Real Estate Trending: The Reurbanization Movement

Many demographics and real estate experts believe that the trend over the next decade will be a movement from the suburbs back to urban centers and suburban town centers. Here are four of the demographic categories that are leading the charge, and why.

If you’re reading an article about real estate trends and investment, you probably grew up in an era when middle class families lived in suburbs, yards and fences were valued, and sharing a wall with another home was not very desirable. After all, this is how post-World War II America thought and lived: if you could afford it, you moved to the suburbs and raised a family there, with a dog and several children.

This era may be coming to a close. Demographic experts and students of real estate trending believe that we are entering an era of “reurbanization,” when the middle classes will start moving back into city centers (or, in many cases, suburban town centers). And not only shifting away from the suburbs, but shifting towards a mentality of signing a rental lease instead of a sales contract, in many cases.

Why? What’s changing? Among other factors (such as cities more aggressively courting professionals and seniors), there are four reasons that experts point to when they explain this rising trend of the middle classes returning to the cities.

Trend 1: Early Baby Boomers (55-64)
This aging-but-healthy group of individuals (a sizable group at that – 26 million Americans) have been extremely vocal about their distaste for nursing homes and senior communities. Instead, many are selling (or in some cases being foreclosed on) their sprawling suburban homes now that their children have moved on, and are looking for a smaller, lower-maintenance home where they can walk to all the amenities they want. Where does leave them? Signing a rental lease on an apartment (or buying a condo) in a city or suburban town center, in a mixed-age community.

Many of these Baby Boomers are eschewing the one-way tickets to Florida that their parents took, in favor of staying closer to their children and grandchildren. They are also healthier than their parents, and more open to a lifestyle of walking everywhere, which makes them a great match for urban life.

Trend 2: Later Baby Boomers (46-54)
With substantial real estate challenges ahead of them, the 52 million Americans in this age bracket (who bought their real estate from the early baby boomers), are under water on their mortgages and have an infinitely smaller pool of buyers for their suburb homes (Generation X is much smaller). Further, the real estate market bust and economic downturn have deterred many of these later boomers from buying second homes, despite being at the historically-appropriate age to do so. Instead, many are just looking to get out from under their real estate debts, and downsize as their children leave home for college and their first jobs. And after all, that yard that was so handy when three kids were practicing sports now seems like an awful lot of work for two people.

Trend 3: Generation Y (18-33)
The 82 million Americans in this young adult category has watched their parents and peers lose the wealth they had invested in their real estate, which has made a permanent impression. At the same time, they’ve witnessed the urban revival of the last ten years, seeing cities become safer and more culturally active again just as they reached the perfect age to enjoy the urban joys of restaurants, bars, art galleries, theatres, and clubs. They like walking to work and to these cultural attractions, they like living close to one another for a game of beer pong, and they have no problem signing a rental lease and postponing buying a home for a while.

Trend 4: Immigrants
Immigrants have always formed clusters and neighborhood strongholds, generally among inexpensive but safe urban neighborhoods. The 40 million Americans who were born elsewhere will want to remain close to others from their culture and home countries, and will continue to populate urban neighborhoods and suburban town centers. As a final note, remember that immigration is the fastest vector for population growth.

While stories of towns in Michigan bulldozing their overdeveloped suburbs are the dramatic exceptions, the fact remains that demand for suburban, detached houses is on the decline, and more and more Americans are opting to sign a rental lease instead of taking the plunge of real estate ownership. While this trend does indicate a rise in real estate prices in urban centers, it also means safer cities with higher education and income levels, and more affordable suburban living for those who want it.

Article Tags: Real Estate, Suburban Town, Rental Lease, Baby Boomers, Million Americans

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