Smart growth, real estate trends, and the economy

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Smart growth, real estate trends,and the economy

• Joe Molinaro
• National Association of REALTORS
• Smart Growth Partnership
• Fort Lauderdale, Florida
• January 30, 2009

2
Residential Sales

• December 2008
• UP 6.5 over Nov. 2008
• DOWN 3.5 compared to Dec. 2007
• In many markets, condos and townhouses doing
  better than detached homes furthest suburbs
  suffering highest foreclosure rates and greatest
  decreases in value.

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March 2008
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Commercial Real Estate

• Retail Vacancy Rate
• 4th Q 2008 10.8
• 4t Q 2009 (projection) 12.7
• Health of retail chains the biggest factor in
  2009.

5
Future Growth and Housing Needs

• High Growth Rate in U.S.
• 200 Million in 1968
• 300 Million in 2006
• 400 Million in 2035

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Residential Development

• US 2000 to 2040
• Growth-Related Units 50 million
• Replaced Units 39 million
• Total Units 89 million
• Loss rate 6 per decade compounded.
• Source Dr. Arthur C. Nelson, FAICP, Virginia
  Tech.

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New Construction 2000-2040

• Construction
• Residential 24 Trillion
• Nonresidential 22 Trillion
• Infrastructure 9 Trillion
• Total 55 Trillion
• Source Dr. Arthur C. Nelson, FAICP, Virginia
  Tech

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Where will Growth Occur?

• Northeast 6.5 South 56
• Midwest 8.2 West 29.4

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Toward Megapolitan America
Source Metropolitan Institute at Virginia
Tech, 2005
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Traditional Households on the Wane Household
Type 1960 2000 2040 HH with
Children 48 33 27
Single-Person HH 13 26 30
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People Turning 65 Each Year
In thousands. Source US Census Bureau 65 in
the United States 2005 Wan He, Manisha
Sengupta, Victoria A. Velkoff, Kimberly A
DeBarros. December 2005
12
Share of Growth 2000-2040

• HH Type Share of Growth
• With children 13
• Without children 87
• Single-person 38
• Source Dr. Arthur C. Nelson, FAICP, Va. Tech.
  Adapted and extrapolated from Martha Farnsworth
  Riche, How Changes in the Nation's Age and
  Household Structure Will Reshape Housing Demand
  in the 21st
• Century, HUD (2003).

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Future Housing Shares

• Housing Type 2003 2040
• Apartment 24 30
• Owner Attached 11 20
• Small Lot 15 30
• Large Lot 51 20
• Source Arthur C. Nelson, FAICP, from 2003 data
  from American Housing Survey 2003. 2040 figures
  derived from preference surveys. There is no
  warranty or guarantee, express or implied, of the
  accuracy of the data or information contained
  herein.

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NAR-Smart Growth America 2004 Survey

• When features of smart growth communities and
  suburban sprawl communities were described,
  people preferred smart growth 55 to 45.

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Neighborhood Feature Preferences
Source National Association of Realtors Smart
Growth America, Survey 2004.
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Housing Unit Preference by Type, Surveys

• Unit Type Share
• Attached 38
• Apartments 14 36
• Condos, Coops 9 24
• Townhouses 15 40
• Detached 62
• Small Lot (lt7,000 sf) 37 60
• Large Lot (gt7,000 sf) 25 40
• Source Low range of surveys reviewed by Arthur
  C. Nelson, Planning for a New Era, Journal of
  the American Planning Association, Fall 2006.

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Looming Large-Lot Oversupply, 2005-2030

• Supply Preference Split the
• Unit Type 2005 Change Difference
• Attached 39M 15M 13M
• Small Lot 12M 40M 22M
• Large Lot 58M - 23M - 3M
• Source Dr. Arthur C. Nelson, FAICP, Virginia
  Tech. Figures in millions of units.
• Preference change based on low-range of
  preference survey averages.
• Mid-point is mid-percentage distribution between
  2005 and low-range estimate of preference surveys
  and supply of occupied units in 2005.

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Fundamental shift in the structure of the built
environment - Chris Leinberger, Brookings
Institution

• From driveable suburban to walkable urban

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Unmet Demand for Urbanism

• Market share for Walkable Urbanism 35 to 50
• Supply in most markets 5
• Source Chris Leinberger, Brookings Institution

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Transportation
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Transit Use Up

• 2007 Americans took 10.3 billion trips on
  public transportation, the highest level in 50
  years.
• 2006 to 2007 transit use increased 2.1
• Transit use up 32 since 1995.

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New Rail Transit Systems

• Denver
• Dallas
• Houston
• Phoenix
• Salt Lake City
• Charlotte
• Minneapolis

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Growth in driving is slowing(Vehicle Miles
Traveled)

• 1982- 2000 average growth rate was 3.2
• 2001-2005 average growth rate was 1.6
• 2006 growth rate was 0.6
• 2007 0.3 decline

Source Brookings Institution
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VMT declining in Florida too

• 1991 2002 5.22 annual growth rate
• 2002 - 2006 3.55
• Dec. 2006 - Sept. 2008 - 2.5

Sources Brookings Institution and Bureau of
Transportation Statistics
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Amtrak ridership up

• Six years of consecutive growth
• 2008 ridership at all-time high, 28.7 million

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Voters Supporting Transit

• 2005 to 2008 nationwide over 70 of transit
  ballot initiatives have passed.

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2007 Growth Transportation SurveyNAR and Smart
Growth America

• Which of the following is the best long-term
  solution to reducing traffic in your area?
• Build new roads -- 21
• Improve public transportation -- 49
• Develop communities where people do not have
  to drive as much -- 26
• Telephone survey of 1,000 adults, October 2007

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NAR Idaho Association of Realtors

• Which of the following is the best long-term
  solution to reducing traffic in your area?
• Build new roads -- 25
• Improve public transportation -- 49
• Build communities where people do not have to
  drive as much -- 19
• Telephone survey of 500 registered voters in
  Idaho, February 2008.

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New NAR poll, Jan. 2009

• Overwhelming support for transit
• I am going to ready you two statements about
  traffic congestion and Id like you to tell me
  which of these is closer to your view?
•  
• A Some people say that we need to build more
  roads and expand existing roads to help reduce
  traffic congestion 27
•  
• B Some people say that we need to improve
  public transportation, including trains and
  buses, and make it easier to walk and bike to
  help reduce traffic congestion 67
•  
•  

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Maintaining and repairing roads preferred over
expanding roads by a 3-to-1 margin

• As the federal government makes its plans for
  transportation funding in 2009, which one of the
  following should be the top priority?
•  
• Expanding improving roads, highways, freeways
  bridges 16
• Maintaining repairing roads, highways, freeway
  bridges 50
• Expanding improving bus, rail other public
  transportatn 31

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In a straight-up choice between travel modes,
building transit is a huge favorite.

• Given that the U.S. population will increase by
  100 million people by 2050, which of the
  following approaches do you prefer to accommodate
  this growth?
• Build and improve rail systems, such as commuter
  rail, light rail, and subways 75
• Build new highways and freeways 20
•  

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Climate Change
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Transportation Greenhouse Gases 3 Legs of a
Stool

• Vehicle Efficiency (mpg)
• Fuel Greenhouse Gas content (Fuel GHG)
• Vehicle Miles Traveled (VMT)
• Need progress on all 3 legs, but climate policy
  discussions have ignored VMT

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Questions Answered inGrowing Cooler (Urban Land
Institute, 2008)

• What reduction in vehicle miles traveled (VMT) is
  possible in the United States with compact
  development rather than continuing urban sprawl?
• What reduction in CO2 emissions will accompany
  such a reduction in VMT?

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US VMT Growth Projected to Outpace Vehicle Fuel
Improvements (Fig 2-3)
From Reid Ewing, et al, Growing Cooler
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• Compact development can reduce VMT 20 - 40
• 7 - 10 reduction in CO2 due to
  location/density/transportation

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Climate Change

• Half the states have climate change legislation
• King County, WA calculates carbon footprint of
  new development

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National Political Environment

• President Obama and Smart Growth.
• Economic Recovery Legislation has been a
  disappointment to Smart Growth advocates

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Economic Stimulus

• House version 825 Billion
• 42 Billion for roads and transit
• 30 billion for roads
• 12 billion for transit
• The U.S. does not have a national transportation
  policy.

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Shovel-Ready Approach to Stimulus Not Supported
by Public

• Transportation spending should only include
  projects that can be started right away, such as
  traditional highway and bridge construction, to
  create new jobs and provide an immediate boost to
  the economy. 15
•  
• Transportation spending should be targeted
  specifically to projects that achieve multiple
  goals, including creating new jobs, reducing
  dependence on foreign oil, improving the
  environment, and increasing transportation
  choices, even if the jobs are created over a
  longer period of time. 80

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What will growth look like?
Urban redevelopment and brownfields redevelopment
Atlantic Station, Atlanta
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Urban centers in First-ring suburbs
Bethesda, Maryland
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Neighborhood Centers at rail transit stations
Columbia Heights, Washington, DC
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Development at light rail stations
Minneapolis Light Rail
Salt Lake City Light Rail
45
Opportunity!
Hundreds of old shopping centers can be
redeveloped as mixed-use neighborhoods
www.deadmalls.com
46
Impediments

• Zoning
• Financing
• Transportation Investment
• Supply Side Building urbanism is more difficult