Sudden Changes in Demand and the Great Inversion

I've been making my way through The Great Inversion by Alan Ehrenhalt. His main thesis is that the majority of the changes going on in central cities, which is occasionally attributed to gentrification, are actually symptoms of a more systematic demographic inversion taking place across the country. This process is fairly quickly reversing a decades long trend of suburbanization to create new American cities that more closely resemble those of nineteenth century Europe.

This is an extremely apt observation. While gentrification as a process occurs, it's important to put it into a larger framework of what the root cause really is. It always has taken as its assumption a changing pattern of demand (coupled with a potential value in urban land not currently realized), and Ehrenhalt's analysis of what this means for downtowns, exurbs, and everyplace in between is extremely enjoyable.

One thing I still found missing from the analysis is a clearer explanation of why this change in demand is occurring. The demand created by aging boomer parents is fairly apparent, but it isn't so with millennials. For millennials, Ehrenhalt included anecdotes of college students polled showing a preference for living in the city, after watching Seinfeld and Friends from the safety of the suburbs.  While I'm sure this happened to many American college students, I still think there is something broader to be said about the general change in urban demand among millennials without falling back on the story of the bored suburban kid rebelling by moving to the big city.

A possible explanation for this change in demand is the fact that suburban growth was always in essence a ponzi scheme. Demand for the suburbs was dependent on the fact that demand for suburbs would always continue among later cohorts. The analogy I would draw is a line that is constantly growing longer. You'll more willingly get on line if you see people will gather behind you. The wait doesn't seem too long when compared to the growing number of people behind you. Whatever inconveniences you have to deal with in your suburb is mitigated by the fact that people are still moving further away than you, and they have it worse out there.

Of course like any ponzi scheme, collapse is inevitable. Once this process stops, demand for suburban areas as a whole ends up suffering. Exurban areas immediately feel the hit, as they have during the latest housing crisis, and other suburban areas are forced to adapt in the myriad of ways Ehrenhalt describes, which depends on whether the metro area is growing, stagnant, or declining, and how far out the area is.

This ends up describing both why this change is happening now, why it seems to be happening to millennials (it would happen to any cohort in our position), and why the change seems to be happening so suddenly.

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