Census: Cities, not exurbs, have been growing

Posted: April 06, 2012

The nation's prolonged economic downturn appears to have claimed another victim: expansion of suburbs at the edges of metropolitan areas.

For the first time in almost two decades, data released by the Census Bureau show, the annual growth rate of cities and adjacent communities has surpassed metropolitan fringe areas.

Since 2010, the data show, cities and older "ring" suburbs have posted an annual 0.8 percent increase in growth, compared with 0.4 percent for exurbs. That means some of the fastest-growing edge areas disappeared from a list they had dominated for most of the previous decade.

For Philadelphia, growth since the 2010 census has translated to a population increase of 10,465, mainly the result of an increase in births.

But John Kromer, senior consultant at the Fels Institute of Government at the University of Pennsylvania, said the data "reinforced the findings of Philadelphia's population increase in the 2010 census," the first since 1950.

In contrast to suburban areas, where residential builders have been hamstrung by lower demand, tightness of credit, and competition from cut-rate short sales and home foreclosures, "throughout the recession, the city . . . experienced a growth in infill construction and upgrading of existing housing stock, with the expectation that activity will pick up speed as the economy recovers," Kromer said.

High energy prices, for gasoline and home-heating fuel, are a contributing factor in this region and elsewhere, observers say.

Of the national census data released Thursday, Kevin Gillen of Econsult Corp. in Philadelphia, who tracks the region's housing patterns, said: "It really does seem to be fundamentally different this time around."

During past economic downturns, Gillen said, "the further away you were, the better off you likely were."

In 2006, at the height of the housing boom, exurbs nationwide grew 2.1 percent, according to census data, compared with a 0.2 percent loss for cities and their near suburbs.

In Philadelphia, Kromer said, immigration has contributed to the city's recent population growth.

But throughout the housing bust, Gillen said, it's also been true that "the more centrally located you are, the better that your home has continued to hold its value" - a sign people are gravitating once again toward the jobs and other amenities of life in the city or just beyond.

During the real estate downturn of 1990-94, which followed the housing boom of 1987-89, the typical home in Philadelphia depreciated in value 19 percent, while the average home in its suburbs fell in value a scant 3.7 percent, Gillen said.

When the most recent boom went bust, homes in the city and suburbs lost value, he said, but Philadelphia home prices have fallen an average of 18 percent from a peak in 2007, compared with a 22 percent drop in the suburbs.

Mark Zandi, chief economist at Moody's Analytics in West Chester, said the bursting of this housing bubble "was especially hard on homeowners who had stretched to get into homes by buying in less-pricey exurbs surrounding major cities."

"Many borrowed using subprime and other risky types of mortgage loans," Zandi said. "The collapse in housing in these areas also hammered the economy and jobs. . . . These households have since lost their homes and are now back renting closer in to the urban centers, where there are more jobs."

The Inquirer's most recent Home Price Survey, published in October, offered examples of prices in the region in August 2007 - the height of the housing boom locally - and second quarter 2011 that signaled the shift.

Closer-in suburban communities, mostly in central Bucks, Chester, and Montgomery Counties and western Delaware County, appear to have gained longer-term value, according to an overall Econsult analysis that looked at 376,257 regional sales from April 1, 2005, to June 30.

Communities on the suburban fringe fared less well - Upper Oxford (down 20 percent) and West Caln (down 27 percent) in Chester County and Springfield, Bucks County, (down 30 percent) - as the struggling economy continued to shut thousands of first-time and less-well-off buyers out of the market.

The city and older suburbs have benefited as those who would typically have been buying their first homes are renting instead. As the for-sale market has faltered, Zandi said, the rental market has gained in popularity.

From the late 1990s to 2006, suburban builders' focus was on single-family homes, leaving a shortage of apartments and few projects in the development pipeline.

"It's much easier to develop rental in the city than suburbs," Kromer said, adding that "investors nationally are buying up thousands of foreclosed properties and converting them to rentals."

Another source of new city dwellers is aging baby-boomer suburbanites, but the slow resale market and hefty declines in home equity have squeezed what city developers had assumed would be a flood into a trickle.

That has affected the exurbs, as well, where age-restricted and active-adult communities popped up in farmers' fields in the 2000s. Some communities in Egg Harbor Township, Atlantic County, for example, have had slower sales because aging boomers were unable to sell their suburban homes and downsize.

Among other factors at work against the exurbs are high energy prices - for gasoline, which increases commuting costs, and for home heating and cooling, which has pushed some buyers with tighter budgets into smaller houses in the city and near suburbs, rather than McMansions in the exurbs, real estate experts say.

"We don't appreciate how energy conservation is important to the economics of the real estate market," Kromer said.


Contact Alan J. Heavens

at 215-854-2472, aheavens@phillynews.com, or follow @alheavens on Twitter.

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