Could Cities Be Safer Than Suburbs?

Many assume cities will be reduced to chaotic hellholes overrun by raging mobs and armed looters as the economy deteriorates. Perhaps this is backwards, and the real criminal hellholes will be partially-abandoned suburbs and exurbs.

Way back in 2006 longtime correspondent UKC and I began a dialog about the Pareto Principle and the way the popping of the housing bubble would hollow out exurbs and suburbs. At the risk of parading about our prescience, please read this entry from August 1, 2006: Twilight for Exurbia?

Here are UKC's comments in that entry:

"If there is a crash in the housing market many people will be forced to sell or will have it done for them by the lenders. One can then expect the price to drop and the demand then to pick up. However home ownership is not without costs - property taxes and maintenance being the most obvious. Will demand pick up to meet the supply? - maybe not. It is a reasonable assumption that if there is massive oversupply then there may well not be buyers for some homes at any price. The source of the oversupply could be in the many empty properties held by speculators, but also in hard economic times people move in with family members to save on costs - all of which conspires to reduce demand.

Empty properties soon deteriorate and a reasonable assumption is that many properties will be abandoned. But, here's the kicker, is the number of abandoned properties likely to be evenly distributed across every neighbourhood with every street taking its ration of a couple of empty houses. I think not - these effects tend to concentrate. There will be always some purchases if the price is right and some neighbourhoods will remain vibrant and others will become sinks in a classic feedback cycle inhibits or promotes purchases in the area.

Sooo... assuming the thesis of asymetrical desolation distribution is correct - what will be the determining factors in whether a suburb will survive or die?

It is possible that the future viability of a location will not be predictable a priori - a bit like chaos theory where small changes can effect improbably large outcomes. For some years in the future it may be that the value of a property could be almost entirely dependent on the maintenance level of the surrounding area. This was always the case, but now the effect may be greatly amplified. In conditions of massive oversupply, it is possible that once an area gets perceived as being on the downhill slide then the surrounding houses will rapidly become unsaleable at any price. In physics this is known as a phase transition (more recently popularized as the Tipping Point) and it happens rapidly. After a housing price crash, until things settle down, this effect could introduce extreme price volatility as the market determines which suburbs flip from being viable to being sinks."

I posited three possible suburban situations which might well experience just this sort of phase shift:

1. exurban areas (far from urban job centers) which lack nearby employment
2. new suburbs in areas of declining demographics
3. hastily constructed homes in hurricane-prone, high-insurance locales.

As an example of scenario #1, we might speculate that new tracts of homes in exurban areas like Modesto, calif., a long (or even extreme) commute away from job centers, might remain empty regardless of price. The reason is that massive overbuilding in such areas far exceeds native population growth; once all the speculators have exited, the thousands of available homes may well exceed the demand created by new residents supported by local jobs.

Exurban wages tend to be far lower than in urban centers or suburban business parks, which means that prices for new homes would have to drop appreciably before local wage earners could afford the new homes.

Additionally, employment typically drops in recessions, which may well translate into a smaller pool of people willing to endure extreme commutes required to live in exurbia.