Reverse Gentrification: The New Real Estate Frontier?fkgentrification

There was a great article written in March of 2008 for theatlantic.com by a very smart fellow named Christopher B. Leinberger, a professor of urban planning at the University of Michigan, real-estate developer, and author of “The Option of Urbanism”.

The article talks about the economic, societal, and demographic factors that were involved in the fleeing of people from urban living to the sprawling suburbs that occurred between the end of World War 2 until the downturn in housing prices a few years ago. He then goes on to talk in detail about what he predicts to be essentially a reversal in trend, where the affluent & educated flee back to more urban settings, while lower income, less educated folks start to get pushed out of the inner cities and start to occupy the McMansion riddled, car-dependent housing developments that were initially designed, built, and sold as “The American Dream”.

In retrospect, the article was visionary in many ways, considering it was written near the beginning of the housing market collapse. I would highly recommend taking a look at the article, as it very well may be the blueprint for the new American lifestyle.

Read the full article here

There were a couple of articles written in the past few days, one by the New York Times and another by CNBC.com that brought the principals of this article, and the question “How could it happen?” to mind. One of the articles was a report from Lathrop, CA, one of the hardest hit areas of the foreclosure crisis, an inland suburb of San Francisco that was the norm not too long ago – an often imitated model of build big, build cheap, and build far.

As housing values plummeted, and unemployment soared along with gas prices, these car dependent, large-house-on-a-large-lot type communities that saw the biggest & fastest price appreciations are now seeing the worst of the downturn. Many of the neighborhoods where well manicured lawns, expensive SUV’s and expensive retail shops once ruled the landscape, now look like a modern version of the slums. Abandoned homes now stand to rot with no one to take care of them. Many of the residents who have stayed behind tell stories of increased gang violence, break ins, and stray bullets flying through houses. The expensive retail stores are being replaced with Payday Loan storefronts and liquor stores.

This has, and unless drastic change occurs, will continue to cause a vicious cycle of reverse gentrification out of these sprawling suburbs and back into more centrally located, walkable urban living situations. As the wealthier occupants move out of these areas, the tax base in these communities shrink, and as it does, so go the better public schools, infrastructure, and so on. Those who are “upside down” on their mortgage and can’t sell will continue to walk away from mortgages, perhaps more for reasons of personal safety than economics in certain areas. Even those who still have equity in their homes will have a hard time selling, as with the decline of the neighborhood it will become harder & harder to attract qualified buyers. All of this continues to feed the downward spiral and feed upon itself, causing the well off, the higher end shops & restaurants, and the decent paying jobs running for higher ground.

As the masses flee from the ‘burbs to the cities, the inner city tenement buildings that were once centers of poverty, crime, drugs and violence will start to become gentrified, and the subsequent rise in housing prices in these areas will start to push the former inhabitants to seek affordable housing – possibly in the very same McMansions that were once considered a haven for people looking to escape the ills of urban life.

There are some other factors at play here as well. The baby boomer generation, who made up most of the market for these suburban homes, are getting older and seeing their kids move away. As the household shrinks, so does the need for a big house. Then we have their children, the Gen X and Gen Y’ers of the world. These people are at the stage of their lives where their parents and grandparents were starting families and buying homes, but due to a horrible job market, huge credit card & student loan debt weighing them down, and a general uncertainty about the future, many are opting or being forced to rent, share small living quarters with friends or family, and moving close to wherever they can find work, rather than buying a big home in the suburbs and starting a family.

There’s also an issue of gas prices to consider. Not only is it that much more expensive to commute 40-50 miles each way to work daily, but it’s also significantly more expensive to heat and power a larger suburban home than a smaller urban apartment or condo.

We’ll have to stay tuned to see what the end game is to this reverse gentrification trend, but it seems that the writing’s on the wall, and spray painted on the doors of the unoccupied suburban McMansions. We probably won’t see a complete 180 degree turnaround, where all the country’s successful people are living in urban lofts while the McMansions all become crack dens and meth labs, but maybe we’ll learn from the mistakes of the past and find some sort of happy medium. I certainly hope so.

Jon D. Maddux is the former CEO of YouWalkAway.com. Although there has been a bit of controversy with the company name, the entrepreneur passionately believed that homeowners across America would desperately need foreclosure advice and so he came up with the Walk Away foreclosure help website. Having over 11 years of real estate and finance experience, Maddux realized with the burgeoning credit crisis, many homeowners in adjustable rate mortgages and high LTV loans were unaware of what they were about to face. With that understanding, Maddux developed an affordable business model that allowed homeowners to know their rights and use the law to their advantage. Beyond the monthly foreclosure monitoring service and cease and desist letters, You Walk Away provides attorney consultation in each state and CPA consultations. Homeowners are armed with the knowledge and peace of mind they need to go through possibly the toughest experience of their lives.

Since January 2008, You Walk Away, LLC has helped over 8000 customers navigate through the hardship of foreclosure and / or a short sale. You Walk Away has been featured in news publications and TV programs such as: ABC Nightline, CNN,Yahoo Finance, Time Magazine, The Wall Street Journal, front page of The New York Times, Bloomberg, Forbes, Fortune,Money Magazine, NPR, AP, NBC, CBS and Fox News among many others. Many of these publications have used quotes from Maddux about foreclosure, short sales and mortgages as well as obtaining a mortgage after foreclosure or short sale.

More recently Jon has launched http://www.afterforeclosure.com, a free website that helps people find out if they are eligible for a new mortgage after foreclosure or short sale. There are free resources available on the site to help consumers get back into homeownership. At http://www.afterforeclosure.com and now https://www.loansafe.org, Maddux writes about foreclosure, short sales and getting new financing after foreclosure or short sale. Jon specializes in hard to get Jumbo mortgages after foreclosure and short sale. As you can imagine, with helping thousands of customers go through this process, there is special insight and first-hand knowledge that he gets and is able to share with his readers. Jon Maddux is a licensed mortgage professional focusing on helping people that have gone through foreclosure or short sale buy again with better market timing.