Sunday, March 1, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Wealth Gap: Many seek new homes near cities but are priced out

Wealth Gap Home Construction

This June 4, 2014 photo shows homes within the newly built Portland townhouse development in Phoenix. Americans increasingly say they prefer to live near the centers of cities and towns, where commutes tend to be easier and culture, restaurants and entertainment close by. It marks a pronounced shift away from the yearning for open suburban space that drove U.S. home construction for decades. (AP Photo/Matt York)

By
From page B14 | June 22, 2014 |

Josh Boak

WASHINGTON — City living has been a blessing for Tim Nelson.

The Phoenix lawyer moved downtown a few months ago into a new $389,000 home with a warehouse-style floor plan, a Jacuzzi tub and kitchen counters made of Caesarstone quartz. His favorite coffee spot is three blocks away. When the Arizona Diamondbacks play on Friday nights, he can watch postgame fireworks from his deck.

“I like the views,” said Nelson, 50. “My commute is almost nonexistent.”

Nelson has plenty of company.

Americans increasingly say they prefer to live near the centers of cities and towns, where commutes are typically shorter and culture, restaurants and entertainment close by. It marks a shift away from the yearning for open suburban space that drove U.S. home construction for decades.

But it carries a costly trade-off: Land in many cities has surged in price. And fewer Americans can now afford newly built homes in the walkable neighborhoods they desire.

The average price of a newly built home nationwide has reached $320,100 — a 20.5 percent jump since 2012 began. That puts a typical new home out of reach for two-thirds of Americans, according to government data.

Yet many builders have made a calculated bet: Better to sell fewer new homes at higher prices than build more and charge less.

Their calculation is partly a consequence of the growing wealth gap in the United States. Average inflation-adjusted income has declined 9 percent for the bottom 40 percent of households since 2007, while incomes for the top 5 percent exceed where they were when the recession began that year, according to the Census Bureau.

Buyers have historically paid about 15 percent more for a new home than for an existing one, a premium that’s reached 40 percent today, according to the real estate data firm Zillow. An average new home costs about six times the median U.S. household income. Historically, Americans have bought homes worth about three times their income.

The high prices and sparse construction are no help for a still-subpar U.S. economy. With new-home sales well below their historical average, construction firms need fewer workers. The economy remains 1.49 million construction jobs shy of its total in December 2007, when the Great Recession began.

After 60 years of migrating to car-dominated suburbs, polls show more Americans want out of long commutes in favor of neighborhoods where jobs and stores are nearby.

Stuck with pay that’s barely budging, many face a tough choice: Keep renting. Pile up huge mortgage debt to buy a home near their job. Or buy a cheaper home that requires a lengthy commute.

“Middle-class Americans are (being) squeezed out,” said John McIlwain, a senior fellow at the Urban Land Institute.

Low mortgage rates have eased some of the pain from rising prices. But the desire to live near town centers on costlier land could depress home ownership rates to as low as 60 percent, McIlwain estimates. That would be down from 65 percent today and 69 percent during the housing bubble.

About 40 percent of Americans still live in a suburb “where most people drive to most places,” according to a new poll by the American Planning Association, a trade group for community planners. But just 7 percent say they hope to stay in car-dominated neighborhoods. Those findings mesh with a March report on the preferences of millennials by Nielsen Holdings.

The construction business thrived for decades by bulldozing cheap farmland into suburban networks of streets and houses. But as farmland grew costlier, land prices in cities and towns with attractive amenities soared, says Christopher Leinberger, a professor at George Washington University and an industry strategist.

Homebuilder Toll Brothers spent $24 million in 2012 to buy two-thirds of an acre near Nationals Park in Washington. That’s equal to roughly $830 a square foot, compared with $5 a square foot before the ballpark existed, Leinberger said.

At the Walnut Hill Townhomes in Chattanooga, prices start at $610,000. The figure reflects a revival of that industrial city. A pedestrian bridge spans the river, carrying locals to gastropubs, gourmet tacos and a waterfront park.

Dale Mabee, who’s building the homes, said his material and land costs meant prices had to be $243 a square foot, nearly three times the average in the metro area.

“It’s almost a necessity to build at a higher price point to make the numbers work,” Mabee said.

Among the buyers was Spencer McCallie, a 77-year old former school headmaster. McCallie initially retired to a lakeside cabin about 30 miles outside the city. But its quiet pleasures were undercut by long drives downtown for symphony concerts and Rotary Club meetings.

“We didn’t want to have to come in 28 miles because we knew we’d have to come home late at night,” McCallie said.

The shift in tastes is among factors that are eroding home affordability despite still-low mortgage rates. Among other factors: tighter lending rules and difficulty producing down payments.

All of which helps explain why construction has yet to rebound with vigor. Just 433,000 new homes were sold on an annualized basis in April. Over the previous half-century — when the United States had a smaller population — annual sales had averaged 660,000.

Builders noted in recent earnings calls the higher prices and the decline in construction.

Richard Dugas, CEO of PulteGroup, says building entry-level homes isn’t profitable enough anymore.

Builder D.R. Horton says escalating prices have left first-time buyers “underserved.” It’s introduced a low-cost division with homes priced as low as $120,000, targeted in part at millennial buyers but located at the edges of suburbia where land is cheaper.

For those able to live downtown, the tight supply of new homes has forced them to act fast.

Crews broke ground last month on a 47-rowhome luxury development in Chicago. Every apartment — starting at $562,900 — sold before digging began. The rooftop decks survey the city skyline. Buyers are waiting 12 to 16 months for construction to finish before moving in, said Heather Gustafson of CMK Realty.

The homes are built in the Cabrini-Green area, once occupied by a housing project notorious for gang violence. The city began to demolish the project in 1995 and resettle residents, clearing prime real estate just a 20-minute walk from the office towers and trendy restaurants of Chicago’s Magnificent Mile.

Adam Kriticos, a mortgage broker, bought the last available home at the development, known as Basecamp River North. He had less than four days to make an offer after touring a model home. That didn’t faze him.

“It’s not like we’re overpaying for where the market is now,” he said.

 

The Associated Press

The Associated Press

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

  • Recent Articles

  • Enter your email address to subscribe and receive notifications of new posts by email.

  • .

    Solano News

    Peace and patience: Quilters gear up for show

    By Amy Maginnis-Honey | From Page: C1 | Gallery

     
    School bands compete in Pageantry on Parade

    By Susan Hiland | From Page: A1, 3 Comments | Gallery

     
     
    Police seek suspect in armed robbery

    By Bill Hicks | From Page: A3, 3 Comments

    4-H Presentation Day brings fun, education to Fairfield

    By Susan Hiland | From Page: A3 | Gallery

     
    Conservancy plans next Quail Ridge Reserve walk

    By Susan Hiland | From Page: A3

     
    The agony of the codling moth, ecstasy of worm-free apples

    By Christine Macgenn | From Page: C4

     
    What you eat can affect your medications

    By Marilyn Ranson | From Page: C4

    Tri-City NAACP honors community members at gala event

    By Bill Hicks | From Page: A5 | Gallery

     
    CAASC 18th Annual Chinese New Year and Scholarship Celebration

    By Steve Reczkowski | From Page: A5 | Gallery

     
    Rollover in Suisun City

    By Aaron Rosenblatt | From Page: A5, 1 Comment | Gallery

    State schedules ramp closure at freeway project site

    By Kevin W. Green | From Page: A5

     
    Appointments on tap for Board of Supervisors meet

    By Kevin W. Green | From Page: A5

     
    NY, SF town house prices through the roof

    By Bud Stevenson | From Page: B7

     
    Fairfield police log: Feb. 27, 2015

    By Susan Hiland | From Page: A9

     
    Suisun City police log: Feb. 27, 2015

    By Susan Hiland | From Page: A9

    Airmen with local ties finish basic training

    By Nick DeCicco | From Page: B10

     
    Force draws many from South, middle class

    By Tom Philpott | From Page: B10

    .

    US / World

    Christie to Calif. Republicans: No rush to pick 2016 nominee

    By The Associated Press | From Page: A1

     
    US missionary abducted in Nigeria is courageous, friends say

    By The Associated Press | From Page: C3

    Dress that ‘greatly resembles’ stolen Nyong’o gown found

    By The Associated Press | From Page: A5

     
    Weekend storm drops snow, rain, hail in California

    By The Associated Press | From Page: A5

    Churches, synagogues, mosques bear tough New England winter

    By The Associated Press | From Page: A6

     
    Hyundai recalls 263,000 cars due to power-steering problem

    By The Associated Press | From Page: A10

     
    Blind dog rescued after being lost for 2 weeks in the cold

    By The Associated Press | From Page: A10

    Details about proposed national monuments in California

    By The Associated Press | From Page: A10

     
    National monument supporters in California get antsy

    By The Associated Press | From Page: A10, 1 Comment

    US drone strike in Yemen kills 3 suspected al-Qaida fighters

    By The Associated Press | From Page: A11

     
    Greece will not seek another bailout, prime minister says

    By The Associated Press | From Page: A11

    Attacks kill 37 people in and north of Iraq’s capital

    By The Associated Press | From Page: A11

     
    Nemtsov a possible ‘sacrificial victim,’ investigators say

    By The Associated Press | From Page: A12

    .

    Opinion

    New school funding plan remains on bumpy path

    By Dan Walters | From Page: A8

     
    Even Gruber deserves a break sometimes

    By Megan Mcardle | From Page: A8, 2 Comments

    I might just vote for a Democrat next time around

    By Letter to the Editor | From Page: A8, 9 Comments

     
    Aging Fairfield housing agency faltering

    By Letter to the Editor | From Page: A8

    Editorial Cartoon: March 1, 2015

    By Daily Republic Syndicated Content | From Page: A8

     
    Sound off for March 1, 2015

    By Daily Republic | From Page: A8

     
    .

    Living

    Today in History: March 1, 2015

    By The Associated Press | From Page: A2

     
    Community Calendar: March 1, 2015

    By Susan Hiland | From Page: A2

    With numbers falling, Houston-area nuns’ future uncertain

    By The Associated Press | From Page: C3

     
    Horoscopes: March 1, 2015

    By Holiday Mathis | From Page: C4

    Kidney Walk participation helped give me a positive outlook on life

    By Kathy Mitchell and Marcy Sugar | From Page: C4

     
    .

    Entertainment

    Publisher launches line of Warhol e-books

    By The Associated Press | From Page: C2

     
    Q&A: Opera star Deborah Voigt writes of turbulent life

    By The Associated Press | From Page: C2Comments are off for this post

    PUBLISHERS WEEKLY BEST-SELLERS

    By The Associated Press | From Page: C2

     
    Review: ‘The Girl on the Train’ has realistic plot

    By The Associated Press | From Page: C2Comments are off for this post

    Take a look – Dr. Seuss has a new book

    By The Associated Press | From Page: C2

     
    TVGrid

    By Daily Republic Syndicated Content | From Page: B11

    .

    Sports

    Jeff Gordon takes a final spin at track that meant so much

    By The Associated Press | From Page: B1

     
    Vikings girls looking for first section title

    By Paul Farmer | From Page: B1 | Gallery

    Local Report: Vaca’s Aquino wins Masters wrestling title

    By Daily Republic staff | From Page: B1

     
    Phegley hopes his style will catch on in Oakland

    By The Associated Press | From Page: B1

    A year after meeting Tiger, Indian golfer on the rise

    By The Associated Press | From Page: B1

     
    Thunder’s Russell Westbrook has surgery on cheekbone

    By The Associated Press | From Page: B2

    Anthony Mason, rugged forward of 1990s Knicks, dies at 48

    By The Associated Press | From Page: B2

     
    Warriors center Festus Ezeli suspended for a game

    By The Associated Press | From Page: B2

    Reichelt leads Austrian World Cup downhill sweep

    By The Associated Press | From Page: B2

     
    Players’ union head: future spring games in Cuba possible

    By The Associated Press | From Page: B2

    Harrington takes 36-hole lead, then more rain in Florida

    By The Associated Press | From Page: B2

     
    Defending champ Federer beats Djokovic to retain Dubai title

    By The Associated Press | From Page: B2

    Safarova beats Azarenka to win the Qatar Open

    By The Associated Press | From Page: B2

     
    Environmental activists disrupt meeting by Olympic officials

    By The Associated Press | From Page: B2

    Hamilton hones Mercedes with fastest time at F1 testing

    By The Associated Press | From Page: B2

     
    Harvick wins Xfinity race at Atlanta for 3rd year in a row

    By The Associated Press | From Page: B4

    Stolen No. 44 NASCAR race car found in suburban Atlanta

    By The Associated Press | From Page: B4

     
    .

    Business

    For many in US, cash saved at gas pump is staying in pockets

    By The Associated Press | From Page: B7

     
    Fruits and vegetables get a star-studded marketing push

    By The Associated Press | From Page: B7

    Historic snows causing headaches for real estate industry

    By The Associated Press | From Page: B8

     
    Nevada casinos keep $953.7 million in winnings in January

    By The Associated Press | From Page: B8

    Boy, 13, builds Braille printer with Legos, starts company

    By The Associated Press | From Page: B9Comments are off for this post

     
    Recalls this week: hand trucks, ceiling fans

    By The Associated Press | From Page: B9

    Review: Freedom! These smartwatches leave the phone behind

    By The Associated Press | From Page: B9

     
    Greek prime minister rules out third bailout

    By The Associated Press | From Page: B9

    AP Exclusive: Fuel-hauling trains could derail at 10 a year

    By The Associated Press | From Page: B12 | Gallery

     
    .

    Obituaries

    Thomas Browning

    By Nancy Green | From Page: A4, 1 Comment

     
    Leah E. Hoffman

    By Nancy Green | From Page: A4

    John W. Van Wart

    By Nancy Green | From Page: A4

     
    Virgil Albert Hanson

    By Susan Hiland | From Page: A4

    .

    Comics