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Home Prices Drop Most in Areas with Long Commute

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Home Prices Drop Most in Areas with Long Commute

Economy

Home Prices Drop Most in Areas with Long Commute

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RENEE MONTAGNE, host:

This is MORNING EDITION from NPR News. Good morning. I'm Renee Montagne.

STEVE INSKEEP, host:

And I'm Steve Inskeep.

Home prices may be falling across the nation, but not every neighborhood suffers equally. Even in regions that have taken a beating, some areas are practically untouched. And there is a way to tell the difference. Neighborhoods close to sources of work, neighborhoods with short commutes are doing better than neighborhoods with long commutes. And that seems to be stopping urban sprawl.

NPR's Kathleen Schalch reports.

KATHLEEN SCHALCH: The Washington, D.C. metro area's been hit hard. In the past year, prices tumbled an average of 11 percent. That's the big picture. Let's zoom in closer and look at Ashburn, Virginia, about 40 miles from the center of town.

Realtor Danilo Bogdanovic cruises past new housing developments halted in their tracks.

Mr. DANILO BOGDANOVIC (Realtor): And as you can see right now, it's just dirt, and there is nothing going on. This crane hasn't moved in probably a couple of weeks.

SCHALCH: Housing prices in parts of this county have dropped 18 percent.

(Soundbite of car door slamming)

SCHALCH: We stop in front of two rows of neat, new brick town homes on Faulkner's Lane.

Mr. BOGDANOVIC: These were selling for about 550 at the peak, which was about August '05. And they're selling right now for about 350. And 50 percent of this community has been either foreclosed on or is facing foreclosure.

SCHALCH: How far are we now if you wanted to commute into Washington?

(Soundbite of laughter)

Mr. BOGDANOVIC: During rush hour? Anywhere from an hour on a good day to an hour and a half. Possibly longer.

Mr. GALEN RUPE (Auctioneer): And we have an opening bid of 236,000. Now, I'm going to go 237.

SCHALCH: This is an auction of foreclosed homes north of Washington in the Maryland suburbs. All of the addresses are far from downtown. Here, too, average commute times are among the highest in the nation. There aren't many takers. Auctioneer Galen Rupe glances up at the small crowd on the steps of the Montgomery County courthouse.

Mr. RUPE: Going once, twice - third and final call. Sold it back to the lender.

SCHALCH: The bank is stuck with it. But Montgomery County also butts right up to the edge of the city. And in these close-in neighborhoods, the market seems fine.

Ms. PAM RYAN-BRYE (Real Estate Agent, Long and Foster): When I have a listing in this neighborhood, there are often 40 to 60 people coming through the open houses.

SCHALCH: Pam Ryan-Brye is an agent with Long and Foster. She sells homes just over the line in the city, too. She just sold one to Barbara Craven, who's come for the inspection.

(Soundbite of smoke detector alarm)

Ms. BARBARA CRAVEN: That's the smoke detector. They're testing it.

(Soundbite of laughter)

SCHALCH: It's smaller than what the Cravens are used to out in the suburbs, and the bathroom's a bit grungy.

Ms. CRAVEN: The bathtub is very small and kind of rounded. Now, it's not as long as a normal bathtub.

SCHALCH: But Craven and her husband grabbed this house the minute they saw it, because here they can take the subway to work instead of being stuck in their cars.

Ms. CRAVEN: We had to leave at 6:00 a.m. every morning to miss enough traffic so that we could get in at a decent time. I mean, I've sat two hours in traffic trying to get into town.

SCHALCH: And the same thing on the way home?

Ms. CRAVEN: It's worse on the way home.

SCHALCH: Inside the city, average home prices are actually up 3 and a half percent from a year ago. Jonathan Hill is vice president of Metropolitan Regional Information Systems, which tracks home sales. He sits in his office, clicking through page after page of price data sorted by zip code. There are lots of negative numbers, but generally not in places that are close in or near public transit.

SCHALCH: Well, here's a place I know is by a metro: 20912.

Mr. JONATHAN HILL (Vice president, Metropolitan Regional Information Systems): Wow, almost a 10 percent increase in average sales price.

SCHALCH: What about other cities?

Mr. DAVID STIFF (Economist): I looked at six metro areas: Los Angeles, San Francisco, New York, San Diego, Miami and Boston.

SCHALCH: That's David Stiff, chief economist for the company that produces the Case-Shiller Home Price Index. He matched home resale values against commute times and found that in most of these major metropolitan areas, the trend's the same: the longer the commute, the steeper the drop in prices. Stiff says the old rule was, quote, "Drive until you qualify," meaning until you can get what you want at a price you can afford. Stiff says buyers are now asking…

Mr. STIFF: What is the cost of gasoline? What is the cost of my time?

SCHALCH: In fact, recent studies suggest that buyers had underestimated the cost of their long commutes. Often, those expenses can add up to more than they save. Developers, too, miscalculated. Lured by cheap land and rising home prices, they overreached.

Mr. STIFF: Partly because the bubble collapsed, but partly because these developments were just bad ideas to begin with.

SCHALCH: Because they were simply too far away from places people needed to go. Builders have already shifted gears. David Goldberg is with a national coalition of planners and environmentalists called Smart Growth America. He points to what his hometown, Atlanta, was like in the 1990s.

Mr. DAVID GOLDBERG (Smart Growth America): Atlanta was recognized as the fastest spreading human settlement, probably in the history of the world.

SCHALCH: While the suburbs spread, the city itself was losing population. Now the tables have turned. In the past two years, new construction in what had been forests and farmland has slowed more than 70 percent, but construction in town has held steady.

Goldberg sees other cities rebounding, too, including Baltimore and Philadelphia.

Mr. GOLDBERG: Philadelphia was losing downtown housing and in-town housing until very recently, and now that's the hottest part of their market.

SCHALCH: Goldberg expects this to continue even after the current housing crisis ends. Throughout the country, the percentage of families with children is shrinking. The share of empty nesters, seniors and young people living alone keeps heading up and up. They don't typically clamor for big, green lawns.

Mr. GOLDBERG: We don't live in the Ozzie and Harriet era anymore. We live more in the "Seinfeld," "Sex in the City" era in which young people find cities to be compelling.

SCHALCH: Has sprawl stalled? For now at least, but not everywhere and probably not forever. Experts are waiting to see what the next housing boom brings. So don't sell that lawn mower yet.

Kathleen Schalch, NPR News, Washington.

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