ARBOR OUTLOOK: The pandemic and an urban exodus
"Another Pleasant Valley Sunday ... charcoal burning everywhere." — from "Pleasant Valley Sunday," as performed by The Monkees
When I was 15, my parents moved our family from Chicago's northwest side to what was then the rural suburb of Lake Zurich. We wanted more space, a safer environment and access to better schools. In our nation's major cities, urban dwellers are again chasing that same suburban dream. The housing market in suburbs near New York City has limited inventory, so many suburban homes are being purchased above asking price, often sight unseen.
As Matthew Haag wrote in The New York Times, "Over three days in late July, a three-bedroom house in East Orange, NJ, was listed for sale for $285,000, had 97 showings, received 24 offers and went under contract for 21 percent over that price."
In downtown Los Angeles, a $1 billion, mixed-use complex (apartments, stores, restaurants, theatres and a luxury hotel) designed by architect Frank Gehry may or may not thrive upon completion. Some downtown office buildings in Los Angeles are currently almost 90% unoccupied.
This movement resembles the same mass migration to the suburbs in the 1960s and the 1970s that my parents were part of. Urban decay, a shrunken tax base and increase in crime were associated with that exodus. How places like New York City and LA will fare now when so many of its wealthier residents leave and pay taxes in surrounding municipalities is anyone's guess.
Long-time NYC dwellers like Jerry Seinfeld are insistent that the city's population will return, just as it did after 9/11. I'm not so sure. Who among us hasn't wandered out into our suburban backyard at sunset and breathed deeply and happily in the peaceful gloaming, while standing on our own well-landscaped piece of property?
Many urban dwellers are deciding that life is too short to live in a 500 square-foot apartment in Queens, when for about the same money you can own a 2,000 square-foot house in a New Jersey suburb, one with a big backyard and plenty of space for the kids.
The larger question for the economy is this: is this suburban movement a temporary trend, or does it have legs? Work from home jobs and the recent announcement by the Federal Reserve that interest rates will likely remain low for the foreseeable future will probably fuel continued suburban home purchases. And if inventory remains low, home prices will likely remain high.
An even larger question evolves: will our country live in a decidedly different fashion in the next half dozen years than it has over the last 40 or 50? And if so, what will be the economic impact on cities and their tax base, on urban commercial and residential real estate, and on those remaining brick and mortar city stores?
I love big cities and their theatres, museums and restaurants. But just for a long weekend. Then I want to return to my quiet backyard down south. Now, how are those steaks coming on the grill?
Margaret R. McDowell, ChFC, AIF, author of the syndicated economic column "Arbor Outlook," is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a “fee-only” registered investment advisory firm located near Sandestin.