Suburbia Running Out of Gas

"Suddenly, the economics of American suburban life are under assault as skyrocketing energy prices inflate the costs of reaching, heating and cooling homes on the distant edges of metropolitan areas.

[L]ife on the edges of suburbia is beginning to feel untenable.

Across the nation, the realization is taking hold that rising energy prices are less a momentary blip than a change with lasting consequences. The shift to costlier fuel is threatening to slow the decades-old migration away from cities, while exacerbating the housing downturn by diminishing the appeal of larger homes set far from urban jobs.

In Atlanta, Philadelphia, San Francisco and Minneapolis, homes beyond the urban core have been falling in value faster than those within, according to an analysis by Moody’s Economy.com.

In Denver, housing prices in the urban core rose steadily from 2003 until late last year compared with previous years, before dipping nearly 5 percent in the last three months of last year, according to Economy.com. But house prices in the suburbs began falling earlier, in the middle of 2006, and then accelerated, dropping by 7 percent during the last three months of the year from a year earlier.

Many factors have propelled the unraveling of American real estate, from the mortgage crisis to a staggering excess of home construction, making it hard to pinpoint the impact of any single force. But economists and real estate agents are growing convinced that the rising cost of energy is now a primary factor pushing home prices down in the suburbs, particularly in the outer rings.

More than three-fourths of prospective home buyers are now more inclined to live in an urban area because of fuel prices, according to a recent survey of 903 real estate agents with Coldwell Banker, the national brokerage firm.

Basic household arithmetic appears to be furthering the trend: In 2003, the average suburban household spent $1,422 a year on gasoline, according to the Bureau of Labor Statistics. By April of this year — when gas prices were about $3.60 a gallon— the same household was spending $3,196 a year, more than doubling consumption in dollar terms in less than five years.

Some now proclaim the unfolding demise of suburbia. "