21 March 2018

Affordable Homes Drive Rebound in Exurbia

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The exurbs are starting to make a comeback, signaling that the housing market's recovery is slowly spreading beyond major cities. Areas on the outskirts of cities went bust earlier and harder than most other places during the housing downturn. That is partly because job losses, mortgage defaults and high gasoline prices hit families living there particularly hard, hampering home sales and construction in the far-flung neighborhoods. Builders, blaming weak demand in these areas, shifted to building on more expensive land closer to city centers.

Though definitions vary, exurbs generally are bedroom communities on the fringe of metropolitan areas, where homes account for most of the building stock, many residents make long commutes to work and agriculture or open land border the community on one or more sides.

Many economists deemed a recovery in these areas unlikely for several years. Yet many of the locales, specifically in the South and West, are rebounding earlier than expected for one main reason: relatively inexpensive housing costs.

Nationwide, median home prices for existing homes have risen by roughly 23% since 2009, while prices of new homes are up about 26%. In some cities, including Phoenix, Miami, Austin, Texas, and San Jose, Calif., home prices are at or near prerecession levels, leaving them out of reach for many families.

Meanwhile, average rents have increased 10% in the past three years to $1,100 a month in the top 79 U.S. markets, the highest level since research firm Reis Inc. began tracking rents in 1980. In contrast, home prices in these outskirts have remained relatively low, creating a draw for buyers weary of rising rent and home prices in city centers.

Some builders, too, are moving to the outskirts because land prices are substantially lower there. The nascent revival of these areas is occurring as home construction is slowly ramping up on a broader scale. Commerce Department data released Thursday show that builders started construction of 437,100 single-family homes in the first eight months of this year, up nearly 3.1% from the same period last year.

Research firm Metrostudy, part of Hanley Wood LLC, examined home construction in 10 mostly exurban counties across the U.S. It found that developers in the 10 counties produced 136.1% more home lots in the past four quarters than in the previous year, handily outpacing the broader market's 46% increase in that span. Those communities also saw an 18.9% increase in home construction starts in that span, exceeding the broader market's 17.2% increase.

Consider the recovery of Homestead, Fla., a town roughly 20 miles south of Miami best known for suffering the worst damage from Hurricane Andrew in 1992. It is a classic exurb, with rows of stucco-walled homes surrounded by palm-tree farms and, to the west, the Everglades. Many residents here commute to jobs in larger cities such as Miami and Fort Lauderdale.

Homestead was devastated from 2008 to 2011 by rampant foreclosures, plunging home values and a near halt to new construction. But now Homestead is rebounding as construction crews are erecting new houses and a new city hall. Homestead has become a magnet in the past year for families in South Florida looking for bargain-priced housing.

Lennar Corp., the largest home builder in Homestead, has seen sales here rise from a low point of 66 in 2010 to a projected 230 this year. Lennar's prices in Homestead range from $170,000 to more than $300,000.

Click here to access the full article on The Wall Street Journal. 

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