Downsizing can be a process of finding gain, not pain, as the recession continues.
Thursday, August 19, 2010
As housing starts and sales continue to droop, you’ll find the best deals by walking around.
Human-scale homes and communities feature amenities that you can walk, bike or take public transit to without getting in a car. I live in such a development where I can walk or ride to Starbucks, the supermarket, bank, dry cleaner, library and hardware store. I wouldn’t want to live anywhere else right now.
You won’t generally find human-scale communities in sprawling urban areas dominated by highways ( what I call “spurbs.”) Investing in human-scale development is a relatively new and enlightened way of buying real estate. You may be able to profit in real estate investment trusts, or REITs, or find communities that feature this kind of building.
Christopher Leinberger, a research fellow at the Brookings Institution and real estate developer, said human-scale or “walkable” communities command a 40 percent to 200-percent premium in cost per square foot over properties in car-centric neighborhoods.
Demographics is destiny when defining the growth of human-scale developments.
Places with sidewalks, bike paths, trails and public transit will continue to prosper while spurbs will wither. That’s because millions of empty nesters among the Baby Boomers – born from 1946 to 1964 – are selling their large, four-bedroom-plus suburban family homes and downsizing to condos, town homes, coops and apartments half the size.
While the majority of Baby Boomers will not abandon their suburban enclaves quite yet, their sheer numbers will ensure significant migration to more pedestrian-friendly areas.
There were 52 million Baby Boomers aged 55 or older in 1990. By the end of this year, that number is forecast to grow to about 77 million and to 85 million in 2014, according to the National Association of Homebuilders (www.nahb.org), a Washington-based trade group.
Empty nesters are often moving to urban enclaves in Brooklyn, Philadelphia, Chicago, Seattle and Portland, Oregon.
EMPTY NESTERS ARE OFTEN MOVING TO URBAN ENCLAVES.
In his research on this subject, Leinberger has found that the supply for these kinds of neighborhoods lags the demand in major cities.
The New York City metro region, with about 20 million people in four states, Leinberger estimates, should have 80 walkable neighborhoods, but only has 21. He said the area could use more areas like downtown Princeton, New Jersey, Washington D.C.’s DuPont Circle, or Chicago’s Lincoln Park.
Not only do human-scale neighborhoods help you build equity over time, they are better for your health and have lower carbon footprints. Since you are walking or biking to your destinations – usually within a mile of your home – you’re getting more exercise and polluting less.
When investing in human-scale areas, it’s not as simple as looking at listings and prices. Urban planners from the “New Urbanist” movement (www.cnu.org), who focus on building human-scale communities, examine “vehicle miles traveled.” The fewer number of miles you need to spend in a car, the higher the walkability.
One useful human-scale gauge is provided by “WalkScore,” (www.walkscore.com), a service that measures relative walkability (Leinberger is an advisor to the firm). In the New York metro area, for example, the highest-scoring neighborhoods were Tribeca, Little Italy and Soho. The lowest were Howland Hook, Ardon Heights and Woodrow.
Looking to relocate? Be prepared to pay a premium for human-scale neighborhoods. While places like Soho and San Francisco’s Chinatown have a high desirability factor, you’ll find few bargains there.