The US housing market is reaching a turning point, with average prices rising by up to 1% later this year, marking the start of a housing recovery, says the first report from the Demand Institute, a division of the Conference Board and jointly operated by Nielson.
But smart growth prevails in this recovery, making it very different from previous ones. Rentals will lead the way in walkable communities and the slowest areas to recover will be outer suburbs – sparsely populated areas with low walkability.
Although they see home prices rising 2.5% a year by 2014, and 3-3.5% from 2015-2017, the recovery will be led by demand for rentals, as over 50% that plan to move in the next two years say they will rent.
And young people and immigrants will lead that demand. Renting previously foreclosed homes will help clear the huge oversupply of existing homes, afterwhich home ownership rates will rise once again.
The areas of the country that rebound the fastest are those with the highest employment and lowest foreclosure rates.
Those with typical smart growth features will "likely lead the way with strong, early growth," the report says. That includes vibrant walkable communities easily reaching amenities and transportation.
Housing prices and unemployment also fell the least between 2006-2011 in walkable urban and suburban areas.
"Many local, state and federal policies remain at odds with the kinds of development people want, however, says the Smart Growth America blog. "Incentive structures, tax credits, transportation investments and zoning regulations often make it easier to develop properties that wouldn’t qualify as walkable."
Demand Institute also points to the shrinking size of homes. Most Americans have seen little or no pay increases and baby boomers, who delayed retirement for financial reasons during the recession will downsize.
Industries that should benefit include car-sharing services, home remodeling, media, and retail.
Over the longer run, people will want to own a home again, they say. More than 80% of Americans believe buying a home is still the best long-term investment they can make.
Last month, southern California passed a visionary smart growth plan that will guide planning through 2035.
In 2010, the U.S. Green Building Council (USGBC) launched LEED for Neighborhood Development, which integrates the principles of smart growth, new urbanism and green building to reduce urban sprawl and increase transportation choices.
Read The Shifting Nature of U.S. Housing Demand: