Sane Asylum: Suburbs and the American Middle Class




Americans love their suburbs.  Suburban living almost defines the American way of life.  Privacy, both homes and backyards.  Space.  Peace and quiet, except for power mowers and leaf blowers.  Compare this with the high cost of space, peace and quiet in cities.

Suburbs are a refuge from the stress of live and work in America.  They are places where nothing happens.  Little or no violent crime.  No class conflict.  Family oriented.  Acceptable schools at a lower cost than private schools in cities.  Lots of space for playing fields and organized sports for kids.  I sometimes think this is the main activity in suburbs.

When Americans retire, they move to “senior citizen” suburban developments that are often even more isolated and further removed from urban life than the suburbs they came from.

But what about the excitement of a city?  For example, the live cultural events.  There is an improving substitute – electronic entertainment.  I can watch all the cultural entertainment I want on my big screen HD TV with Dolby sound. Or over the Internet.  It is not surprising that entertainment is becoming more electronic and passive. 

Social interaction continues to be more “virtual.”  The high density of cities is less important for social and creative interaction.  This trend is consistent with the suburban mentality. 

The housing boom – rapidly rising housing prices leading to large positive wealth effects like spending equity, lower savings and increased borrowing – covered the stagnant incomes of middle class families.  The housing bust takes away a major funding source of a rising standard of living and leaves millions of homeowners with little or no equity in their homes.
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The housing crisis is devastating because it undermines the foundation of the American middle class – home ownership in the suburbs.  Even those who still own homes have seen some or all of their equity disappear.  About 20% of homeowners with mortgages are “underwater,” holding mortgages that are larger than the market value of their homes.  More and more are simply walking away from their homes. 

Foreclosures and short sales continue.  Who is buying foreclosed and short-sale homes?  According to a private source, about one-fourth of all short sales are to speculators.  Buyers of foreclosures and short sales have to come up with large amounts of cash that middle class families don’t have.  

It is difficult for some young families to buy a suburban home despite the fall in housing prices and low mortgage rates.  In the future, first-time home buyers will be faced with rising housing prices and rising interest rates on mortgages.   Many younger families wouldn’t qualify for a mortgage because their student loans are too large.

In the longer run, it is unlikely that Americans will abandon their desire to live in a suburban environment.  There is also the possibility of a reduction in the economic, environmental and social costs of suburbs.  The cost of solar energy panels is decreasing and this is a decentralized technology perfect for suburban housing.  Electric or hybrid cars may become the standard second car for short trips and commuting to work.  The “family” car will probably have a higher MPG. 

A major middle class strategy for upward mobility has been to have the market value of their suburban home go up in value and use the increased equity as a down payment on a bigger home in a “better” suburb.  This strategy is on hold for at least 20% of homeowners who now have “negative equity” in their homes. No one knows when suburban housing prices will start going up.  It depends on future real economic growth.  When that occurs, so will the demand for living in the suburbs.
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Related Posts:

What Now?  The Crisis of America's Middle Class

Comments

  1. Melissa LoganSeptember 20, 2012 at 10:11 PM

    I'd like to see an alternative to the traditional suburb with more mixed uses. I understand not wanting to live on top of other people or being dependent on major metropolitan centers for basic cultural events, but clearly the suburban homeownership dream has significant drawbacks and challenges. If you don't have easy local access to urban amenities it can be a catch-22 of attracting new business and getting individuals to invest in their own towns, particularly when the economy is in crisis. That includes tax ratables and amenities that might increase property values and home equity. So then the town declines further. We start to see bigger gaps, a higher transient population...it's a real tangle.

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