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Ever since the Greeks built temples on high and the Egyptians erected pyramids in the sand, real estate has always been all about location. Never has that been more true than today, specifically when it comes to price. As millennials and active baby boomers flock to urban cores, embracing shared cars and bicycles, the discount for living farther away from town is growing.
"In my 26 years in the business, the price discount available to someone who is willing to commute has never been greater," John Burns of John Burns Real Estate Consulting wrote in a new report.
Take the Chicago area: Home prices in closer-in Deerfield are about 15 percent below their peak in 2006, but keep going out the interstate, and home prices are still as much as 30 percent below peak, according to the report. The same is true in Los Angeles, where home prices in the close-in suburb of Glendale are now 2 percent above peak, but further out in Palmdale they are a striking 37 percent below peak.
"We're still a little bit under prerecession pricing, whereas the inner jurisdictions are now above prerecession pricing," said Brian Cullen, head of development at Willowsford, a 4,000 acre residential community in Ashburn, Virginia, about an hour's drive from Washington. "People will make a value decision that they want to live in Willowsford, that they want a community that offers a lot of things they want, and that the driving isn't that challenging for them."
On a fall weekend in Willowsford, Ian Walsh throws a baseball with his three young sons on the front lawn of their spacious new colonial. It's days like this that make the commute during the week to downtown D.C. all worthwhile.
"It's easy to look at the math, the amount of square footage you can get inside your house, including the land, just the size of house you can get for the dollar, just drops dramatically as you get a little bit outside of the city," said Walsh.
Home prices in Ashburn are still over 15 percent below their recent peak, and that, according to Walsh at least, is an easy trade-off for the drive.
"When I get out here and into the neighborhood, I kind of feel the stress of the city roll off my shoulders a little bit and relax almost instantly, and any sort of stress from work or the commute is kind of wiped away when I pull in," he added.
For families with children, the suburbs have until now been the preferred option, but changes in demographics and social behavior are fighting that "norm." The Burns report looked at driving habits and found that for those ages 20-24 today just 78 percent have a driver's license, compared with 93 percent back in the late 1970s. Even though more workers today telecommute, they still show strong demand for urban neighborhoods.
"Prices are so ridiculous," said Jane Fairweather, a real estate agent in Bethesda, Maryland, one of the closest suburbs to Washington that now boasts a growing and pricey urban core of its own. "For those who have money, they will pay the premium, whatever that is, to live in a walkable community. I'm sure there's a price that people would say 'no,' but I don't know what that is to tell you the truth!"
Realtors used to say you get $1,000 in savings per mile as you drive outside of the city. The farther you go, the more you get for your money. That is no longer the case, as the nation's urban housing markets have recovered from the recession far faster than the so-called exurbs, or, the areas beyond the close-in suburbs.
"This 'drive until you qualify' discount far exceeds the industry rule of thumb today," Burns said.
That, in turn, may mean that there is a lot more room for prices to grow in the far-out suburbs. Buyers could be looking at a better investment in the long run, but only if they're willing to take the long drive.
— CNBC producer Stephanie Dhue contributed to this report.