Where Are Real Estate Values Safest? In the City

• July 10, 2009

by Will Smith

Local think tank The Brookings Institution published findings recently showing that the housing markets of the nation’s largest cities have fared far better than their suburban counterparts thanks to swelling populations. According to census data for the 12 months ending in July 2008, cities saw their population growth accelerate while the ‘burbs saw the reverse.

From Brookings:

“…Big cities on the coasts and in large stretches of the Heartland registered upticks in their growth at the same time that many suburbs, exurbs and smaller metropolitan areas saw the bottom drop out of their mid-decade growth.”

The figure below from Brookings shows very clearly how the population growth rate of this region’s “central city” — defined as DC, Arlington, and Alexandria — has accelerated since 2003, while growth markedly decelerated in outer areas from 2001 to 2006 and remained relatively flat since. “If there is a silver lining to the bursting bubble of mid-decade housing and suburban growth,” writes Brookings, “it is the proof that large diverse core cities were able to survive.”

Important to note is that Brookings is referring to the rate of growth, not absolute growth. You’ll see from the figure that both central city and the outer suburbs saw positive growth every year. It’s just that while the suburbs’ growth slowed down, growth picked up in the city, which saw its housing prices retain more value as a consequence.

It will be interesting to revisit this graph next year when it includes data from August 2008 through July 2009, these last 12 months when the worst of the recession hit.