Review of Foreclosing the Dream

There may been no shortage of monday morning quarterbacking over the housing crash, but University of Virginia planning professor Bill Lucy sits in a unique position to offer a more comprehensive analysis of how the recession may be reshaping our communities. Having studied for over thirty years the spatial ebbs and flows of the housing market, and publishing in 2006 with colleague David Phillips Tomorrow's Cities, Tomorrow's Suburbs, he is prepared to fit this event into the longer view and wider frame of the contemporary situation. His recently released book Foreclosing the Dream tells this story.

Last week's numbers from the National Association of Realtors reveal that home values have turned downward again, dampening hopes that the economy may be out of the woods. We've already heard all of the blame being poured onto predatory lenders, credulous homebuyers, negligent oversight agencies, and maybe a corrupt politician or two, but we're left with the feeling that there must be some deeper undercurrent to all of this. Do we really think a few tweaks in the financial system and legal structure will patch things up for good? Bill Lucy suggests that the "American Dream" itself, or at least how it's currently visualized, will have to be adjusted to thrive in a new economy.

"We are at the threshold of some sort of reversal," Lucy writes.

There's evidence of a reversal of the conventional flight to the suburbs, according to a variety of indicators.

1. Studying the spatial distribution of foreclosures in the 35 most populous metro areas, Lucy found that many of the farthest flung exurbs were hit the hardest. Of course, every city is different and foreclosures were very clustered in certain geographic areas (Nevada, California, Florida). Some inner cities like Cleveland and Detroit were hit hard, but cities such as San Francisco and Washington DC show a clear spectrum of foreclosures emanating outward. More often than not, this is the evident pattern.


2. Sale prices have confirmed a similar pattern in many cities. Washington DC saw an 8 percent increase in home values between 2007 and 2008, while exurban Loudoun County homes lost 17 percent of value. (The difference in sale prices in the DC metro have stabilized slightly in the last year, but that could just be a blip when viewed in context.)


3. For the last couple of decades, the age-old formula of "trickle down housing" has seen a new twist. It used to be the case that homes had their highest value when they were new, and the value dropped through time as they aged. Since the 1990's, this pattern is still the case with the exception of the oldest bracket - homes built before 1940. These are valued, on average, more highly than the newer houses built in the 50's and 60's. Apparently, their location in predominantly walkable neighborhoods closer to an urban center overcomes their age disamenity.


4. The gas price spike of 2008 alerted many homeowners to the volatility of living in a high-mobility environment. Prices may have dropped since, but there is more awareness now of the fixed costs of transportation associated with a particular housing choice.


5. Demographics nationwide are moving toward more households that are elderly, emptynesters, and singles. These are all cohorts that tend to favor urban or inner suburban settings. Perceptions of school quality and safety continue to make suburbs attractive to families of all races, but this may be changing in some places. The Lower Manhattan School Board recently ran into trouble when they grossly underestimated the number of children that would be enrolled in public schools.

However, there are strong entrenched interests that push back against this changing market (and the interests of the planet):

Local governments in metro areas are fragmented, more suitable for the much smaller population centers they once were, and they tend use zoning to protect their tax bases by pushing residential growth to the edges. The federal government has been slow to move away from the preference for highway funding over other transportation options. Many homeowners still don't want density for other people near their own home, and they rally against it. Some developers and corporations have hefty financial interests tied up with continued outward expansion. For these reasons and more, there's considerable friction involved in moving toward a more sustainable urban future.

Yet against all of these forces, it seems to be happening anyway in many cities.

The thesis of this book received some confirmation this January with an EPA study of building permit distribution over that last few decades:

"The permit data showed that, in several regions, there has been a dramatic increase in the share of new construction built in central cities and older suburbs."

Even throughout the housing crisis, many multifamily developments in denser areas remained stable. Urban development was particularly strong in major global cities and medium-sized cities known for smart growth policies. The study sounds a lot like Foreclosing the Dream. They call it a "fundamental shift."