Americans are understandably concerned by the current housing downturn, but whether it is all bad news depends on your perspective. I am sensitive to the millions of Americans hurting in the current economic slowdown, but in the long term the contraction of a predominantly sprawl housing market may be good for the country. Our development patterns for nearly a century now have been based around the reality of cheap oil prices, and sprawling housing development dictates that most Americans spend an exorbitant amount of time driving every day. But with oil prices now climbing to record highs ($102 a barrel on February 27), it appears that the current housing downturn may be the beginning of the end for sprawl in America.

It is common these days for the media to highlight gloomy national figures. The National Association of Realtors (NAR) reported in late February that home sales rates are at their slowest since 1999, and the median price of homes sold fell 5.8% from a year ago. The Associated Press calls it the worst housing slump in a quarter century. And the West as a whole is not fairing too well with median home prices falling 8.7%—the biggest decline by region in the U.S.—between the fourth quarter of 2006 and 2007.   

But the real estate bust looks different if considered from a more local perspective. A recent New York Times article highlighted the fact that of the 150 metropolitan areas featured in the NAR report, median home prices were rising in 73 of those markets. One such city is Austin, Texas.

Austin will host the Congress for the New Urbanism conference this April, in part because the city is the midst of a boom in urban living. The city has a vibrant twenty-four-hour district downtown and is stepping up its public transportation services, including a new rail system set to go online in the fall of 2008. It seems likely that cities like Austin are faring so well largely due to their excellent urbanism. While tract housing in the exurbs of a city like Phoenix amounts to a commodity market, it makes sense that walkable towns and cities with great character and amenities would have more consistent demand. This is likely why larger cities like New York and San Francisco—both notable for their excellent urban design—have fared relatively well through the housing bust thus far.

An article in the October/November issue of New Urban News confirms such logic. It cites data from numerous markets across the country suggesting that new urban projects are weathering the housing downturn better than the national average. In Denver in 2007, “Areas with traditional urbanism—walkable blocks and street networks—now have an advantage. While the Denver region as a whole has seen sales prices slip by one percent this year, many walkable neighborhoods have risen sharply in value. These include North Capitol Hill with a 47 percent increase… and Jefferson Park, Hilltop, and University Park, all up 24 percent.” Evidently urbanism is an important factor just over the mountains from Buena Vista.

Good urban design is not the only factor in determining the health of local real estate markets, however. Just as important, the New York Times points out in its February 15 article “Some Cities Are Spared the Slide in Housing,” is whether a local market saw a major boom in real estate prices over the last several years. Most markets that saw large run-ups in prices—usually peaking in 2005—are now experiencing equivalent price drops. Those markets that maintained cooler growth during the national housing boom, however, are typically in much better shape now and among the 73 markets with rising prices in the NAR report.

Local statistics suggest that Chaffee County is one such market. According to the Chaffee County Board of Realtors, the total value of real estate sold in the county increased 18% from 2005 to 2006 and 8% from 2006 to 2007. The median price of home sales, meanwhile, climbed 5% from 2005 to 2006 and 9% from 2006 to 2007. This is the very same median price figure that dropped 5.8% nationally and 8.7% in the West as a whole over the last year.

So while the national and regional markets are floundering, the market in Chaffee County is apparently holding strong. It’s hard to say exactly why this is, but it certainly appears that Chaffee County falls into the category of those markets which did not see booming prices around 2005 and are now, therefore, not seeing equivalent price drops. While the median price did increase 5% in 2005 in the County, this figure was 13.6% nationally that year and as high as 30% in many locales.

The Chaffee County real estate market appears to have dodged a bullet with the current downturn. It would be unwise, however, to assume that the future is automatically bright. Our valley is far from immune to the type of sprawling development which set up the country for its current economic woes. The best thing we can do right now is to direct growth to our existing downtowns in Buena Vista and Salida and make sure that development is well-designed. Neighborhoods like South Main will only grow in appeal as oil prices climb higher. And with interest rates at their lowest in years, it is easier than ever to buy into our most-loved places in the valley.      


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