Dead U.S. Exurbs Are Staging ComebacksJohn Gittelsohn and Prashant Gopal
Erica Luna’s commute eats almost four hours out of her workday, and means no messing around with the snooze button at 4 a.m. She’s a San Francisco Bay area exurbanite, one of the legions trading convenience for a mortgage on the fringes of the most expensive U.S. housing market.
The calculus is simple. Luna and her husband had to leave the San Jose rental where they lived with their kids because the owner was selling, and finding an affordable rental was tough. Buying was impossible: The median price is almost $1 million. In Mountain House, about 55 miles east in the San Joaquin Valley, they became homeowners in December for less than half that.
And the hours they both spend getting to and from their jobs? At least their trips are mostly on trains. “If we had to drive,” said Luna, 34, “we wouldn’t last.”
The exurbs, communities one step or more beyond the suburbs, were left for dead after the 2008 crash. Now outside San Francisco, Phoenix, Atlanta and other thriving cities, they’re coming back in a tentative recovery. Homebuilders are resuscitating developments that lay dormant for almost a decade and grading old farms into new subdivisions. Prices are climbing in markets swamped by foreclosures just a few years ago, from Stockton, California, to Paulding County, Georgia.
“It’s where the growth has to go because it’s where the land is,” said John Burns, a housing consultant in Irvine, California. “Demand can’t be met closer to the jobs.”
The risk is that another recession -- or even just a rise in interest rates -- could put the outer regions back at the center of the next bust.
The push to the outskirts is being fueled by the more than 4 million new jobs created since 2013, historically low mortgage rates and a population bulge of millennials settling down. National Association of Realtors data show first-time buyers made 32 percent of existing-home purchases in May, up from 27 percent a year earlier.
“There’s a move to the next circle out,” said Joel Shine, chief executive officer of Woodside Homes, which builds in Arizona, California, Nevada, Texas and Utah. “It’s happening in all of our markets.”
Confidence about the industry’s prospects is the highest since November 2005, according to the monthly National Association of Home Builders/Wells Fargo index of builder sentiment released Thursday.
Seven Hills, about 90 minutes from downtown Atlanta at rush hour, is 12 years old and suddenly the area’s most popular subdivision -- with a median price about 22 percent less than metropolitan Atlanta’s. Houses are selling at a pace of about 175 a year, the most since 2007, said Eugene James, regional director for Metrostudy, which tracks new construction.
For Lamar and Sue Jones, the draw was a 1,900 square-foot three-bedroom in the Nature Walk neighborhood for just $210,000, worth it though their move added 30 minutes to his commute.
“You kind of get accustomed to it,” Lamar Jones, 64, said of the drive to his job selling natural gas industry products, which can take more than 100 minutes. “Sometimes I listen to motivational CDs.”
In Virginia’s Stafford and Loudoun counties, outside Washington, existing-home sales in June jumped 30 percent and 20 percent, respectively, according to Real Estate Business Intelligence. In the San Tan Valley, about 50 miles from Phoenix, the 547 single-family home permits in the first five months of 2015 were the most issued in the period since 2008, according to Michael Orr, director of Arizona State University’s Center for Real Estate Theory.
“It’s like a tide and, each month, it’s going a little farther out to the edges,” Orr said.
They’re the same edges that boomed during the housing bubble that burst with the biggest drop in home values since the Great Depression.
The exurbs’ comeback is precarious because they’re attractive to buyers who “could be more sensitive to mortgage-rate increases,” said Megan McGrath, an analyst with MKM Holdings. “The longer-term risk is that it’s a more vulnerable land position to hold ahead of the next housing downturn.”
For now, far-flung is hot in many parts of the U.S. The recovery’s even reached Stockton, a city almost 80 miles from San Francisco that filed for bankruptcy and had the highest U.S. foreclosure rate in 2012; it emerged from Chapter 9 in February.
Woodside Homes and KB Home have been raising prices in subdivisions where Stockton meets the almond orchards and Cabernet grape vineyards of the San Joaquin Valley. Woodside’s entry-level model starts at $268,000, up almost 40 percent from late 2012, when its community reopened after the crash.
“People like myself who used to sell foreclosed homes have changed,” said Paul Jacobson, a local real estate broker. “Now we’re traditional Realtors.”
In Mountain House, about 25 miles to the southwest, the bust was so bad that CalPERS, the California state employee pension plan, wrote down more than $1 billion of its investment in the community in 2008. But after years of dismal sales, 240 homes were purchased in the fiscal year ended June 30.
Erica Luna and her husband, Jesse Moncayo, paid $435,000 for one, a Lennar Corp. three-bedroom within walking distance of a new school. Her aunt lives with them and cares for the children -- ages 11, 9, 8 and 1 -- while their parents are working and commuting.
“You have to go to the valley to see the prices go down,” Moncayo, 34, said on the train home from his job as a health-care services recruiter for an insurance company, traveling through Altamount Pass, where electricity-generating windmills spin on golden-grass covered ridgelines. “Even if there’s another housing crash, we have good enough jobs that we can wait it out.”
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