Tuesday, December 13, 2011

Sacramento Bee: Study shows shift away from suburban housing demand

Report: Sacramento-area housing shift seen as suburban spreads lose appeal

Published: Tuesday, Dec. 13, 2011 - 12:00 am | Page 1A
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Is Sacramento's long-standing love of suburban living winding down? A blunt new analysis says yes, but some local builders say no way.

The report released this week by the Urban Land Institute contends that Sacramento and other California metropolitan areas are about to discover they have an "oversupply" of classic subdivision housing, thanks to a sea change in what buyers want and can afford.

Younger people are postponing homebuying, the report says, and when they do buy, more of them will opt for denser, urban-style housing, including small-lot homes, town houses and condominiums near transit, jobs, nightlife and other amenities. A higher percentage are likely to rent indefinitely because they cannot afford a home. At the same time, more baby boomers will seek buyers for their suburban spreads.

If the ULI's view holds true, some middle class neighborhoods already hit by recession and foreclosures could deteriorate further. One local planner says he fears an end result could be community blight.

The study could also have significant implications for the thousands of new suburban homes that have either been approved or are awaiting approval in the Sacramento region, but haven't been built yet. During the mid-2000s housing boom, Sacramento experienced enormous expansion in suburbs such as Elk Grove, Roseville, Lincoln and North Natomas.

"This is a reality check," said Kate White, a director with ULI, a national group of developers and academics with an urban focus. "We've really overbuilt in one particular housing type."

White said the ULI and Rockefeller Foundation sponsored the report, called "The New California Dream," to give planners a glimpse of evolving housing needs in metropolitan California in the post-recession period. The report was written by Arthur Nelson, a planning professor at the University of Utah, based on analysis of demographic trends and consumer-preference surveys.

Nelson's stark conclusion is that Sacramento could have an excess of 230,000 conventional-lot homes by 2020. That's a 40 percent oversupply. He defines those as houses on lots larger than 5,000 square feet, the typical post-World War II subdivision size. They can be found in old and new neighborhoods around the region.

It doesn't mean those houses will stand vacant, Nelson said. But he said it may mean aging residents will be stuck in houses they no longer want, or won't get the sales prices they expected.

And, unless builders provide more apartments and denser infill housing, many first-time buyers and downsizing older residents won't be able to find the type of housing they want.

"The message," Nelson said, "is think twice before expanding the current supply of (homes on) large lots."
Dennis Rogers of the North State Building Industry Association called that message laughable.

"I reject flatly his assumption," Rogers said.

Rogers, who had not yet seen the report, said it sounds like the ULI is pushing an urban-infill agenda. He said builders are adding density and additional housing types to their developments, including those in the suburbs. But he said plenty of Sacramentans, including younger buyers with kids and people moving from the Bay Area, still want the traditional suburban lifestyle.

While some baby boomers will downsize, he said, others will want to retire to a house with a bigger yard.
Yet University of Southern California demographer Dowell Myers says report author Nelson has the basics right. Myers' research indicates the shift began five years ago, but is hard to view statistically because so few houses are being bought and sold during the recession.

A just-approved project in central Sacramento may embody the trend Nelson and Myers have identified. The planned Northwest Land Park urban village will house 2,000 people in town houses and densely packed homes near downtown. Developer Ranch Capital has its eye on first-time buyers.

"The oversupply of homes in the area is like having a car lot full of Suburbans in a market that wants Ford Fiestas," Ranch Capital spokesman Kevin Smith said.

Historically, though, Sacramento-area residents have snapped up plenty of SUV-sized homes. And some cities plan to build more.

The city of West Sacramento, for instance, is looking to add some "executive-style" houses on big lots to complement denser, urban-style housing that's gone up in the past few years. The goal: to get business owners to locate in the city.

"We needed (a) more diverse housing stock," Mayor Christopher Cabaldon said.

Planners with the Sacramento Area Council of Governments say their own demographics studies predict a need for more housing styles, more density, and more infill construction. Recent state laws regarding greenhouse gas emissions – notably SB 375 – are pushing the point, requiring Sacramento and other urban areas to head in that direction as well.

But just how far in that direction is right for Sacramento? Or, as USC's Myers put it, what's the new normal?
Mike McKeever, SACOG's chief executive officer, said Sacramento's leaders need to keep an eye on the trend Nelson identifies, because the implications of getting it wrong could be serious.

"If you overbuild any type of (housing style), an oversupply is going to drive down price and property values," he said. "We worry about blight."

Nelson himself says he expects to see a transformation in who lives in larger homes. As baby boomers pass away, those homes may pass forward to multigenerational families, including immigrant families, or may become rentals populated by unrelated people.

"These larger homes will become the next generation of affordable housing," he said. "It's already happening."

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