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On the House: 2018: The year of heading to the 'burbs? And other real estate predictions

Caitlin McCabe, The Philadelphia Inquirer on

Published in Home and Consumer News

2017 -- and the craziness that has come with it -- may not be over yet, but economists are already looking toward to the start of 2018.

A new year will not necessarily bring a new housing market, the economists predict, as many of the problems that plagued the market in 2017 -- namely, the inventory shortage -- continue.

Still, some big changes could be afoot. As the number of homes listed for sale will remain in short supply next year, homeowners will choose to remodel instead of sell, worsening the inventory crisis, economists at Zillow predict. And with so much pent-up demand brewing, builders will take notice: Finally, according to the predictions, they will begin building the elusive entry-level home again.

To do that, and to actually make money doing so, builders will have to return to a familiar strategy, Zillow said: suburban sprawl.

In an era in which cities are having their moment in the spotlight, the sudden suburban reversal may seem shocking. After all, as urban areas have continued to see an influx of better dining, entertainment, and housing options, younger and wealthier residents have poured into cities, boosting housing demand and raising prices.

That's exactly why the suburbs will soon have their moment, observers say.


"There is just less land available to build on" in cities, said Skylar Olsen, a senior economist at Zillow. "The land available is farther out, where you tend to run up less against NIMBYism (an acronym for the phrase 'Not in My Back Yard') and challenges to development."

Across the United States and in Philadelphia, the cost to build in urban areas has become a problem, according to experts -- and not just because of the often lengthy and expensive approvals processes that many developers face. Land costs are rising, and developers in many cities have still not been able to fetch high enough rent or condo prices to offset that expense. Meanwhile, construction costs -- particularly labor -- remain expensive, as workers have not returned to the industry after leaving during the recession.

"In a city that's becoming less affordable, construction labor cannot afford to live nearby," Olsen said. "I have heard from a lot of developers who cannot get projects to (work) because labor contractors are willing to take a little bit less in pay in areas where they do not have to drive two hours to get there."

The expected suburban switch, however, will be driven by more than economics. It is true that land costs are typically cheaper in the suburbs and that developers usually face less resistance from township planners. But the predicted suburban growth will likely also be pushed by demographics, Olsen said.


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