Sunday, April 19, 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

.

Solano News

Waiting game: Woman, toddler hope for kidney transplants

By Amy Maginnis-Honey | From Page: C1, 2 Comments | Gallery

 
Tiny twins call Heather House their 1st home

By Amy Maginnis-Honey | From Page: A1, 35 Comments | Gallery

Solano ranks last in Bay Area for health

By Ryan McCarthy | From Page: A1, 2 Comments | Gallery

 
SID to consider water rate hikes

By Kevin W. Green | From Page: A1

 
 
City announces Browns Valley Road closures

By Bill Hicks | From Page: A3

Healthier Living program begins mid-May

By Kevin W. Green | From Page: A3

 
Bachelor party turns into community event

By Susan Hiland | From Page: A3, 2 Comments | Gallery

Il Fiorello serves up chocolate desserts

By Susan Hiland | From Page: A3 | Gallery

 
Coping with seasonal allergies

By Emerita Brigino-Buenaventura, M.d | From Page: C4

When to throw in the towel on sickly plants

By Karen Metz | From Page: C4

 
Church hosts health, wellness fair

By Susan Hiland | From Page: A5 | Gallery

Solano superhero back in school

By Kevin W. Green | From Page: A5

 
Weather for Sunday, April 19, 2015

By Daily Republic staff | From Page: B6

Home, garden show offers something for everyone

By Bill Hicks | From Page: A6 | Gallery

 
2 nations at center of market drop

By Bud Stevenson | From Page: B7

Vanden robotics team ready to compete in world championships

By Bill Hicks | From Page: A7 | Gallery

 
Fairfield hotel gets major renovation

By Kevin W. Green | From Page: B7 | Gallery

 
Teen victim of Dixon shooting dies

By Bill Hicks | From Page: A7, 2 Comments

Land use, design, project synergy key to growth

By Brian Miller and Karl Dumas | From Page: B7

 
Fairfield police log: April 17, 2015

By Glen Faison | From Page: A9

Suisun City police log: April 17, 2015

By Glen Faison | From Page: A9

 
Commissary-Exchange pairing gains steam

By Nick DeCicco | From Page: B10

Airmen with county ties complete training

By Nick DeCicco | From Page: B10

 
.

US / World

San Francisco marks anniversary of 1906 earthquake

By The Associated Press | From Page: A7

 
Time plus distance help some Oklahoma City victims move on

By The Associated Press | From Page: A7

 
Scarlett O’Hara outfit fetches $137,000 at auction

By The Associated Press | From Page: A10

Turin Shroud goes back on display for faithful and curious

By The Associated Press | From Page: A10

 
Caged puppies on car roof trigger dozens of 911 calls

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

French replica of revolutionary frigate sets sail for Boston

By The Associated Press | From Page: A11

 
Islamic State blamed for Afghan suicide bombing killing 35

By The Associated Press | From Page: A12

.

Opinion

Talk about corruption

By Letter to the Editor | From Page: A8, 4 Comments

 
Justice not served

By Letter to the Editor | From Page: A8, 23 Comments

 
Clinton should spruce up a bit

By Letter to the Editor | From Page: A8, 17 Comments

 
Sound off for April 19, 2015

By Daily Republic | From Page: A8, 1 Comment

 
.

Living

Community Calendar: April 19, 2015

By Susan Hiland | From Page: A2

 
Today in history: Sunday, April 19, 2015

By The Associated Press | From Page: A2

 
Vatican unexpectedly ends crackdown of US nun group

By The Associated Press | From Page: C3

Horoscopes: April 19, 2015

By Holiday Mathis | From Page: C4

 
Wife needs to decide if she can tolerate husband’s binge drinking

By Kathy Mitchell and Marcy Sugar | From Page: C4

.

Entertainment

PUBLISHERS WEEKLY BEST-SELLERS

By The Associated Press | From Page: C2

 
Anna Kendrick has book of essays coming out in 2016

By The Associated Press | From Page: C2

Phil Klay, Leslie Jamison among PEN award nominees

By The Associated Press | From Page: C2

 
.

Sports

Crawford, Heston lead Giants to win

By The Associated Press | From Page: B1

 
Curry scores 34, Warriors beat Pelicans 106-99 in Game 1

By The Associated Press | From Page: B1 | Gallery

Reddick’s 3-run homer sends A’s to 5-0 victory over Royals

By The Associated Press | From Page: B1

 
Cal defense shines for a change at scripted spring game

By The Associated Press | From Page: B1

 
Jones throws 2 TDs, wins challenge at Ohio State spring game

By The Associated Press | From Page: B2 | Gallery

Serena Williams gets a rare test from Giorgi but holds on

By The Associated Press | From Page: B2

 
Tom Watson: Next Masters might be his last

By The Associated Press | From Page: B2

Free agent center Wisniewski signs 1-year deal with Jaguars

By The Associated Press | From Page: B2

 
Pete Rose hired by Fox as special guest studio analyst

By The Associated Press | From Page: B2

Marcotte, Ryan win US cycling Criterium championships

By The Associated Press | From Page: B2

 
Independent league experiments with 3-ball walks

By The Associated Press | From Page: B2

Merritt maintains edge through 3 rounds at RBC Heritage

By The Associated Press | From Page: B2 | Gallery

 
As Spurs know, international players can impact NBA playoffs

By The Associated Press | From Page: B3 | Gallery

Rose scores 23, Bulls beat Bucks 103-91

By The Associated Press | From Page: B3

 
Harden has 24 points, Rockets beat Mavs 118-108 in Game 1

By The Associated Press | From Page: B3

Pierce leads Wizards past Raptors in OT in Game 1

By The Associated Press | From Page: B3 | Gallery

 
Hometown report: Little League baseball

By Daily Republic staff | From Page: B4

Hometown report: Youth track

By Daily Republic staff | From Page: B4

 
Kenseth content in car and not contemplating retirement

By The Associated Press | From Page: B4 | Gallery

Logano leads flag-to-flag to win Xfinity race at Bristol

By The Associated Press | From Page: B4 | Gallery

 
This date in sports history for April 19

By The Associated Press | From Page: B5

 
.

Business

Using a prepaid card? Avoid getting socked with fees

By The Washington Post | From Page: B7

 
This year’s fight for the tech industry: Patent trolls

By The Associated Press | From Page: B8

Recalls this week: blowers, bike hooks, mattresses, toys

By The Associated Press | From Page: B8

 
IMS: US prescription drug spending jumped 13 percent in 2014

By The Associated Press | From Page: B9

Fast-growing Asian aviation confronts safety challenges

By The Associated Press | From Page: B9 | Gallery

 
 
.

Obituaries

Carole Anspach

By Nancy Green | From Page: A4

 
Frances Bayona Lozano

By Nancy Green | From Page: A4

Robert Larkin

By Nancy Green | From Page: A4

 
Barbara Medders

By Nancy Green | From Page: A4

Carrol “Carl” Gordon Parker

By Nancy Green | From Page: A4

 
John Thompson

By Nancy Green | From Page: A4

Allen Ellsworth Dolby Sr.

By Nancy Green | From Page: A4

 
Sterling Jenkins

By Nancy Green | From Page: A5

Dennis Burkhart von Ting

By Nancy Green | From Page: A5

 
.

Comics