Housing bust, rising gas prices end exodus to distant suburbs

Stung by high gasoline costs, outlying suburbs that flourished in the heady 2000s are now seeing their growth stunted to historic lows, halting American city dwellers’ decades-long exodus to sprawling homes in distant towns.

New census estimates as of July 2011 highlight a shift in population trends following the protracted housing bust and renewed spike in oil prices. Two years after the recession technically ended, and despite faint signs of a rebound, Americans again are shunning moving at record levels and staying put in big cities.

That is posing longer-term consequences for residential “exurbs” on the edge of metropolitan areas.

Construction of gleaming new schools and large malls built in anticipation of a continued population boom is being cut back. Spacious “McMansions” offering the promise of homeownership to middle-class families sit abandoned or only half built. Once an escape from urban problems, suburban regions hit by foreclosures are posting bigger jumps in poverty than cities.

The result: The annual rate of growth in American cities and surrounding urban areas has now surpassed that of exurbs for the first time in at least 20 years, spanning the modern era of sprawling suburban development.

“The heyday of exurbs may well be behind us,” Yale University economist Robert J. Shiller said.

Mr. Shiller, co-creator of a Standard & Poor’s housing index, is perhaps best known for identifying the risks of a U.S. housing bubble before it actually burst in 2006-2007. Examining the current market, Mr. Shiller thinks America is now at a turning point, shifting away from faraway suburbs in the long term amid persistently high gasoline prices.

Demographic changes also play a role: They include young singles increasingly delaying marriage and childbirth and more apt to rent and a graying population that in its golden years may prefer closer-in, walkable urban centers.

“Suburban housing prices may not recover in our lifetime,” Mr. Shiller said, calling the development of suburbs since 1950 “unusual” and enabled only by the rise of the automobile and the nation’s highway system. “With the bursting of the bubble, we may be discovering the pleasures of the city and the advantages of renting, investing our money not in a single house but in a diversified portfolio.”

The signs of longer-term bust are evident in places such as Kendall County, Ill., an outlying suburb of 116,000 people located about 50 miles southwest of Chicago.

The nation’s fastest-growing county from 2000 to 2010, Kendall was part of an exurban wave that more than doubled Kendall’s population. By the late 2000s, however, Kendall County’s growth began to wane amid recession and rising gasoline costs. By 2011, Kendall County’s annual growth had stalled further at 1 percent, dropping its county growth-rate rank to 236th.

Things were especially turbulent over the past 10 years for real estate agent George Richter, who has worked in Kendall County for more than two decades.

“New home construction couldn’t be built fast enough,” he said. “A lot of us in the industry were very, very nervous about how fast and large the annual growth rate and property value were. We knew there’s no way that something could continue on.” Now, he said, there’s little new construction.

About 10.6 million Americans reside in the nation’s exurbs, just 5 percent of the number in large metropolitan areas. That number represents annual growth of just 0.4 percent from 2010, smaller than the 0.8 percent growth rate for cities and surrounding urban areas. By comparison, in 2006 exurban communities grew at an annual rate of 2.1 percent, compared with a population loss of 0.2 percent for inner cities.

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