TRAX in Daybreak - Real Estate Boost?

As we experience a declining housing market in the U.S., it is important to consider the geography of areas both losing and gaining property value. In Utah we are currently seeing some neighborhoods decline as they are primarily constituted of homes in the higher price ranges. Beyond this trend, there is another subtle trend that I have noticed taking place across the country. Homes within a walkable distance to light-rail stations are fairing better in this down market and some are even gaining value.

The Washington post reported on this trend, showing the percent change in the median home price of individual zip codes of Washington D.C. and its surrounding counties. The paper found that areas without direct access to metro stations - ones that were typically suburban in nature - experienced greater losses in median home value.

In Denver, where they have pushed light-rail construction heavily, the Denver Post reported that values have increased for homes near light-rail stations:

Margarete Humphrey knows her bungalow near the Louisiana Station light-rail stop is in a hot neighborhood. But she was surprised to learn the value of her home has increased over the past two years as much of the metro Denver housing market has declined. Homes near light-rail stations along the southeast line, which opened in November 2006, have increased by an average of nearly 4 percent over the past two years, according to an analysis by Your Castle Real Estate. But the rest of the Denver market declined an average of 7.5 percent.

While most of the studies indicate that transit increases property values, there are a few that have found that it decreases property values. In looking at these studies these negative impacts occur because of the negative side effects that are realized by those properties located right next to rail facilities. The noise, aesthetics, and traffic were cited as the primary culprits. In these studies homes that were in extreme close proximity lost value, but homes further away (but still within walking distance) gained value. However, most of these negative impacts can be mitigated by proper planning. The Daybreak plan looks to mitigate these factors as the TRAX line follows commercial, industrial, and retail properties in its penetration of the community. So these "nuisance effects" are absorbed by these non-residential areas that actually benefit from the traffic of cars and people. Further benefit is realized as these non-residential properties will be using the TRAX parking to their benefit.

So how does transit increase property values? Because it increases access to area destinations for residents in close proximity to transit stations. It is for this very reason that TRAX may be able to add maximum value to the Daybreak community. Daybreak essentially lies on the fringe of development in Southwest Salt Lake County. To get to most destinations, residents must travel either East or North to arrive there. Right now there are limited options to do this and accessibility is definitely a problem. TRAX offers a direct route to Salt Lake City, the University of Utah, various sports complexes, shopping centers, commuter rail, etc. While gas prices have recently gone down drastically, I do not expect them to stay there. The more gas prices increase the more people will see TRAX as their best transportation option. This will only increase property values more.

Overall, transit adds value to communities like Daybreak regardless of the economic climate. Neighborhoods and communities with strong connectivity will thrive in the long-term. Transit has the ability to increase (or at least sustain) value because it provides more people with access to essential destinations in a given area; it also improves one's quality of life in congested metropolitan areas such as the Wasatch Front.

Trees for Daybreak

The street that I called home when I was a child was lined with trees. Any memory that I have while playing in my neighborhood includes these long-lived giants. They were planted long before I was born and will probably outlive me even if I live to be 100. The shade they gave during the hot summer months, the brilliant colors and piles of leaves in the fall, the climate and peace of mind that they provided was more valuable than any other amenity. Sara Ebenreck said that trees outstrip most people in the extent and depth of their work for the public good.

Considering these memories, I am glad that the landscape plan for Daybreak calls for the planting of 100,000 trees among the 4200 acres that will eventually make up the whole of the community. It is one of the major reasons that I moved here. Most of the trees in Daybreak are just getting started, but given time will grow to be the same green sentinels that I enjoyed in my old neighborhood.

This transformation will dramatically affect every aspect of life in Daybreak. For example, one of the main underlying philosophies of Daybreak is conservation and smart growth. We are building homes that are energy efficient, planting water-wise plants and reducing runoff among other things. All of these efforts will be reinforced by the planting of trees.

• "The net cooling effect of a young, healthy tree is equivalent to ten room-size air conditioners operating 20 hours a day."—U.S. Department of Agriculture
• "Landscaping can reduce air conditioning costs by up to 50 percent, by shading the windows and walls of a home." — American Public Power Association
• "The planting of trees means improved water quality, resulting in less runoff and erosion. This allows more recharging of the ground water supply." —USDA Forest Service

Trees help the environment in more direct ways as well. Especially in Utah, the temperature underneath a tree can be much cooler. By using trees in our neighborhoods, we moderate the heat-island effect caused by the heat radiated by pavement, buildings, and other hardscapes. The quality of the air we breathe is improved by trees as the leaves filter dust and other particulates. Trees also absorb other pollutants such as carbon monoxide, ozone, sulfur dioxide and recycle it into oxygen.

One of the most interesting affects trees have is on your pocketbook. Besides saving money by lowering energy costs, trees can increase the value of your property. A house with mature trees can be worth 5 to 20 percent more than homes of similar size and quality.

But when will these benefits be realized? While the full benefits will not be realized for at least a generation, proportioned benefits will be realized along the way. Depending on the growth rate of the variety of trees planted in Daybreak, some will take much longer. I personally look forward to a fall day 20 years from now when the trees are turning colors and the children are crunching the leaves under their feet. If you have any other reservations about planting trees in Daybreak, then just look at the two pictures below. The same street photographed at different times (no digital manipulation) one with trees and one without. Which street would you rather live on?

Housing Density and NIMBYs

Housing density has been and will remain the most common disagreement with regards to new development in existing towns. The politics surrounding this issue can be fierce with strong emotions on all sides. The battle over density usually starts when a developer purchases land with plans to build medium to high-density residential. One resident will hear about the pending project and will rally the troops. This person is usually referred to as a NIMBY which stands for Not In My Back Yard. This neighborhood watchdog will then broadcast the message that an evil developer is trying to profit with a new development and does not care about its impact on the surrounding community.

This was the case with Daybreak and many other new urban communities across the nation. The question that I would like to ask most NIMBYs is this: how did you inform yourself about the topic of density and its effects? Some of them call on first-hand experience. The neighbors near many developments complain about the traffic that the development is causing. Of course while the infrastructure that will accompany the development is only starting these neighbors pass judgment by what they see immediately. This short-term, subjectivity should not be taken as fact, but many NIMBY’s present it as fact. Many NIMBYs that I have talked to use the words “its just common sense” all too often when trying to explain their information source. While I feel that common sense is a valid tool that cannot be underestimated, I also feel that it is sometimes confused with myth.

These myths are traditional in my opinion. Passed down through the generations and are added to with each new generation. The history of where these myths started reaches back as far as the 1800s. The US started as an agricultural nation and transitioned into an industrial nation with factories and mass production. This transition was accompanied by waves of immigration from Europe. Each new wave contained different ethnic groups that were overtly discriminated against. This discrimination clustered these immigrants into densely populated areas with the least desirable jobs. This segregation along socio-economic status lines resulted in the materialization of many of the myths that are associated with density.

Fast forward to the age of suburbia that started after World War II. Being enabled to travel long distances via automobile, people could more economically live in the suburbs and further segregate themselves. Zoning use ordinances specified separation of land use and from then on commercial could no longer coexist with residential. In many cases this meant separation of density as well. Fast forward again to the 70s and 80s where the government decided to build “project housing” which not only segregated people of lower socio-economic status, but actually concentrated them. Many of these were an immediate failure with rampant crime and social problems. The images created by these projects reverberated with further intensity in the media particularly in movies and television. The “inner city” was a dangerous crime ridden area only suitable for those “other” people. All of these events perpetuated the myths of density with a simple philosophy: guilty by association.

So what is the real story behind density? The best way to answer this question is to address the myths often cited by NIMBYs one at a time.

Myth: Density will lower the value of my home. Many things can lower the value of a home, but density is not by itself one of them. In fact researchers have conducted many studies on single-family housing that is located in proximity to dense residential developments. The conclusion of these studies is that there is not a significant difference in the appreciation rate of those single family homes located in close proximity to high residential developments and those single-family homes located further away. In fact the percentage of appreciation is 2.9 versus 2.7 percent. This is not a significant difference. However, if you have an apartment building located next to your home that is 5 stories tall, over 30 years old, the grass is browning, windows are broken, loud music is blaring from the windows, and the paint is literally peeling like a sunburn, then this will obviously lower the value of your home. Of course, if a single family residence was in the same state, then it would lower the value of your home as well.

Another myth is that dense housing will create more traffic. Obviously if you add more cars to an area you will have more traffic. However, research has proven that higher density housing decreases traffic per person. Single family detached homes average 10 car trips a day. Compare that to the 6.3 car trips per day made by people living in townhomes and condominiums. Density is also needed for public transportation to be feasible. The Mid-Jordan TRAX line would not extend to South Jordan at all if not for the density that will make up the Daybreak Town Center. This mode of transportation will bring an additional choice for transportation that is likely to be used considering gas prices. Daybreak further mitigates traffic by having most necessities within walking distance which encourages the two-legged commute.

The most prominent myth about density is that it creates crime. This claim is absolutely false. Numerous studies have been conducted and the conclusion is that per population, crime is the same in higher density housing as it is in single family housing. The perception of crime is perpetuated when the observer holds an entire apartment complex to the same standard as one single family home. So when three juveniles from the same complex commit a crime and the police show up at the apartment complex three times in one year, it is considered “crime ridden.” On the other hand if the police show up for a juvenile in a single family residence this is considered an “anomaly.” Crime research indicates that crimes increase in accordance with certain socioeconomic indicators such as education attainment, unemployment (particularly of males), and the poverty rate.

The final main myth is that dense residential housing is unattractive and is only desired by lower-income households. Considering the changing demographics and preferences of consumers, this assumption is not based in reality. This market appeals to empty-nester and first-time home buyers tremendously. As with anything in real estate it is all about location, location, location. You can buy a single-family home in some locations for half of the price of a town home in south Jordan. Considering that the average income earner in Utah currently cannot purchase high-density housing in many areas, I would have to say that it is not just the poor that are moving into condos and townhomes. If the housing has a good design and is well maintained it will attract quality residents who care about and participate in their community.

So who is winning this battle, the NIMBYs or the New Urbanists? The New Urbanists have the clear lead, but this depends greatly on where you live. In North Dakota and Oklahoma , the NIMBYs are holding their ground. If you live in Utah , Colorado , Texas , Florida , or California on the other hand, the New Urbanists are definitely ahead of the game. Since its inception in the early 80s, New Urbanism has grown at a phenomenal rate in most states. Locally, more and more new urban developments are popping up. They are called by different names such as smart growth or transit oriented developments, but they are the same with respect to density.

In fact, South Jordan will shortly be surrounded by these developments. With the Herriman Towne Center , Daybreak, Jordan River , and other future communities coming to light, New Urbanism will also be the future of development locally. A number of strong forces demand this density. Energy costs demand homes that are more efficient, smaller, easier to take care of, and closer to the necessities of life. Businesses now want to locate their operations in communities that are vibrant, walkable, and have transit nearby. Density is the vehicle that has to be used to accomplish these attributes. The government wants density as it allows for less expenditure on infrastructure per tax payer. Finally, people are demanding more density and they are voting with their feet. The success of dense New Urban communities speaks volumes about this demand.

Density will have its place in the future of South Jordan, but if not planned correctly it can cause problems. Density cannot be thrown in a community in a half hazard manner in order for the developer to make a buck. Instead it should be planned and integrated correctly according to transect planning and community needs. These new developments must feature good designs that are sensitive to the context of the surrounding community. These designs and features must be maintained by a community organization such as a HOA. I can see why many NIMBYs are opposed to housing density, but assumptions should not be made based on false associations of the past. To those NIMBYs who will fight till their last breath any development that has more density that 2 units per acre consider if your beliefs about density are actually true. Also consider if your energy might be better spent ensuring that these developments are integrated properly instead of trying to ban them all together. Density is here to stay. Instead of a battle of how many units per acre, we need to ensure that these units are built, maintained, and located in a fashion that will enhance the community for all of us.

Are Houses in Utah Getting Smaller?

Are Utah Homes Shrinking? Since the beginning of suburbia after WWII homes across the country have been getting larger. The average home back then was about 1100 square feet. In the 1970s this size grew to 1600 square feet. Presently the average American home is 2300 square feet. This may still sound fairly small, but the calculations for this figure do not include basements, bonus rooms, or garages. Now this trend is reversing itself. According to recent reports the average size of the American home is beginning to shrink. This downsizing is attributed to rising fuel costs, the “green” movement, and an aging population.

The leading edge of the baby boomer population just turned 62. This demographic is getting ready for retirement and the majority are becoming empty nesters. Since they do not have kids and want to stretch their retirement dollar, buying a smaller home in a nice community is becoming a priority. One of the new features in the new North Shore Village will be residential construction targeted specifically at the aging baby boomer population. While Kennecott had this in mind earlier it did not make it off of the drawing board into Eastlake Village. Now that lending standards have been tightened and less people can qualify for a loan, homes are not selling very well and there is a large inventory on the market. However, these baby boomers usually do not have trouble qualifying for financing and half of them buy their retirement homes with cash. This is a great market to target given the circumstances.

Another target market is the green movement. The whole philosophy behind Daybreak promotes sustainable communities. This “green” philosophy is not necessarily embodied in a 5000 square foot house. (Although some homes in Daybreak exceed this size) Even with the energy saving appliances and energy star certified home, a house that big is an energy waster if you have a small family. More than likely you don’t use half of the rooms of that house daily. Rising utility and maintenance costs of a home that large is becoming more of a disincentive to potential buyers as well. Another disincentive is the rising cost of transportation. If you live in South Jordan , chances are that you work somewhere else in the valley and commute. This will be a problem for Daybreak residents in the near future, but in 2010 TRAX will alleviate that burden for some residents and the Mountain View Corridor (Later) will be the choice of others.

Preferences are changing along with demographics as a survey from the National Association of Home Builders has found that 60% of home buyers now prefer an amenity-rich smaller home. Studies also suggest that buyer preferences toward huge suburban lots are also waning. Caring for a full acre of property can be time-consuming and expensive. With both of these resources becoming more scarce, it is no wonder buyers are looking for small lots or maintenance free communities. If the trend toward smaller homes continues, then it could make a big difference in home values. A recent study by the online appraisal service Zillow.com found that less expensive homes appreciate more than expensive and presumably larger homes. If this trend continues, we will probably find that Mcmansions will represent the weakest portion of the market.

Many will say that with a low-interest mortgage you will get more house for your money. However, you will also get higher insurance premiums, utility bills, maintenance costs, and higher property taxes. With these costs and trends, homes in Utah will definitely get smaller. Those homes that are smaller, energy efficient, and convenient will also see the most appreciation in the future.

Renting In Daybreak

In an earlier post I talked about how apartments are an integral part of new urban communities. In my opinion if they are integrated properly into a community they can bring diversity and allow people that could not otherwise afford to buy a home a chance to live in Daybreak. How do Daybreak residents feel about apartments being built? According to a Daybreak Daily website poll most Daybreak residents do not like the idea. In fact, 62.5% of the 115 respondents indicated that they were not happy with the decision to build apartments in Daybreak. (May 13) They are not alone. Most owners of single-family homes or condos in the United States do not want to live near rental housing. They see them as high-crime areas that put extraordinary burdens on local schools and civil services. However this has been proven completely false. Numerous studies conducted by Harvard, NYU, and numerous government entities prove that these claims are false. Per unit crime in apartments is almost equal to that of single family homes. As for property values, "Between 1987 and 1995, single-family houses located within 300 feet of apartment communities appreciated at roughly the same rate as those not near an apartment property, 3.12 percent compared to 3.19 percent."

On the other hand I feel that there is something to be said about the habits that tend to be exhibited by renters. People frequently moving in and out result in noise and create an environment of impermanence and of a transitory lifestyle. Property managers report a higher incidence of rule violations by tenants. Examples include noise disturbances, illegal parking and overburdening of the Association recreational facilities. These rules are broken because many tenants are ignorant of these community restrictions. Rental occupancies tend to be shorter than owner occupancies and do not facilitate long-term relationships among neighbors. Resident owners are more likely to carefully maintain exclusive use common areas than are tenants. However, most of these negative attributes apply to homes and condos that are rented out. These are properties that are integrated into the community with the purpose of being owner occupied. The condos and homes in Daybreak that are being leased are more likely to exhibit these problems. With the proper planning the negative impacts can be minimized.

From what I understand Kennecott intends to build many apartments in or within close proximity to the village center. This is good planning, but the devil is in the details. How exactly will they integrate it with the predominant architecture in Daybreak? Exactly how close will these apartments be to single family homes? I would not want to walk out of my front door and stare at a massive facade of a 5 story concrete apartment building. Kennecott Land seems to have a penchant for surprising stake holders by withholding details until the last minute. I would urge them to be a little more forthcoming with residents. Especially those on Topcrest.

Many aspects of the community hinge on the successful integration of higher density housing. Take TRAX for example. You cannot justify having a line run into daybreak without a certain amount of residents in the immediate area of the stations. This calls for density. To truly be a walkable community a development must have a higher density for all essentials to be in close proximity to all homes in a community. From a business standpoint, it makes sense to build these apartments now. It is good timing that they are ready to build the village center and apartments right when the market for rental properties has become much more attractive and commercial entities are still expanding. In all practicality I feel that these apartments can be a great addition to the community if they are done properly. I just hope the planners use the successful attributes of other new urban communities.

Buy Now in Daybreak?

Many potential Daybreak home buyers are sitting out on the sidelines waiting to see what happens to the housing market. Will prices fall? Probably. If the home you are looking to buy is over 300,000, then you might consider waiting a little longer. The market for homes in that range is definitely trending downward. However, if the home you are looking to buy is under 260,000, then I suggest that you move forward and purchase your Daybreak abode soon. Now is the time to buy for three main reasons. First, many of the home builders are offering incentives that will definitely give you a boost in your purchase. Some home builders give 10,000 to put toward closing costs, upgrades, or to cut down the selling price of the home. An agent I know from one home builder said they would finish the basement of the home for free in addition to incentives already put in place. Another reason is that the market for homes around the 260,000 range and below will stay strong because people can afford these homes, especially the condos. That is the one area of the market that is not suffering right now. The third and final reason is the most compelling.

An article in TIME magazine aptly titled "Ignore the Headlines" illustrated this reason well. Essentially you could buy now at a possibly higher price, but get a lower interest rate. The alternative is to buy later when the price is down, but the interest rates have gone back up. More than likely you will be paying the same monthly payment.

"The thing that will make home prices stop falling is the very same thing that will push mortgage rates higher," says Jim Svinth, chief economist at mortgage firm Lending Tree. So anything you gain by a further drop in prices might be offset by rising financing costs."

Another trend that suggest interests rates will go up is inflation. Oil prices are at record levels which drives up the cost of just about anything that has to be transported (food, goods, building materials). Food prices in particular are rising at a rate which has prompted several news stations to monitor a "basket of goods" to report rates of local inflation. When inflation goes up interest rates go up. Click on the graphic on the left for a graphic comparison of buying now or buying later. With inflation rising and a possible economic recovery home loans will definitely get more expensive.

First-time Home Owners in Daybreak

I have talked to a lot of potential first-time home owners in Daybreak. You see them all the time. They are walking through the parks, at the visiting center, walking out of the model homes, and driving slowly while their heads swivel looking at the houses. These prospective buyers have been passed up by the whirlwind of appreciation that has lifted the Utah housing market in the last 5 years. If these couples had been old enough or bought at the right time, then they would have nearly 100,000 in equity to put down on their new house in Daybreak. As it is they can barely make a 3% down payment. For the most part, these seem to be honest hardworking people who just missed the boat. Many of them can no longer afford some of the town homes in Daybreak let alone an actual house. Because of this we will see a dramatic shift in the demographics of Daybreak. The main difference will be between Eastlake and Founder's Village.

Founder's village contains those original residents of Daybreak. These families bought their homes when the starter homes were going for the mid 100s. At the time you could buy a house with an income of just over 40,000 a year. Yes, two teachers together could easily afford to live in Daybreak. The down payment required was half what it is now. These "starter" homes are now selling between 265 and 330. Well out of the price range of the aforementioned teachers. These young families moved in at the right time. The 1100 kids that go to Daybreak Elementary are a testament to the demographics of Founder's Village. Eastlake on the other hand might be altogether different. Are young families still moving into Eastlake? Yes they are, but not near as many. Are these possibly teachers or blue collar workers? Not unless they were able to get in on the equity from the housing boom. No, these will be families that have already owned homes for a few years or have high incomes relative to the average income in Utah. Essentially these families are more likely to be established and have older kids. This will bring a whole new demographic to Eastlake. Instead of toddlers running around in the splash pool you might find teenagers running around the new swimming pool or lake.

Real Estate in Daybreak

When considering real estate in Daybreak you should know that Daybreak represents a unique market within a unique market. The Wasatch front is a unique real estate market that has bucked some of the national housing trends in the last year and a half. This digression has been fueled in part by our strong economy and low unemployment rate. However, I would argue that Daybreak is a unique market within the Wasatch front because of the amenities, architecture, and new urbanism concepts that are followed by the community planners. On average, homes are definitely more expensive in daybreak than in the surrounding areas because of these factors. So how will this affect future values? Daybreak was modeled after other prominent neighborhoods in Utah including the Harvard - Yale area. This particular area is also a unique market that has unique trends when compared to surrounding real estate. Because of the quality of life in the Harvard - Yale area, the property values are extremely high. A modest 3500 sq ft 4 bedroom house in this area could easily run you a million dollars. This value has been gained over time and will remain as long as the quality of life in this area remains high. Considering that most people who live in daybreak had to pay a premium to live there, they have a vested community interest in the quality of life in and around their neighborhood. This vested interest is different than other communities along the Wasatch front because of the uniqueness of Daybreak. You literally cannot find another neighborhood like it. If you want to move to a neighborhood that is similar , where would you move? In the long-term, house values in the Daybreak area should climb higher than values of surrounding homes because of the initial design and the continued interest that residents have in creating a high quality of life.