The American Suburb Is Bouncing Back

From the very inception of the current downturn, sprawling places like southeast California's Inland Empire have been widely portrayed as the heart of darkness. Located on the vast flatlands east of Los Angeles, the region of roughly 3 million people has suffered one of the highest rates of foreclosures and surges in unemployment in the nation.

Yet now George Guerrero, a top agent at Advantage Real Estate in Chino Hills, says he can see the light, with sales picking up and inventories finally beginning to drop. "There's been a real surge in sales," Guerrero says. "The market has come back to where it should be. I think we are ahead of the curve here of the overall recovery."

Of course, for the moment, much of this growth is concentrated in foreclosure sales. However, even developers of new properties, such as Brookfield Homes , also report a strong uptick in sales. In his new developments in the Inland Empire, notes Adrian Foley, head of Brookfield's Los Angeles area office, sales are up 150% since six months ago.

Although the economy is still hurting, the housing trend has become much more positive. Statewide, existing home sales have jumped 30% over the past year, taking the inventory from an estimated 16.7 months to less than seven months. In Chino Hills, it is down to six months.

Most encouraging, this activity is taking place exactly where the market was hit hardest in the beginning – in the suburbs and at the lower end of the market, which in the Inland Empire means between $150,00 to $300,000. This could presage the resurgence of the suburbs and the prospects for the middle and working classes once again to purchase their piece of the American dream.

Nor is this merely a Californian phenomenon. Nationwide, existing home sales – predominately in the suburbs – have been on the rise for the last few months. The strongest growth is occurring in Sunbelt markets in Arizona, Nevada and Florida, as well as in California. These places experienced some of the greatest surges in prices, which forced many buyers to turn to subprime and interest-only loans.

These loans are largely not available today, Guerrero notes. Instead of financial quackery, lower prices – sometimes as much as 50% below peak – are allowing new buyers to buy affordably. In 2007, Inland Empire median house prices were roughly seven to 10 times the average annual income of potential buyers. Now they are settling close to the historic norm of three times.

But not everyone will be happy to see life return to the suburban housing tracts. Indeed, for some self-proclaimed urbanists, planners and pundits, this development might seem almost nightmarish.

Long the Rodney Dangerfield of American geographies, suburbs have never been popular with the country's intellectuals, academics and planners. The destruction of community, racial segregation, expanding waistlines and a host of environmental sins – from consuming too much gas to helping create global warming – all have been blamed on the suburbs.

When the mortgage crisis first hit, some urbanists, not surprisingly, were quick to blame the suburbs – instead of Wall Street – for the financial meltdown. With energy prices on the rise, they persuaded themselves and the ever-gullible mainstream media that the long-awaited "back to the city" jubilee was imminent.

In contrast, the suburbs and exurbs, crowed Brookings' Chris Leinberger, were soon to become "the new slums." As the middle classes trudged their way back to Boston and other suitably dense big cities, James Howard Kunstler – the "shock jock" of the new urbanist movement and a leading apostle of the "peak oil" thesis – happily proclaimed, "Let the gloating begin."

Yet as George Guerrero could tell them, a dream is not a thing so easily destroyed. The American landscape continues to change, but perhaps not entirely in the ways so eagerly projected by urban boosters and their media claque.

For one thing, even with the higher energy prices of last year, there seems to be, in fact, no notable shift of population to the urban core. Instead, as demographer Wendell Cox has pointed out, the recession may have slowed migration, but the trend toward the suburbs and sprawling Sunbelt cities has not ended or reversed.

At the same time, the once-widely ballyhooed market for dense urban living has unraveled. The "gospel of urbanism" may be accepted as such by most of the mainstream press, most notably The New York Times and Atlantic Monthly, but on closer examination the new religion has limited numbers of converts. In many locales – from Massachusetts to Los Angeles – inner-city condominium projects are losing value at least as much or more than suburban single-family houses. In San Diego, for example, condo prices have dropped in some developments by 70% since 2007, twice the decline in the overall market.

The problem has much to do with timing. In many areas, urban condominium developers continued to build even as the economy soured, largely due to the longer lead times and financing arrangements around such projects. Yet as the prices of houses have dropped many potential condominium dwellers have opted to purchase single-family homes – or are sitting anxiously on the sidelines waiting for prices to drop further.

As a result, foreclosure rates for condominiums, according to the Federal Deposit Insurace Corp., are on average one-third higher than for single-family residences. You do not have to travel to the outer exurbs to find zones of foreclosures, bankruptcies and the turning of ownership properties to rentals. Towers are either unoccupied or have gone to rental in markets as diverse as Miami, central Atlanta and downtown L.A. Even Chicago, the poster child for urban gentrification, now suffers from abandoned "condo ghost towns."

Manhattan, too, which long saw itself as immune to the housing downturn, is now experiencing the most precipitous price decline since 1980. Big urban developers across North America are filing for bankruptcy, including the largest private landowner in downtown Los Angeles, just like suburban builders were last year.

As someone who lives in – if you consider L.A. a city – and likes cities, I do not greet the urbanization of the housing crisis as an unalloyed positive. Yet one can hope that lower prices and interest rates – as well as the administration's tax credits for up to $8,000 for first-time buyers – could allow more people to consider an urban option, if that's what they want.

However, this will not be where the bulk of the action will take place. Surveys consistently show that between 10% and 20% of people want to live in dense cities. In a country that will gain 100 million people over the next four decades, that's 20 million, not exactly what you'd call chopped liver.

But the bulk of growth will continue to be in the 'burbs. The main reason is simple enough for almost anyone but a planning professor, architect or pundit to comprehend: preference. Virtually every survey reveals that the vast majority of Americans – and around 80% of Californians – prefer single-family homes that generally are affordable only in suburban areas. The fact that jobs have also continued to move inexorably to the periphery – as a newly released Brookings report demonstrates to liberal think tanks' own undisguised horror – makes living in the 'burbs even more attractive.

These trends lead developers like Randall Lewis in Upland, Calif., who has suffered the downturn in the Inland Empire, not to dismiss the suburban future. He takes note of a recent 10% to 20% surge in sales among the 18 projects his company is now working on, all in suburban projects in California and neighboring states.

"The basics of the suburbs are still there," Lewis suggests. "Schools are important, but also people like the sense of place. But the basic amenities are children, grandchildren, where people go to church, where their work networks and friends are."

Lewis also rightly adds that a somewhat different suburbia will emerge from the crash. It will be a "melting pot," he suggests, "not just by race, but by ages and lifestyle." You will see more singles, empty-nesters and retirees as people choose to "age in place" close to where they have settled. There likely will be more smaller-lot, townhouse and other mixed-density developments closer to burgeoning suburban job centers.

But even as they change, the allure of suburbs – and the single-family house – will not fade and could even grow as they develop more city-like amenities. The fundamental desire to own a place of your own, to possess some private space and a relatively quiet environment has not died. Nor is it likely to without the imposition of a draconian planning regime.

For right now, it's all enough to make George Guerrero a born-again optimist. "There's something healthy just beginning to happen out here," he says. "This time people with good credit are getting good deals at good prices. It's a wonderful thing to see."

This article originally appeared at Forbes.

Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History and is finishing a book on the American future.