Shifting the Suburban Housing Price Paradigm

Note: This article is in response to the NYT’s Allison Arieff’s wonderful article on the follies of pre-fab suburbs and how the American innovation ethic should be ashamed that cookie-cutter houses are one of our most easily identified exports. You can read the article at the link above (and I highly recommend you do so). 

Disasters do well when they’re glued to our memory through a short, descriptive nickname. We have Savings-and-Loan, Katrina, and the Dust Bowl, among dozens of other branded traumas. While the most recent trouble in this country doesn’t really roll off the tongue—sub-prime mortgage crisis—it tends to bring up a similar lexicon based entirely on placard signage with “foreclosed” being the most visceral and ubiquitous. A home was the most valuable asset in most people’s lives until, suddenly, it wasn’t.

The amazing glut of financial data we’re all drowning in explains the how and why succinctly once its reduced a little, but Allison Arieff’s opinion piece in yesterday’s Times is separate from any economic jargon and it implies an interesting question from the perspective of aesthetic-economics: Did our housing stock sink because it’s junk? The supersaturation of the housing market by prefabricated single-family homes is, as Ms. Arieff drives home, consummately uncreative and could in fact be economically disastrous. Ms. Arieff makes the argument for more creative takes on home design as part of a greater drive towards altering the suburban dialogue; less about me and more about we, in the least socialistic sense of the word. Does this house fit into the aesthetic of the surrounding nature? The topography and geography of the region? Do I need a house this big?

Those are important questions to ask when reconsidering the future of the suburban vernacular, but the future of the greener, more beautiful, geographically integrated and neighborly home rests on the back on consumers and builders who both take long looks at their wallets before making real estate decisions—now more than ever. Fortunately we can use the Housing Price Index (HPI) to see where design and economics overlap, at least heuristically.

There are dozens of neighborhoods that innately chained themselves to prefab suburbia but we are going to choose three for reasons of regional and economic smoothing: Irvine, CA, Lakeland, FL, and Dayton, OH. California and Florida were disproportionately eviscerated by the housing crises so any look at their respective HPI products should be with that caveat in mind (all data points taken from the Federal Housing Finance Agency):

LowHPI 1024x665 Shifting the Suburban Housing Price Paradigm

Housing Price Indices for Lakeland, FL, Irvine, CA, and Dayton, OH from Q1 2007 to Q2 2011

Dayton floats near the neutral HPI transversal while Lakeland and Santa Ana faced anywhere from +5 to -20 HPI indices in the course of 18 reporting quarters. On the balance they are a deep red and overall housing stock worth won’t recover without an absurdly robust financial resurrection. This is the harsh hangover of the boom times especially in the sun drenched, dream states of California and Florida where the construction of cookie cutter suburbs was strongest and excess housing stock is par for the impeccably manicured, Jack Nicklaus designed course. Amazingly, and for reasons I’m sure Rick Perry would quickly take credit for, the last head of the suburban Cerberus, Texas, saw general HPI increases in sprawling Houston and Dallas showing that money can often overcome aesthetic deficiencies.

The mirrored examples we’ll use are Ogden, UT, Peoria, IL, and Augusta, GA (controlling for incomes as much as possible is important when discussing economic shockwaves so you’ll see that the media incomes for all six cities are within one standard deviation except for Santa Ana [high outlier] and Dayton [low outlier]). These communities have something in common: they’re all pretty old. Older communities understandably have a lower proportion of prefabricated suburban model homes and tend to be more heterogeneous architecturally. That isn’t necessarily a precondition for an economic bulwark (see: Baltimore, MD and Detroit, MI) but this figure does present the necessary contrast:

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Housing Price Indices for Peoria, IL, Ogden, UT, and Augusta, GA from Q1 2007 to Q2 2011

Both of these graphs show that 2007 was a terrible year for the housing market universally; good design or not, most people’s houses were worth a lot less in 2007 than 2006. It’s also important to note that California and Florida were twin epicenters of overextended credit and misadventures in real estate so the track of their respective lines are more tumultuous than other states. The outcome in both those states is a bit of a conundrum though; prefabricated housing made it easier—financially and logistically—for developers to build oceans of cookie cutter neighborhoods, but are the ghost towns in California and Florida barren because they were priced inaccurately or because there are too many damn houses?

What we can read (inexactly, of course) is that non-streamlined design in cities of similar size and income have done significantly better in holding their values over the course of the recent recession. Regions with high levels of new construction (<20 years) have faced precipitously tumbles from their peak worths in the years before 2007. This economic extension of Ms. Arieff’s article on the folly of large, single family, unsustainable prefabs is, at best, a heuristic analysis of post-recession housing stock. But judging from the empty acres of perfectly symmetrical homes in Florida and California, there may be something to it.



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