Is Downtown Stealing Suburbanites?

by Gabe Bullard on January 14, 2009

The burst of the nation’s housing bubble last year has apparently done little to disturb a trend that began developing before the mortgage crisis. Industry analysts say in some cities, many homebuyers are abandoning suburban living for lofts and condos in downtown areas.

Melody Jones can see Iroquois Park from her living room, even though she lives more than six miles away, on the 8th floor of the Henry Clay Building downtown. She moved here from the suburbs.

“We had the typical, 4-bedroom, 2-and-a-half-bath, 2-car garage house there,” she says.

Sam Rechter also moved downtown from the suburbs. He lives in the Waterfront Park Place building.

“Right now we live on one floor, in a single-floor plan, which I like. I don’t miss the steps at all,” he says. “We used to have a three story house and we had a lot of steps.”

Rechter and Jones are what developers call urban pioneers. They moved downtown despite the absence of malls, grocery stores and other retail in their new neighborhoods.

They say in addition to the view and cozier rooms, they’re excited about the downtown development that will be spurred by construction of Louisville’s new arena.

“The day of the McMansion, 5,000 square ft. with three bathrooms on the second floor and five bedrooms on the second floor and the living room, kitchen, dining room on the first floor and the washer, dryer in the basement may be over,” says Ron Crouch, director of the Kentucky State Data Center.

Crouch predicts the shift to smaller dwellings, including those in downtown areas, will continue.

“I’m afraid in many of our large subdivisions with huge homes, I don’t see the market down the road,” he says. “You’re going to have a market for ranch-style homes, one floor homes with a full bedroom on the first floor and smaller homes.”

Downtown developers say their units are filling up, and Indiana University Southeast finance professor Uric Dufrene says the evidence is clear where many of the urban pioneers are coming from.

“I think you could surmise that it’s coming probably from the suburbs because we’re not seeing a significant increase in the population of Jefferson County,” says Dufrene.

Developers are counting on others to follow the pioneers downtown. They say empty nesters and young people are drawn to urban cores the way baby boomers were first drawn to suburbs.

For areas to thrive they need people and retail. Right now, Dufrene says there’s not enough of both to support downtown and the suburbs.

“Unless you have an increase in population or an increase in income, you only have so many retail dollars to go around,” he says. “And so any new retail establishment downtown simply removes or transplants dollars from the suburbs downtown. And we’ve seen that in Louisville.”

The downtown trend is a reversal of the urban flight of the latter 20th century. After World War II, highways, a baby boom and economic growth helped push populations to the suburbs. Now, high gas prices, smaller families and other factors are pulling them back.

Uric Dufrene says that could mean a glut of suburban housing.

“As downtown regions continue to develop and as people move downtown,” he says. “Someone will have to buy that housing stock in the suburbs. And unless the area sees an increase in population, you could have some difficulties down the road. I’m talking long term here.”

Downtown resident Melody Jones and her husband say they know about the difficulties of selling suburban homes.

“We have one for sale in Shelbyville that we can’t get rid of,” she says. “We can’t give it away for the price it was paid five years ago.”

The Joneses also own an extra condo downtown, which they expect to sell before closing on the Shelbyville property.

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