Many seek new homes near cities but are priced out

Jun 11 2014, 13:42 IST
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SummaryPhoenix lawyer moved downtown a few months ago into a new $389,000 home with a warehouse-style floor plan.

City living has been a blessing for Tim Nelson.

The Phoenix lawyer moved downtown a few months ago into a new $389,000 home with a warehouse-style floor plan, a Jacuzzi tub and kitchen counters made of Caesarstone quartz. His favorite coffee spot is three blocks away. When the Arizona Diamondbacks play on Friday nights, he can watch postgame fireworks from his deck.

''I like the views,'' said Nelson, 50. ''My commute is almost nonexistent.''

Nelson has plenty of company.

Americans increasingly say they prefer to live near the centers of cities and towns, where commutes are typically shorter and culture, restaurants and entertainment close by. It marks a shift away from the yearning for open suburban space that drove U.S. home construction for decades.

But it carries a costly trade-off: Land in many cities has surged in price. And fewer Americans can now afford newly built homes in the walkable neighborhoods they desire.

The average price of a newly built home nationwide has reached $320,100 - a 20.5 percent jump since 2012 began. That puts a typical new home out of reach for two-thirds of Americans, according to government data.

Yet many builders have made a calculated bet: Better to sell fewer new homes at higher prices than build more and charge less.

Their calculation is partly a consequence of the growing wealth gap in the United States. Average inflation-adjusted income has declined 9 percent for the bottom 40 percent of households since 2007, while incomes for the top 5 percent exceed where they were when the recession began that year, according to the Census Bureau.

Buyers have historically paid about 15 percent more for a new home than for an existing one, a premium that's reached 40 percent today, according to the real estate data firm Zillow. An average new home costs about six times the median U.S. household income. Historically, Americans have bought homes worth about three times their income.

The high prices and sparse construction are no help for a still-subpar U.S. economy. With new-home sales well below their historical average, construction firms need fewer workers. The economy remains 1.49 million construction jobs shy of its total in December 2007, when the Great Recession began.

After 60 years of migrating to car-dominated suburbs, polls show more Americans want out of long commutes in favor of neighborhoods where jobs and stores are nearby.

Stuck with pay that's barely budging, many face a tough

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