Marianne Cusato, Forbes.com
Free-flowing jumbo loans enabled the overconsumption of jumbo homes, creating jumbo expectations of jumbo lives. Then the bubble burst and the jumbo house of cards came tumbling down.
Today one in four mortgages is upside-down, housing starts teeter at record lows and housing prices are projected to fall 40% from their 2006 peak before bottoming out later this year, according to the S&P/Case-Shiller Index. Despite the doom and gloom of the Great Recession, over the course of the next 10 years we will stabilize and recover.
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Things might be bad today, but the scope of this crisis begs the question: Were things really ever as good as we thought they were? Were our oversized expectations really being met by bloated McMansions and home loans we couldn't afford?
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The lending practices and overconsumption that led to our current crisis were not fiscally sustainable. But the failure was more that just financial; it was also environmental and social. Recovery must encompass the triple bottom line: people and planet as well as profit. Over the next 10 years our collective hangover will subside. By 2020, the face of housing will emerge more livable and sustainable, and fiscally within our means.
In 2020 cost per square foot will be abandoned as a metric. Homeowners will instead weigh the total monthly costs of living in a home. More stringent construction requirements coupled with higher homeowner expectations will make performance the key indicator of a building's value. Sales listings will be required to include the projected monthly costs to heat, cool and maintain a home.
The home of 2020 will be closer to work, school and shopping. Until recently, in almost every U.S. city, homeowners drove deep into suburbia to get the most bang for their buck--hence the "drive 'til you qualify" craze. Now they are left holding the bag.
Sprawl depends on cheap oil, and recent $5-per-gallon gas proves that has come to an end. The volume of construction required to build roads and fossil fuels consumed by long commutes is no longer sustainable. That's not to mention the effect on quality of life--road rage, anyone?
Failed suburban sprawl will become the new frontier for development. Cities grow like rings of a tree, expanding out from a center. Until now the typical pattern of growth is to build more rather than retrofit. New rings of sprawl are cancerous; as they expand they kill previous growth.
For reasons both economic and environmental, we will see patterns of growth fold back on themselves as foreclosed sprawl is retrofitted into mixed-use communities. Towns like Stapleton, Colo., where an airport was converted into residences, shopping and offices, all built within walking distance, will lead the way.
We will witness growth in mid-size cities such as Austin, Texas; Charlotte, N.C.; and Portland, Ore.; rather than in larger cities like Dallas, Atlanta or Los Angeles. Cities that offer transit-oriented development, job opportunities and a better quality of life will see high demand.
"Currently we are tied to a 19th-century approach, which isolates the big city unto itself, without taking advantage of the connections and opportunities it could enjoy simply by planning and linking to smaller nearby cities," says Dr. Catherine Ross, an advisor to the White House Office of Urban Affairs. According to Ross, in 2020 we will see what she calls "mega-regions" emerge--areas that are rich and vibrant as a result of pooling the most critical and valuable resources from nearby towns, rather than trying to stand alone and compete as independent towns and cities.
In 2020 homeowners will crave fewer symbols of gratuitous wealth. Americans will stop trying to keep up with the Jones. (In fact, chances are the Jones' home was foreclosed upon in 2010.) With average homes shrinking down to size, we will see a heightened awareness of how and where money is spent. Mr. Potatohead, lick-and-stick architecture will give way to budgets you can touch and feel. People will stop spending money on gaudy entryways and gables for the sake of gables. They will instead build windows for the sake of cross-ventilation and lower utility bills. Houses will live--and breathe--better.
The perceived value of a home will be completely redefined. Realtors will stop selling homes based on resale ability and start selling on livability. Homes that boast the highest price tags will be those that are able to adapt to several life phases and comfortably house multiple generations.
Shifting demographics will continue to reinforce the need for smaller homes that are adaptable, sustainable, livable, conveniently located and, most importantly, within our means. These attributes are sorely missing in America's existing housing stock. The challenge for the next 10 years will be to adjust how and what we build to meet our changing needs. The homebuilding industry may be suffering today, but it is also undergoing creative disruption. It will be those that adapt to future realities now that will lead us to a successful and sustainable recovery.
Marianne Cusato is the author of Get Your House Right and the designer behind the 300-square-foot "Katrina Cottage" conceived in 2005 as an alternative to the FEMA emergency trailers for Hurricane Katrina survivors.
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