director of the Metropolitan Institute at Virginia Tech in Alexandria, Virginia. ``You can't do that anymore. Your cost of transportation will spike too much.''

Assuming the price of gas stays around $4 a gallon or spikes higher, places like the Antelope Valley and Inland Empire may be looking at a permanent contraction. Meanwhile, Downtown's gentrification is likely to continue or accelerate, despite the downturn (though I don't see condo sales recovering anytime soon). Of course, Downtown isn't for everyone, but communities with good access to public transportation and that are close to employers are positioned to do better in the long term. Density is a dirty word for a lot of Angelenos, but for better or worse, it looks like suburban sprawl simply isn't economically sustainable for the average family.

I've used maybe half a tank of gas in the past month and that plus the decrease in rent means I'm feeling pretty happy about moving down here.

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