What does a driver’s license have to do with home prices? Experts think they might be a clue to a mystery, namely why home prices in outlying suburbs have remained depressed, while values in suburbs closer to city centers have largely rebounded from the steep declines sparked by the financial crisis last decade.
Closer-in locations typically enjoy price recovery first, but outlying suburbs are taking longer than expected. “In my 26 years in the business, the price discount available to someone who is willing to commute has never been greater,” writes John Burns, in an article posted website of his company, John Burns Real Estate Consulting.
Today, only 78 percent of 20- to 24- year-olds drive, compared to 93 percent in 1978. “I think the delay in getting a driver’s license is consistent with many of the trends in delaying other young adult milestones: graduating college, getting a first job, getting married, having a child, buying a home,” explains Chris Porter, chief demographer at John Burns Consulting. Meeting those milestones meant new households started buying homes — and those within their price range were usually in farther flung suburbs. “There is no denying a buyer gets more for their dollar the further out from the city they travel,” agrees Joe Castillo, broker/owner, ERA Mi Casa, Chicago.
But it’s not just procrastination that’s impeding the price recovery. Following the recession, there’s been a shift in lifestyle choice, with more opting to live near cities and job centers, notes Porter.
This trend won’t last, because young adults will reach the milestones, albeit “at a later age than their parents or grandparents,” Porter predicts. Moreover, because outer-ring home prices are so depressed, today’s buyers may enjoy more pronounced price appreciation in the future.
During the housing boom early last decade, builders quipped that buyers could “drive until they qualify.”
Today, home buying bargain hunters may have to get a car and license first.
© CTW Features