Will urban housing markets collapse?

By Daniel Walker Guido

A new year has begun, yet more than 1,000 people who lived in the lower portion of the 22.7 square miles that make up Manhattan still have not returned to their homes because of damage from Sept. 11. Some have simply gathered up what possessions they could carry and fled to New Jersey.

Long-time urban pioneers, who for decades have made no secret of their love for living downtown, are frightened. As recently as five months ago, not many would believe that any of the 1.5 million highly committed Manhattan residents would ever want to live elsewhere.

But the prospect of another massive terrorist attack is causing many to rethink their options. Already, 19,000 jobs have moved to New Jersey. Manhattan has lost more than 100,000 jobs to areas all over the country. Former New York Mayor Rudolph Giuliani's offer to streamline regulations for developers of commercial and residential projects was met with a tepid response from developers.

Fortunately, Manhattan's problems have not spread to other major cities nationwide, despite some press reports to the contrary, says Michael Carliner, NAHB staff vice president of economics. "There has been a strong infill movement in the past few years, and we do not have any negative feedback from our monthly surveys that says it is declining. Other than being in a high rise, people still want to live in cities."

"I don't think the bottom is going to fall out--in a little while people will start forgetting. It may take six months, but it will happen," agrees Charles Laboz, a broker with New York-based Corcoran Group, a real estate firm.

Yet another optimist, Eugenie Birch, chair of the City and Regional Planning Department at the University of Pennsylvania, says that downtown living is expected to rebound in popularity soon. Of the 45 cities she tracks nationwide, 78 percent had increases in downtown urban residents between 1990 and 2000.