In this past Sunday’s New York Times, Christopher Leinberger reported on the Brookings Institute research that has shown a distinct correlation between high house values and walkability of neighborhoods. His article bore the headline: “Now Coveted: A Walkable, Convenient Place." The research showed a dramatic flip-flopping of a multi-decade trend in which suburban and exurban houses were valued by the marketplace significantly higher than their urban counterparts. The reversal has occurred in just one decade and has been startling in its geographic and social scope.
Throughout the country, since the recession, house values have lost as much as 35 percent. That is clear, regardless of location. But what was happening quietly, it seems even before the recession took hold, was that home values within city location were escalating faster than outlying locations. Both have declined, but the decline is not nearly as pronounced within more urban locations.
Moreover, the difference is value between some inner and outer neighborhoods, even with similar households incomes and demographics, is remarkable. To be clear, the research did not compare a “poorer” neighborhood in the suburbs with a “richer” neighborhood in the city. They were careful to compare those with similar social characteristics. The differences can be astonishing when looking not at the up and downs of the last five years but the changes over the last 15-16 years.
The research included the Seattle area, which reflects national data. For example, a neighborhood in Redmond was compared with one on Seattle's Capitol Hill. Both had average home values in 1996 that were the almost identical. Now in 2012, the average value per square foot in Capitol Hill is $300, while the Redmond average is $200 per square foot. During the 15-year period, the Seattle neighborhood's home values increased by almost 80 percent, while the Redmond values increased by less than 25 percent.
Something quite transformational is going on here, something that belies the “American Dream.” The dream for many is no longer the house surrounded by a big lawn with a two (or three) car garage. That dream for many, is a nightmare. For many others, the ideal has shifted massively.
One of the fascinating new tools that has served to educate buyers about the type and quality of neighborhoods is the scoring system called Walk Score, which was created by a Seattle-based company called walkscore.com, and has spread across the country. The site evaluates neighborhoods by using a complex algorithm involving proximity to supermarkets, restaurants, medical services, and other things that people need on a daily basis. The methodology has been improving and now takes into account geographic discontinuities like freeways and ravines that make proximity more difficult.
So fast has Walk Score been brought into the mainstream that real estate agents across the country now advertise homes with their Walk Score indicated. The Brookings study made us of this mapping analysis to conduct its comprehensive assessment of various neighborhoods. High Walk Score neighborhoods are consistently coming out on top with respect to value per square foot. (To be fair, raw values in many suburban locations are still higher, but that is due mainly to the size of outlying properties.)
To be sure, many people are still choosing outlying areas and homes to live in, although by some estimates we have a sufficient supply of detached, single family houses in outer areas to last at least a decade, without building a single additional subdivision.
Clearly we are experiencing a huge sea change. But the interesting aspect of it is not so much about house preferences or locational decisions, but the value that Americans have been placing on the public realm – our collectively shared streets, sidewalks, parks, plazas, and public spaces. The massive shift in attitude has had to do with a fundamental move by many away from placing the quantity and price of private spaces at the top of every wish list. It is now public places that have high value. People are buying not just houses but places.
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