Who is Driving the Real Estate Market?

Baby Boomers and young, professional adults are driving the real estate market recovery. And, interestingly enough, these huge demographic groups are looking for the same thing in a home.

Baby Boomers, who are downsizing as their children leave home, and the millennial generation, are both looking for smaller homes in central city neighborhoods and close-in suburbs that offer walkability, transportation and shopping. But these homes are getting harder to find with Denver buyers experiencing bidding wars.

And the "deals" that we saw in the last couple of years are now few and far between. "Such 'walkable urban' real estate has experienced less than half the average decline in price from the housing peak." states a Brookings Institute article. "Property values in the high-end car-dependent suburb of Highlands Ranch are now lower than those in the redeveloped LoDo neighborhood near downtown."

This trend, however, has been evident in many cities for a number of years. The researchers noted that "at some point during the last decade, the lines crossed. The last time the lines crossed was in the 1960s-and they were heading the opposite direction."

"It was predominantly the collapse of the car-dependent suburban fringe that caused the mortgage collapse." writes Christopher Leinberger for Brookings.com. "Drive through any number of outer-ring suburbs in America, and you'll see boarded-up and vacant strip malls, surrounded by vast seas of empty parking spaces. These forlorn monuments to the real estate crash are not going to come back to life, even when the economy recovers. And that's because the demand for the housing that once supported commercial activity in many exurbs isn't coming back, either."

The growing demand for walkable neighborhoods is apparent, based on ever-worsening traffic congestion, high gasoline prices, and the fact that many cities have become safer, thanks to falling crime rates, and the revitalization of retail, office and entertainment places.

"Demand for standard-issue suburban housing is going down, not up, a trend that was apparent even before the crash." notes Leinberger, "In 2006, Arthur C. Nelson, now at the University of Utah, estimated in the Journal of the American Planning Association that there will be 22 million unwanted large-lot suburban homes by 2025."

(Read: The New Revival of the Suburbs)

photo credit: IIP State