Could Fewer Cars Mean Higher Home Values?
Here's a thought experiment: picture your nearest subdivision with for-sale signs dotting the yards. Now picture a high-rise downtown with easy access to theaters and restaurants, maybe a valet, and a transit stop a couple of blocks away.
If you give up your car, can you afford the high-rise? And will you miss your car?
Shakes things up, doesn't it? With news that the total number of American cars on the road shrank last year, a leading (albeit crunchy) think tank believes that Americans have lost their knee-jerk attachment to new cars. The Earth Policy Institute parsed federal data and concluded that the total stock of American cars dropped by two percent last year, from 250 million to 246 million. We can't declare whether this represents a long-term shift or a just a symptom of the recession, but let's consider for a moment about what it suggests about strength in housing markets.
The Institute's director, Lester Brown, argued that young people, who are more likely to live in cities with decent public transport, care less about cars than people in their 40s and 50s did when they were teenagers. That makes sense, since first-time home buyers generally avoided cities a generation ago.
Now that cities are safer and have improved parks, schools and newly revitalized downtowns, the urban market has more long-term credibility. And people buying starter homes in cities with decent mass transit have a much better shot at cobbling together a downpayment if they don't have to also make car payments.
Now, I'm a lot less certain than Brown that we've reached a tipping point. (Even at 246 million, that's still 5 cars for every 4 registered drivers). Maybe more people in cities are foregoing car purchases because there are fewer banks offering loans, or because more of them are immigrants leery of federal hassles, or because they're waiting for the car makers to come out of federal receivership. Maybe it's a moment that will fade like the new Knight Rider show. But it's certainly revealing about where to find resilient home values.
Let's take away this lesson from Earth Policy's report: in the aggregate, more Americans are open to living in high density areas. What does that mean for homebuyers?
If access to public transit becomes a factor in home purchases, that locks in a premium in markets that have just expanded subway or rail service -- good news for people who just bought in metro LA, Denver, Washington or other cities with robust transit budgets. (Heck, even Charlottesville has started sounding more serious about bus service.)
It also may mean higher taxes in the future for people in metro areas that have yet to expand or upgrade transit service -- if good rail lines become a lure, cities will compete to provide them. While New York City managed to issue bonds to pay for its only subway expansion in a generation (now crawling along toward a 2014 opening), most cities finance new transit with taxes.
If "smart growth" becomes a selling point -- and it arguably has -- places near shopping and offices will enjoy a premium over far-flung subdivisions. But in counties where smart growth has yet to take root, political battles over where to put high-density development will impact the tax and permitting picture in unpredictable ways.
The calculation quickly veers into emotional and long-range territory. Do the benefits of car-free living, in the short and long term, exceed the cost of future taxes to pay for mass transit? Do the advantages in air quality, stress avoidance, convenience and liberty from foreign oil justify a price premium for high-density homes?
It's just a blip. But the Earth Policy report suggests that more of our fellow citizens are ready to answer those questions with a yes -- and without honking their horns.