Enabled by Technology and Driven by Economics, the Dispersion of the U.S. Population Is transforming Our Nation

In the January 2005 issue of Trends we traced the rapid growth of the real-estate boom in the exurbs. As we explained, according to the U.S. Census, the average commute, measured just one way from home to work, increased by roughly 20 percent from 1980 to 2000, to 25.5 minutes.

From 1990 to 2000, the number of American workers who commute from 60 to 89 minutes between home and work jumped 30 percent, from 5 million to 6.5 million people. Those who commute 90 minutes or longer doubled, from 1.7 million to 3.4 million.

If we count the increases in all of the commuting categories over 40 minutes, there are now six million more American workers who travel at least 40 minutes between home and work than there were in 1990, or 23 million in all.

Futurist Harry Dent believes that 20 percent of the U.S. population ? at least 70 million Americans ? will move from the suburbs over the next 50 years. The most popular destination will be smaller towns well beyond the borders of the big cities. These exurban locales offer several advantages over cities and suburbs:

- Bigger homes for less money
- Lower taxes
- Better schools
- Less traffic
- Safer neighborhoods
Once the embodiment of the American dream, today’s suburbs have become overgrown. They now are afflicted by many of the same problems as cities: rising crime rates, increasing congestion, overcrowded schools, and overpriced real estate.

Among the driving forces beyond the trend toward the exurbs are the dazzling improvements in technologies that allow people to work and live anywhere. Thanks to innovations in computing power and satellite communications, people can put in a day’s work without ever leaving their homes ? and they can live hundreds of miles from their company’s office without having to commute.

Finally, we predicted that the communities that will boom within the next quarter-century are those that are 60 percent beyond the edge of the suburbs. To find the “exurban radius” around a metropolitan area, draw a circle about 60 percent beyond the edge of the suburbs. For example, the suburban sprawl around Los Angeles reaches 60 miles. The best place to invest around L.A. would be 60 percent farther out, or 35 miles past the edge of the suburbs. For a smaller city, such as Phoenix, the suburbs extend about 20 to 25 miles. For the next decade, we can expect to see the exurban development spread another 15 miles.

Other potential hot spots for price appreciation include Westchester County, New York; Barrington Hills, Illinois; Mount Vernon, Washington; Franklin, Tennessee; Stonewall, Virginia; Grantsville, Utah; Divide, Colorado; and Dutchville, North Carolina.

As David Brooks wrote recently in The New York Times,1 “America’s population is decentralizing faster than any society’s in history. People in established suburbs are moving out to vast sprawling exurbs that have broken free from the gravitational pull of the cities and now exist in their own world far beyond.”

Brooks points out that 90 percent of the office space built in the U.S. in the past decade was built in suburbia, often in office parks near the highways. According to Brooks, this has spawned “a tribe of people who not only don’t work in cities, they don’t commute to cities or go to the movies in cities or have any contact with urban life. You have these huge, sprawling communities with no center. Mesa, Arizona, for example, has more people than St. Louis or Minneapolis.”

These communities are now known by many names, from rural areas to exurbs. In 2003, the U.S. Census gave them a new name: “Micropolitan Statistical Areas.” These are the areas far from big cities that are fertile grounds for jobs, retailers, and start-ups. More than 28 million people, or one-tenth of the American population, now live in micropolitans.

Thanks to today’s communications technologies, individuals and businesses can be just as productive in an exurb as they can in a big city. Consider Kord Campbell, a software coder who moved from Silicon Valley to Oklahoma at the end of December 2003. As he told Business 2.0,2 “There’s nothing in Silicon Valley you can’t get here, except for traffic.”

Campbell found that even in small towns in Oklahoma, broadband access has made it possible to do business just as seamlessly as he would if he were back in California. While running his startup firm, called Zoto, he has spent half the cost he would have in Silicon Valley, hired engineers for 30 percent less, and worked with people around the world via the Web.

More than any other technology, broadband is responsible for the growth of the exurbs. In early 2003, about 33 percent of Internet users in the U.S. had broadband connections. By the end of 2004, the number had soared to 51 percent. According to the federal government, 91 percent of American communities now have access to broadband.

According to a 2004 study called “Rural Areas and the Internet”3 by the Pew Internet & American Life Project, Internet use is growing in rural areas. Between early 2000 and the middle of 2003, the percentage of rural residents who were on-line climbed from 41 percent to 52 percent. Pew defined people as “rural” if they did not live in cities or suburbs.

This is happening because 105 million miles of high-bandwidth fiber are now criss-crossing the country, and the connections are spreading farther from the big cities and suburbs, into the rural areas.

The small rural towns are not resisting the technology to keep their old isolated way of life. In fact, a growing number of them are establishing their own municipal broadband networks to attract new businesses and keep existing ones from leaving. Business 2.0 reports that more than 200 communities have spent a combined $500 million to build fiber networks.

For example, Truckee, California is investing $24 million to bring fat pipes to its residents. And Cedar Falls, Iowa has gotten a great return on its investment of $9 million in a broadband network in 1996: It has lured 11 companies to Cedar Falls, including a $100 million Target distribution center with more than 1,000 jobs and total salaries of $25 million. All of the new businesses credit the fiber network as a primary reason for relocating there.

The move to the exurbs is not just driven by faster Internet connections, or the urge for affordable real estate. It’s also driven by the pursuit of old-fashioned values. Leaving behind cities with high rates of crime and divorce, they are relocating to places that offer good schools, big houses, friendly neighbors, and plenty of activities for children. They strive to be more involved in their families and more active in their communities.

This can be glimpsed in the Pew study on rural Internet usage. Compared to Internet users in cities and suburbs, people who go on-line in rural communities are more likely to search for religious or spiritual information. About 35 percent of rural on-line Americans have looked for religious and spiritual information on-line, compared to 27 percent of those who live outside of rural areas.

Among rural users, according to the study, gathering religious or spiritual information is more popular than banking on-line, at 28 percent; looking for a place to live, at 26 percent; and downloading music, at 13 percent.

Looking ahead, we offer the following three forecasts for your consideration:

First, the wiring of all of America’s small communities will eventually lead to the hollowing out of the nation’s metropolises. As soon as it becomes possible to work just as effectively from literally anywhere in the nation as it is in New York, there will be few reasons left for businesses and individuals to tolerate the high real-estate costs, the congestion, and the crime of large cities. However, one advantage of urban living ? access to cultural activities will continue to exist, at least until technologies advance to the point where people can enjoy the virtual experience of theater, art, opera, and museums just as they do in person today.

Second, the cheaper costs of launching high-tech startups in the heartland will hurt the venture capital industry. Now that smaller cities like Bend, Oregon, are fully wired, entrepreneurs can get new businesses off the ground and onto the Web without begging for funding from VC firms. For example, Jon Flowers started nCircle Network Security in Silicon Valley and burned through $13 million in VC funding in 18 months. When he started his next business, Kozoru, he moved to Overland Park, Kansas, an exurb of less than 150,000 people. With a lower cost of living than California, fast bandwidth, and cheap labor, he expects to stretch $3 million in funding for a few years. Another California entrepreneur, Rick Ellis, created a content management system for Web pages called pMachine. Instead of pleading for VC cash, he moved to Bend, a town of 52,000 people and plenty of broadband. He estimates his company will reach $1 million in sales in 2005, without a single dollar of venture capital.

Third, the migration from the cities to the exurbs will continue to reinforce the country’s return to conservative American values. In the 2004 Presidential election, the Republicans campaigned heavily in the micropolitan areas to counter the advantage that the Democrats held in the big cities. The 12 million residents of these areas who voted accounted for about 10 percent of the ballots. As USA Today4 reports, President Bush won 474 of the 573 micropolitan areas in the U.S. by a total of 61 percent to 39 percent over John Kerry. Considering that Bush received only 51 percent of the popular vote to Kerry’s 48 percent, the micropolitan votes made the difference in the election. From now on, politicians will have to recognize the importance of these communities and campaign there more vigorously.

References List :
1. The New York Times, November 9, 2004, “Take a Ride to Exurbia,” by David Brooks. ⓒ Copyright 2004 by The New York Times Company. All rights reserved.2. Business 2.0, December 2004, “Escape from Silicon Valley,” by Om Malik. ⓒ Copyright 2004 by Time Warner, Inc. All rights3. To access the Pew Internet & American Life Projects study on internet in rural areas, visit their website at:www.pewinternet.org/pdfs/PIP_Rural_Report.pdf4. USA Today, November 22, 2004, “For Political Trends, Think Micropolitan,” by Haya El Nasser. ⓒ Copyright 2004 by Gannett Company, Inc. All rights reserved.