“Location, location, location” is an age-old axiom in real estate. In this three-part series, we look at how the location factor in real estate is changing. While location is still significant when considering real estate values, in many cases the hot spots themselves have migrated to what used to be dilapidated, inner-city neighborhoods. Learn what other trends are developing. (See Part 2: Sports stadiums a boon to neighborhood living and Part 3: The road to downtown real estate.)
Real estate professionals know the phrase well: Location, location, location. It was hotelier Conrad Hilton who uttered this famous statement more than 50 years ago about the keys to business success, and location is still a primary driver in real estate sales today.
What is the best location these days for residential real estate? There are some general rules here, such as proximity to job centers and affordability. And there are short-term and long-term trends in real estate markets that are hot and those that are not. But prime location is ultimately all about personal preference.
In geographic terms, locations in the Sun Belt states are very popular these days, with particular growth in parts of Arizona and Nevada, said Robert Lang, director of The Metropolitan Institute at Virginia Tech in Alexandria, Va.
The Las Vegas metropolitan area grew about 83.3 percent from 1990 to 2000, according to U.S. Census Bureau data, and the state of Nevada’s population grew about 66 percent in that time. Nevada, Arizona, Florida and Texas were the fastest growing states in the nation from 2002-03.
Lang said there is a rise in what he calls “boomburbs,” which are suburban communities with more than 100,000 residents. Gilbert, Ariz., for example, is a blossoming boomburb in the Phoenix metropolitan area that is bigger than many U.S. cities. With an estimated population of about 145,000 residents in 2003, the town is projected to grow to about 290,000 residents by 2030.
Gilbert was the fastest-growing U.S. city with 100,000 or more residents from April 1, 2000, to July 1, 2003. Nevada’s North Las Vegas and Henderson placed second and third on that list, respectively. All of the other top-10 fastest-growing cities were in Arizona, California, and Florida.
West of Phoenix, the tiny town of Buckeye has plans for phenomenal growth. There are 500 square miles of developable land in the area, and Buckeye officials are in the process of approving the development of about 160,000 single-family lots. Lang said the town, which has fewer than 10,000 residents, could grow to a city of 500,000 people by 2030. Why are these desert-like locations such desirable destinations? Lang said it’s a combination of factors, such as “restlessness, opportunity, and land cost – maybe its the cheaper houses, the newness of place.
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With so much growth in some areas, there is a worry that continuing outward growth in some areas will leave not-so-new communities in the dust, Lang said.
“A lot of what’s going on in the country – the places that are the newly built worry about the still-building places,” he said. The new growth he said, could lure residents and businesses away from other areas as those areas begin to fall out of favor, he said. “This country is not sentimental about things that are 30 and 40 years old,” he said.
While immigration can keep housing markets hot in some areas that might otherwise be stagnant, there are some areas – such as Cleveland, Ohio, and other areas in the Great Lakes states, that are at a much higher risk of falling out of favor as hot real estate locations, Lang said.
Ohio’s population growth was among the slowest in the nation from July 2002 to July 2003, according to Census stats. Washington, D.C., and North Dakota actually had a decline in population during that period.
From 1995-2000, Alaska, Hawaii, New York and Washington, D.C., had the highest rates in the country in the number of people leaving those states to move to other parts of the country. About 113,000 people moved to Washington, D.C., for example, between 1995-2000, while about 158,000 residents left Washington, D.C., for other states in that time.
Meanwhile, about 466,000 people moved to Nevada during that time, while about 233,000 moved away to other U.S. locations. Southeastern states were also hot destinations for incoming residents during that period, and Alabama, Florida, Georgia, North Carolina, South Carolina and Tennessee had significant increases in migration from other states, the Census Bureau also reported.
In terms of urban growth trends, Lang said there are about 50 percent of the U.S. population now resides in suburban areas; 30 percent resident in central-city areas; about 10 percent live in “micropolitan” areas, which are defined as areas with at least one urban cluster with a population of 10,000 to 50,000; and about 10 percent live in non-metropolitan areas. We can expect that the metropolitan and suburban metropolitan areas will increase as a percentage, with suburban areas growing perhaps from 50 percent to 60 percent by 2030, he said. Micropolitan and non-metropolitan populations, meanwhile, are expected to shrink as a percentage of U.S. population by 2030, he said.
“My guess would be that the metropolitan share would go up and the suburban metropolitan share would go higher,” he said. U.S. population is expected to grow from about 291 million in 2003 to about 420 million or more by 2050. Already, he said, about 73 percent of the nation’s population is in the top-50 largest metropolitan areas. The New York City, alone, had an estimated population of 21.2 million in 2000, while the Los Angeles metro area had a population of 16.4 million.
Globally, the United Nations projects that urban populations will grow from 2.9 billion in 2000 to 5 billion in 2030, and by 2015 the world will have 23 mega-cities – which are cities with a population higher than 10 million. An estimated 47.2 percent of the world’s population lived in urban areas in 2000, and by 2030 an estimated 60.2 percent of the world’s population will live in urban areas.
John Kasarda, director for the Frank Hawkins Kenan Institute of Private Enterprise at the University of North Carolina at Chapel Hill, said transportation systems have historically played an integral role in growth trends, and large airports are increasingly a driver in modern urban development and growth. Airports in the Denver, Colo., area and Dallas-Ft. Worth, Texas, area have been particularly successful in driving employment growth in those regions, he said. He refers to this breed of airport-fueled urban area as an “aerotropolis.”
“Airports are not only attracting business around them but are shaping urban growth. Airports have become so critical in the lives of so many people as well as the local economy,” Kasarda said. “Population and employment growth has been shown to be greater in the (major) airport areas.”
The three “L’s” of “location, location, location,” are now the three “A’s” – “accessibility, accessibility, accessibility,” Kasarda said.
The location of a home is a top priority for home buyers, said Walt Molony, a spokesman for the National Association of Realtors. “The old adage is very true – that has not changed significantly over time,” Molony said. In the latest annual survey of home buyers conducted by the association, Molony said that 68 percent of buyers said that the neighborhood itself was the most important factor in their home purchase.
An indication of hot locations to buy homes is the amount of price appreciation in a given area, Molony said. Las Vegas and parts of California and Florida have experienced some strong price appreciation in the past several years, he said, and population growth and development restrictions can contribute to an increasing demand for housing and a shortage of supply.
As some communities in California have built out, developers have resorted to infill development, such as high-rise condos, redevelopment and mixed-use projects to open up new housing avenues in urban areas. While these developments represent a small fraction of the overall housing stock, the “demand is quite high for that,” said Robert Swatt, a San Francisco Bay Area architect. Swatt said he has seen another trend in which people are buying high-price properties and tearing down the existing homes to start from scratch and build a new home. “There’s almost nothing left to build on” in some Bay Area communities, Swatt said.
Even so, the sought-after locations for luxury homes haven’t changed much over time, he said. “They generally want this bucolic setting – they want their views, their privacy, it’s really an old-fashioned (vision),” he said.
In the multifamily arena, there seems to be “a gradual return to urban markets,” said William Ktsanes, director of research and analysis for RealFacts, a research organization specializing in the multifamily housing market. He said there has been some “explosive growth in rural areas,” such as California’s Central Valley and Inland Empire, though “some developers are pulling away from the suburban hinterlands in pursuit of urban opportunities in cities.”
He added, “Ideas of ‘smart growth’ and ‘new urbanism’ that originated from planners and policy makers are clearly influencing multifamily development.”
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