If People Go Back to Renting, Will it Revitalize Urban Areas?


At some point, the common sense idea of living in urban areas is going to come back into vogue. I think it is most of the way back to that point; more and more people are realizing that living in urban areas is doable if they are willing to trade their cars for public transportation. As mundane as that idea might seem to people who read blogs and look at news with a more skeptical eye, this transformation is difficult to explain to people who think that the key to happiness lies with being comfortably ensconced in a suburban house tens of miles from where they work.

Urban areas are becoming more livable. And now, with the transformational change that is happening in America's housing market, the idea of living in an American big city is becoming more acceptable. Would you live in a large American city? Would you live in Edmonton (pictured above) if everything were right for you? Or would you look at any urban area and say no? I have found it interesting to pose that question by changing it up and adding an urban area like those found in the Midwest or in Canada. Does a little creeping racism show when you do that? Perhaps. But all major cities have some form of diversity. Accepting that diversity, adapting to social changes, and learning to abandon the ideal of a distant suburban "paradise" have helped a number of people change their lives.

When you look at things like this, you can't help but wonder why it didn't happen much earlier in American history:
A major index of home prices in 20 major U.S. cities hit its lowest level since 2002, and 12 of those cities hit a new recession low in March.

Since this time last year, home values in the index -- the Standard & Poor's Case-Shiller index -- have plunged 5.1 percent.

"What's happening," real estate attorney Shari Olefson told CBSA News, "is there's more supply than what can be absorbed. The prices are going down and that's causing adverse feedback because it's causing people to be more fearful of buying."

Plummeting home prices are causing many pondering taking the plunge into the home-buyers' market to ask which makes more sense: buying or renting.

"In 80 percent of the major cities in the country right now," CBS News Business and Economics correspondent Rebecca Jarvis pointed out, citing new numbers from real estate research firm Trulia, "it's actually a better deal to buy a home than it is to rent that very home, in a lot of the places where we've seen foreclosures hit them the hardest, from Detroit to Las Vegas, Phoenix, Miami -- these are places where it makes more sense to own on a month-to-month basis, because you're going to pay less monthly than you would in rent in those cities."
If the home you're living in isn't worth anything, would you leave it in order to live in an urban area where the rent might be less than your mortgage? Would you walk away from it and accept that kind of change? What really is best for your children or your family situation?

The problem is with this research is that it comes from the real estate industry itself.  Based on looking at some of the real estate agent comments about Trulia here, I would say that any research that they do is going to tilt towards the real estate industry. They engage in practices that put a "best foot forward" and that's fine. But research that indicates trends should come from disinterested third parties, and Trulia caters to the marketing needs of real estate agents. That makes their analysis suspect in my eyes.

People are eventually going to give up on the suburban dream and find themselves in urban areas. That, in turn, might fuel the growth of industries that can make urban living more affordable, greener, and more comfortable. A real entrepreneur would be looking at these trends with an eye towards catering to people who want to live where they can afford to live. What sorts of things would go with that kind of lifestyle?