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Neo

Suburban slums at all costs

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Neighborhoods in the cul-de-sac suburbs of America's cities are being subjected to being turned into slums almost overnight. I have always had the opinion that starter neighborhoods are at most risk for this type of behavior but it seems that even affluent neighborhoods can be subject to this unfortunate consequence just the same.

With the downturn of the economy and foreclosures at record highs it is no wonder that this is happening. Cul-de-sac neighborhoods are becoming a haven for robberies and other criminal activity including gang related activities such as vandalism. In my own city of Charlotte where foreclosures seem to be extremely high, foreclosures higher than 50% in some neighborhoods, there has been an abundance of new housing constantly coming online. The city is growing but so is the housing market, so much so that there is no doubt an oversupply. This is being witnessed in cities all across America, some markets worse than others. Add to that the urban revitalization that appears to be happening in our cities and it is no shock that we have the perfect storm for such suburban downturn.

The Atlantic has a wonderful article outlining the build-up to this suburban decay:

http://www.theatlantic.com/doc/200803/subprime

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Not sure I agree entirely with the premise laid forth by the Atlantic Monthly in that article. In larger cities this may well hold true, but I think it has been holding true for a while, ie the ever increasing migration of families into burbs further out from the CBD and the decay of inner ring suburbs in their wake. So is this really a new trend, or just one more noticeable now with the sub-prime mortgage crises?

I live in a cul-de sac sub-division of an exurb filled with middle class families who all seem to have young children. The growth here is caused primarily by the good mix of quality-built housing offered in various developments, substantially better schools, and a well ran city government that is making big strides in making sure the community has smarter growth than one might expect. Now I live outside a pretty small city (Jackson), so the trends might be the same. Memphis has long suffered an outward trend with its suburban development, as how Nashville to a certian degree. Nashville seems more prone to the sort of new housing suburban decay outlined in the article due to it's current boom, but Memphis is the poster child for this sort of trend and it isn't a recent development there.

At the end of the day though, I have to say I think the case outlined by the Atlantic Monthly article will be the exception to the rule for suburban communities and exurbs rather than the rule. Suburbs that are in decay now may well be redeveloped as inner city neighborhoods now. I think the moral of the story is to not expect suburbia or exurbs to be immune from crime, poverty, blight, or other negative trends.

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Look at most Eeuropean cities. It's like a typical American city turned inside out, with the ghettos and projects in the suburbs, and the middle and upper class largely in the city center or on major transit lines. Are we headed that way? And if so, why? I don't think anything has changed in the American psyche, so I'm guessing high gas and electrical costs have a large part to do with it. More money to get to work and the store, and more money to heat and cool more square footage than you need. And more money to keep the large required sod plot green and weed free. We also of course happen to be going through a major real estate bust also which doesn't help-and it's the homes in the suburbs losing value the quickest (as far as I've seen).

We've got people stealing water meters and copper lines from the inside of abandoned homes. There are neighborhoods in Cleveland where aluminum siding is being stolen from homes for scrap. Well, there is little more I could write that hasn't been said by James Kunstler in his books.

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It is scary to see what is currently happening to the suburbs. While some towns have practically new neighborhoods in which the majority of homes are in foreclosure and vacant, others are eroding enough to make it difficult for hard working families to make a change.

I live in what some would consider a new suburban neighborhood, even though I am in the city limits of the principal town. I hope that the convenience of our location to employment centers and the fact that most houses in our area are 1500-2200 square feet with small lots will help us avoid what's being predicted for some subdivisions. But we have seen at the tail end of the development of our neighborhood, many homes were sold to investors and are now rentals. Previous owners who couldn't sell due to market conditions or were foreclosed on have now turned rental as well. Fortunately, all of our renters so far have been families and most are under 'rent-to-own' agreements with the owners. But, each time we have a renter move in it seems to prod an owner into putting his house up for sale to move to another area of town.

I don't think where I live will face quite the fate some more outlying suburbs may face (people who live a minimum 30 miles from work centers) as this area is slated to infill and grow with the city.

I think the suburbs face quite a few challenges with eroding tax bases, increased costs due mainly to higher energy costs, and the fight to keep crime at bay.

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If this is going to be a continuing trend, then I can't really say that I have any problems with it. I'm not saying that I wished for the demise of the suburbs to come in such a manner, but sometimes transition periods are terribly disheartening at first. As gas prices and other economic factors start to weigh too heavily on the affordability of suburban development and people are forced to face the true costs of decentralization, we'll hopefully see a reversal of the wasteful lifestyles that have been dominant in this post-WW2 era.

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The baby boomers lead many demorgaphic shifts and this may be one of them. The suburbs were created to fill the growing housing demand of boomer families and their school-age children. Now that the boomers are aging and their kids are graduating from college and moving out of the family home, the last wave of boomers are approaching retirement age. In growing numbers they are trading in suburban life for a variety of other options, creating an exodus. There may not be enough X-ers with school age children to maintain the previous rate of growth in suburbia. This simple demographic shift, paired with easy lending practices may explain a lot of things we are witnessing right now. We may have to wait for the Millenials to mature into full-fledged family mode before we see a significant change. Until then, happy investing!

Two strategies here:

1. Wait for the price of housing to hit rock bottom (this will take a while), then pick up some quality real estate on the cheap in neighborhoods with good school districs and growing job markets and target Millenials. In the mean time, save up your cash and be ready to pounce when the time is right.

OR

2. Go in front of the Baby Boomers into retirement meccas and resort communities and pick up (on the cheap) high end luxurious places with low maintenace and high end amenities for travel/leisure/retirement living where people can age in place. This means no upstairs, 2 master suites, no big yards, no screaming kids allowed anywhere in sight.

If you have a strategy, the current conditions should not worry you. Use this time to build up your arsenal of cash and build your credit until you're ready to take action. Where there is chaos, there is also opportunity. People with the ability to plan should not be getting caught up in all of this drama. Have a plan and work your plan. Most people on this site are young enough to benefit from what I'm saying. This bit of advice was free. The next time, I may charge you a subscription fee. :P

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I live in a cul-de sac sub-division of an exurb filled with middle class families who all seem to have young children. The growth here is caused primarily by the good mix of quality-built housing offered in various developments, substantially better schools, and a well ran city government that is making big strides in making sure the community has smarter growth than one might expect. Now I live outside a pretty small city (Jackson), so the trends might be the same. Memphis has long suffered an outward trend with its suburban development, as how Nashville to a certian degree. Nashville seems more prone to the sort of new housing suburban decay outlined in the article due to it's current boom, but Memphis is the poster child for this sort of trend and it isn't a recent development there.

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Yeah it's ironic. People flocked to these Cul-de-sac neighborhood to get away from through traffic and such. But it seems to me that it can work both ways. These areas are out of the way because they interconnected to a grid pattern of streets and in some ways become forgotten. Maybe in some ways these areas become havens of crime because they are out of the way and many people don't see it because they never go down that Cul-de-sac road. It's seclusion actually ending up causing it's own slow demise.

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One of the many things I have realized recently that encourages sprawl is the value placed on new homes. The appraisal trade greatly favors new construction over say, an "old" home built in 1980. Using this methodology, every home in America should be worthless by the time it reaches 50 years of age. I'm saying this because my home was appraised recently and was extremely undervalued compared to the new vinyl boxes down the street. Even the depreciation method you use on your taxes assumes your home to be worthless after 27 years. If homes are just commodities to be bought, used, and thrown away like yesterdays newspaper, how will we ever build a sense of place again in this country? I once had a friend who purchased a new home citing that she really didn't want a "used" home that someone else had lived in. Anyway, that is my rant today regarding our suburban housing crisis.

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One of the many things I have realized recently that encourages sprawl is the value placed on new homes. The appraisal trade greatly favors new construction over say, an "old" home built in 1980.

Probably due to the crap that has been built in the last 30 years or so. The cookie cutter houses that have been built in our country's suburbs are mostly of poor quality as they are intended to be a cheaper alternative for prospective buyers. It is no surprise that appraisals favor new construction. If you had the choice of a newly built cookie cutter home or one that was built in the 80's which would you choose? The one built in the 80's probably doesn't have much life left in it before it comes crumbling down (quite literally) due to the poor quality of materials used.

Obviously there are neighborhoods that evade this, but you're not going to buy a 2k sq. ft. home for $150k in them either.

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For anyone wondering why a house is worthless after 50 years, let's go through a fun exercise of upgrading a house built in 1951. In case you don't have a house handy, come walk with me through a house I'm currently remodeling. The original siding and insulation were made out of asbestos. At the time that was the latest technology, but not anything we want today. The original homeowner replaced those a while back. Originally, there was lots of lead based paint as well. The original house had no air conditioning of any kind even though in the summer temperatures stay in the 100s. Maybe at one time people could sleep with their windows open and fans blowing, but I'm not sure anyone is wiling to do that today even in the best neighborhoods.

Today, if I want to sell this house (or live in it), I have to add central heat and air, a dishwasher, washer and dryer, disposal, ice maker for the refrigerator, and a three prong ground on all outlets, at the very minimum. None of these things existed in this neighborhood in 1951. To accommodate the additional electric load, I have to run twice as much electricity from the street to the house, replace the electrical panel and rewire every piece of wire, tearing up a lot of wall space in the process. And to accommodate the additional water pressure of a dishwasher, washing machine, hot water heater, and ice maker, in order to meet code, I need to dig up the front yard and replace the pipe coming from the street to the house with a bigger pipe. That's after I run a lot of new pipe for the additional fixtures, tearing out any walls that are not already torn out from the elecrtical work. The roof and some joists also have to be replaced. This is simply to make the house liveable by today's standards without adding any more space. Anyone interested in living in a house with a refrigerator that needs to be defrosted every month and (gasp) make ice from ice trays?!?!?!?

The appraisal only considers square footage, so all these upgrades come out of the homeowner's pocket as cash. Having been through this process, now I know that it would have been much cheaper to build a brand new house twice the size. Unlike me, banks know this, and are much more willing to finance new construction, because the new house with more square footage is worth more. A sence of space comes from a community that is being developed or redeveloped all at once. It does not come from a lone homeowner, just like a single vacant house does not cause blight. People who want to live in an old neighborhood are investing a lot of personal money that they will never get back when they sell. Most young people are not in a position to do that, so they go wherever they can get financing. And that's how we get sprawl boys and girls. And this is why it literally takes an act of Congress to redevelop existing neighborhoods where residents are unable or unwilling to pump loads of cash into their worthless houses. These come in the form of Hope 6 projects that are currently being slashed.

Maybe if we start changing policy to put value on something other than square footage, things will be different. If anyone has any ideas or suggestions, please share. If anyone is in a position to influence policy, please pay attention.

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The only original thing on the house mentioned above is the slab and some of the framing. The only value is in the location. That has to do with excellent schools, safe neighborhoods, good jobs (not something found in many of the old neighborhoods.)

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^^^

That really depends on the city the old house is. In some cities, the old houses have a historical value and in others it is inpractible (such as in NYC) to tear down. Others yet may be condos. I know people who, for instance, would snatch up a old brownstone in Chicago, renovate it and sell it for around 1-1.5 Million. There are plenty of people out there that make money on renovating old houses. As far as ice trays go, my fridge has an ice maker and I have it disconnected in favor of ice trays :P .

Anyways, I'm glad suburban decay hasn't hit Raleigh as of yet. I think what really helps over here is Raleigh is surrounded by boom towns, which are all growing quite rapidly too. These boom towns in some places run up the Raleigh city limits and develop along the border and as a result, provide easily accessible necessities and conveniences to those living on the Raleigh side. Each side of Raleigh kind of has its own Wal-Marts, malls, etc, creating small cores that feed the burbs.

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I have noticed an increase in suburban decay in the suburbs of Detroit, but it hasn't been nearly as bad as mentioned in the article. I think a lot of the reason is because Michigan has been in a one-state recession since 2001. Houses are sitting empty - lots of them - but I haven't heard of many instances of vandalism, though petty crimes are on the rise all over the metro area. Suburban office parks are hurting too - those are also sitting empty.

I agree that it does depend on where your older house is. I live in a 3 bedroom, 1 bath house in southwest Detroit that was built in 1910. It is worth about 1/3 of what a house of the same condition and age would be worth if it was located in the nearby suburb of Dearborn. In the suburbs, a historic house like this would be worth much more, because they are much rarer there. The schools are also much better, and it's safer.

I should add that I do live with a whole bunch of state of the art 1910 features, such as steam heat (no ducts for A/C), knob and tube wiring, lead water pipes, lead paint, asbestos, etc. The house is still plumbed for gas light fixtures, too. It's a work in progress, but will be much more charming than any suburban cookie cutter box once we're done fixing all the issues.

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I live in a house built in 1880, it has just as much square footage or more compared to comparable houses in the neighborhood. When we moved in we had all the modern conveniences already in place, except for Central Air of course, but then again that isn't too common in New England anyway. Our house is solidly built and we have only used our window AC in this current heat wave. We have all wood floors and 2 full bathrooms with no wasted space. Some of the newer houses I've seen have enormous rooms in them that are out of scale with daily life (unless you have a party every day and who really does that?). Our house is cheaper to cool and heat because it was built in a time when heating and cooling was done more by design than through electric machinery. I wouldn't give up living in a town center for some anonymous box on a dead end street anyday.

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