Have the suburbs fallen out of fashion?
- No (56%, 20 Votes)
- Yes (44%, 16 Votes)
Total Voters: 36
Once again, famed economist and housing guru, Robert Shiller, has spoken words of incomparable wisdom about the realities of real estate. Shiller has worked for decades to inject a healthy dose of reason in what is often a highly irrational market sector. His latest argument is clear and reasonable, as usual — the “dream home” is relative.
While this conclusion may seem self-evident, it’s important to make this observation since real estate buyers are often driven by emotional or fantastical motivations to buy. These fantasies often translate into a twisted notion of value, where price is justified by the extent to which the real estate matches up with their “dream.”
The fact of the matter is, as Shiller astutely signals, the dreams are historically relative —something very close to fashion.
So-called dream homes were built next to factories in the 19th century. With the advent first of streetcars and public transportation, then with the interstate highway system, dream homes began being built further and further away from places of employment. The conclusion of World War II hastened this demographic shift.
It now seems that trend is reversing. Living in convenient, walkable communities near work, restaurants and other cultural attractions is now the commonly held ideal of the new dream, according to a Brookings Institution study.
Attitudes about home ownership are also changing. A recent study by the MacArthur Foundation asked whether buying a home has become more or less appealing. 57% of respondents said it is less appealing today than it was before the housing bubble burst. Only 27% said it has become more appealing.
first tuesday insight
This is why we call it home price appreciation — real estate prices fluctuate above and below the mean price trendline based on changes in how much folks appreciate living in a certain location.
As more people appreciate living in a particular location, population densities grow, increasing demand and thus driving prices up.
This is an important point to make in understanding home price appreciation since many believe it to be a natural or imperative occurrence — real estate always appreciates in value, doesn’t it?
It is this kind of rationality that good real estate professionals depend on in shaping their business plans for the immediate future. We have the data and it makes sense: buyers are now favoring mobility as well as accessibility to employment and cultural amenities.
If your FARM is still in the suburbs and you don’t have the ability to change markets, take these motivators into consideration when developing your FARMing material and figuring out your next pitch. Not everyone can afford to live downtown, but it’s looking more and more like most want to.
Re: “Today’s dream house may not be tomorrow’s” from the New York Times