National realty investment advisors explores the end of the suburbs

National realty investment advisors explores the end of the suburbs
National realty investment advisors explores the end of the suburbs

For close to 100 years, suburban growth outpaced urban growth in America, but as the real estate professionals at National Realty Investment Advisors have observed, that the trend is changing—at least temporarily.

In the past few years, an evolving job market and lifestyle shifts have led to a reverse in the trend, with urban growth expanding and suburban growth slowing down. The year 2011 marked the first time in almost a hundred years that the rate of urban population growth outpaced that of suburban growth. In several metropolitan areas, building was also concentrated more on the “urban core” rather than the suburban fringe. Demand for large single-family homes is also dwindling, according to TIME’s Leigh Gallagher.

Gallagher explains that the American suburb emerged as a place where families could enjoy tranquil, tree-lined streets, center hall colonials, and soccer leagues. Before the invention of cars, suburban residents had to commute by train and walk once they disembarked. Because of this, homes had to be close to the station and close together. Shopkeepers also set up their storefronts around the station, creating a village center that catered to the day-to-day needs of the community.

However, the post-World War II housing shortage, as well as the widespread adoption of the car by the middle class allowed developers to free themselves from the constraints of public transportation. Today’s suburbs more often than not mean endless sprawl, a frustrating commute, and massive homes.

According to National Realty Investment Advisors, a real estate company based in Philadelphia, several factors are causing the current decline of the suburbs, including the rise in urban living (most notably among millennial) and the economic crisis of the past decade. A spokesperson adds, “The young group of workers coming out of college at that time had a disproportionately tough job market, and many had to move to cities to find employment.”

U.S. Census Data shows that 33 of the nation’s 51 largest cities saw their city centers grow faster than their suburbs in 2011. The overall population of city centers also grew 1.1 percent that year, while the surrounding suburbs grew by 0.9 percent.

Veterans United’s Jessi Hall writes that the de-industrialization of central cities, high gas prices, and changing values and preferences are contributing factors to this change. Hall notes that large-scale factories began disappearing from city centers in the second half of the 20th century. As manufacturers left the area, many related problems such as coal dust and other pollutants also began to disappear.

Without tenement housing and factory grime, cities have revitalized their downtown areas and inspired the demand for downtown offices and housing. High gas prices are also to blame for the trend toward urban growth, according to Hall, who cites Seattle as an example. In the Washington city, residents could save an estimated $11,682 per year by skipping a long commute and living in the city instead of the suburbs.

National Realty Investment Advisors notes that the rise in urban living has an effect on the real estate market in several ways. As a spokesperson further explains, “Rents in major urban centers are steadily rising, making urban real estate investment a good choice for those interested in rental properties.”

This trend has spurred the purchase of properties that need some work, which buyers renovate and turn around to charge rents that are higher than what they would have been the previous year.

Despite the change in urban growth, the real estate company predicts that the suburbs will remain alive and well, though urban growth could continue to outpace suburban growth in the coming year.

Hall adds that opinions differ on whether or not the trend will continue. Some analysts predict that an improving housing market will eventually lead people back to the suburbs. However, others believe that downtown living has a permanent future— and that, while the suburbs will continue to live, the city center will be the permanent hub.

According to Hall, the suburbs aren’t going anywhere and most suburban areas are still growing. The suburbs are also still the clear preference of those who buy a home. Fifty-one percent of homes purchased by buyers between July 2011 and July 2012 were in the suburbs or a subdivision, 18 percent were in a small town, 17 percent were in an urban area, and 12 percent were in a rural area.

Those who buy homes will likely continue to turn to the good schools, larger yards, and housing stock available in the suburbs. As the economy rebounds, the lure of suburban home ownership will also help the suburbs gain ground on urban growth, predicts Hall.

TIME’s Gallagher adds that many older suburbs are still going strong. Real estate developers are also beginning to construct new suburban neighborhoods that are mixed-use and pedestrian-friendly. These new communities allow residents to drive a mile or two for everything they need, rather than 10 or 20. They also allow residents to own one car instead of two, reducing costs.

The experts at National Realty Investment Advisors believe that, while urban growth is currently seeing a rise in popularity, the suburbs are here to stay.

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