Is the Role of the Home Changing?

EVERYBODY AGREES THAT THE CHANGES UNDERWAY in the economy are impacting the nation's real estate market and what's happening now is probably only the beginning of what's to come. Most discussions about such matters focus on what our rapidly changing information technologies are expected to do to the business use of real estate. The concern in this article is with possible long-term impacts on the residential real estate choices of households.

While speculations about the long-term future of activity in particular markets are just that-speculations-there are developments underway that suggest the home will, in time, become a more important center of our activities in ways that have implications both for our residential and nonresidential real estate markets. The argument here is worth making because it points to things that should be watched as the future unfolds. Before getting to it, however, I want to review briefly some recent developments in the residential market that suggest this process may be underway.

The housing market has, of course, exploded recently with the sharp increase in the level of single-family home activity both in the new and existing unit markets. While more than a few have expressed concern about a price bubble in these markets, that possibility is not my concern. Rather, my concern is with certain facts that hint at some early housing market impacts of the recent advances in our digital technologies.

The facts of interest are those that show an increase in the size the new units coming on to the market between 1995 and 2003. In 1995, 28% of the units completed and added to the housing stock had floor space of 2,400 square feet or more. By 2003, that figure had risen to 39%. Over this same period there are facts that show a slight decline in the average size of families. The increase in the size of units coming on to the market apparently can't be explained by demographic factors as it has in the past.

WHAT THEN IS THE EXPLANATION?

There are economic models that offer an explanation in terms of what happened to incomes which increased during this period and financing costs that declined sharply. Any self-respecting economist would point to income and financing cost elasticities as factors that could explain the growing demand for more housing space.

These elasticities, helpful though they may be in our interpretation of market developments, are based on calculations that average the relevant experience of the past. While this is an acceptable procedure during periods of relative economic stability, one has to feel a little less comfortable with it during periods of significant economic change. To be sure, we no longer hear much talk about the new economy, but no one doubts that we are living in a period in which our advancing information technologies are generating tons of changes in how the business world operates and, to a lesser extent, in how we live our lives away from our jobs. That this is so has to mean that there are things going on that could be altering our demand for housing space irrespective of what's happening to our incomes or those financing costs.

What things?

THE HOME IN A DIGITAL AGE: THE SOCIAL SIDE

The home has long been at the core of the social life of urban families in the United States. Early on in our history that life for most was largely limited to what were strong cohesive connections with nearby neighbors. This began to change with the coming of the automobile and the suburbanization it brought about. Life in the suburbs, with its mall shopping, TVs, VCRs and neighbors who were not quite so close led to much less contact with those nearby. The social contacts of most suburbanites began to spread over more territory in relationships that, by and large, were weak compared with those of the earlier era. Robert Putnam's Bowling Alone provided us with one view of some of the social consequences of these developments.1

Enter now into the world of the Internet, the World Wide Web and mobile phones, a world that provides the basis for significant expansion in both the number and reach of our social connections. Those who have become active in this part of the world participate in a social network that allows them to easily increase the number of contacts, some of which are with people located in faraway places. And all of this can be done at different locations.

Some early speculations about the outcome of technologies expected to open up such possibilities had people moving into a more nomadic lifestyle.2 While some-perhaps even a lot-of our social life would shift into cyberspace, many of the relationships developed in this world, it was argued, would lead to the pursuit of face-to-face contacts giving rise to nomadic movements. Such movement would lead to the need for living space in more than one place, but less space in any one place. With this view of the world, the housing market would become both more dispersed and more concentrated. A nomadic lifestyle would lead to dispersion. Rather than living in just one place, people would have a number of places of residence. But more than one place, given the family budget for most, would mean units with less living space. And the scale economies realized in building such units would lead to geographic concentrations of them wherever those nomads chose to hang their hats. The result would be smaller units clustered in more densely populated areas, units that could be rented or owned in some kind of condominium or time-share arrangement.

Article Source: http://www.realestate-articles.info

Real Estate Issues, Fall 2005 by Winger, Alan Some Real Estate Implications www.findarticles.com

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