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Homebuyers are voting with their feet

Randy CarpenterDo you love your commute? Would you prefer to walk or ride a bike to work? When searching for a home, how important is proximity to shopping, restaurants, parks and other amenities?

The answers to these questions are changing, both nationally and in Boise. This fall, the National Association of Realtors released its bi-annual National Community Preference survey results. The findings affirm those from a 2013 Sonoran Institute report, titled Reset, which focused on six western communities, including Boise, to assess trends in homebuyers’ preferences and the nature of future housing markets.

Our findings were remarkably similar to those of the NAR study. Both show that Americans want to live in neighborhoods that are walkable and contain a mix of uses, such as coffee shops and restaurants, and most are willing to pay a premium to do so.

Using interviews with developers, surveys of homeowners and data analysis of housing sales, Reset and the NAR study demonstrate that as our society changes, so do preferences for housing. We are in the early stages of what demographers call the “great convergence” of the two largest demographic groups in the nation’s history: millennials and baby boomers. As millennials enter the housing market, they are choosing to live in neighborhoods more urban and dense than those they grew up in. As baby boomers near retirement, many of them are downsizing, selling their suburban homes to live closer to services, shopping and health care.

In particular, both studies found that:

People want walkable neighborhoods close to activities and recreation. A growing cadre of homeowners is prepared to trade size for location and type – they’ll buy a smaller home with a smaller yard in order to live in a compact, walkable, mixed-use neighborhood close to town centers and amenities. For example, 62 percent of Reset survey respondents would choose to live in a home with a smaller lot if it meant being able to walk to parks, trails and recreation; 58 percent were willing to live on a smaller lot in order to be within walking distance of daily needs such as schools, stores and restaurants. Similarly, 78 percent of the NAR respondents said that neighborhood characteristics are more important to them than the size of the house, and 55 percent would give up a large house if they could live within walking distance of schools, stores and restaurants.

Convenience and getting around matter, too. In the housing boom of the 2000s, the “drive till you qualify” phenomenon became common. Homebuyers decided that long commutes from far-flung suburban neighborhoods to work, school, and shopping were worth it, if it meant they could afford a large home and large yards. But as the real estate market has recovered, it appears that people increasingly prefer to spend less time driving and more time doing other things like being with family. Eighty-nine percent of those surveyed for Reset stated that it was important to live within a 30-minute commute to work; 65 percent of NAR respondents said it was important to live within a short commute to work.

Compact, walkable neighborhoods fetch a price premium. Reset found that consumers are willing to pay more for homes if they offer the option of walking to destinations. This is especially true in Boise. Our analysis of data from more than 40,000 house resales in Boise from 2000 to 2011 showed that homes in compact, walkable places sold for an average of 42 percent more per square foot than those in conventional developments. The average premium for all six communities we studied came to 18.5 percent. Interestingly, in five of the six communities, that price premium dropped after the market crash of 2009. In Boise, the premium actually increased after 2009. Clearly, the excellent selection of compact, walkable neighborhoods in Boise is becoming increasingly popular; as we all know, there is no greater indication of a preference than when a person is willing to pay more for something.

Taken together, the findings of our Reset report, supported by the NAR survey, describe a desire for more housing choice – for an alternative to the conventional residential subdivision built after World War II. It’s important to remember that a larger home on a larger lot remains the first choice of housing for many people, especially families with children at home, but both studies call into question certain long-standing tenets – like bigger is always better – and suggest that as youngsters enter the housing markets and boomers retire to senior living, the market is becoming more segmented and discerning.

People aren’t just looking for homes; they are looking for community, for neighborhoods, for convenience and access, and for amenities that enhance quality of life. Research shows they’ll vote with their dollars to prove it.

Randy Carpenter is the director of the Sonoran Institute’s Northern Rockies Program and part of the Community Builders network. To learn more and to read the Reset study, visit communitybuilders.net.

About Randy Carpenter