America’s cities and their suburbs have experienced comparable market dynamics when it comes to the … [+]
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Since the onset of the coronavirus pandemic, numerous headlines have drummed up the rise of the suburbs as the new hot destination for virus-leery city-dwellers, looking for larger houses to accommodate their new schedules of working and schooling at home.
Although often supported by compelling anecdotes, this narrative does not seem to have a solid basis in data, according to the 2020 urban-suburban market report by real estate listing platform Zillow
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Published this Wednesday, the report states that the online traffic suburban, urban and rural home listings typically attract on Zillow has changed very little compared to last year. Suburban residences make up for a third of all the traffic to the website but that share has remained steady, in fact, declining 0.4% this June compared to a year ago. Urban listings, meanwhile, commanded 16.4% of all page views in June, 0.2% more than in 2019.
“[B]y and large, the data show that suburban housing markets have not strengthened at a disproportionately rapid pace compared to urban markets,” the report says. “Both region types appear to be hot sellers’ markets right now – while many suburban areas have seen strong improvement in housing activity in recent months, so, too, have many urban areas.”
With some exceptions, America’s cities and their suburbs have experienced comparable market dynamics when it comes to the days homes spend on the market, the number of pending sales, the share of abodes selling above their asking price and the overall growth in home values.
Supply differs
As of June, inventory in urban areas has been recovering faster with more new stock coming online. While this disparity could, on its own, indicate that the suburbs currently make for hotter housing markets, other factors do not really support such a distinction.
Home values hold steady
Since the start of the pandemic, home values in urban regions (often dominated by condos) have posted a slightly slower pace of acceleration (0.5% versus 0.6% in the suburbs) but remain a fifth of a percent higher than in suburban areas (where single-family houses form the typical stock). In a handful of major metros, however, that dynamics reverted year-over-year. In New York City and Boston, for instance, home values declined in urban zip codes and increased in the suburbs.
Sale prices diverge
The urban-versus-suburban comparison of median sale prices, however, presents a slightly different story. According to Zillow, sale prices have decelerated 6% more in the cities than in the suburbs. But, in urban areas, they also had more room to fall without turning negative, with a pre-coronavirus year-over-year gain of 9.3%, compared to 6.4% in the suburbs. The urban price deceleration, however, disproportionately impacted coastal cities, while the Midwest exhibited no divergence along urban-versus-suburban lines.
Zillow researchers also caution that the fluctuations in median sale prices – as opposed to the steadiness in home values – could be the outcome of disparities in the types of homes being sold as well as the overall low transaction volume during the pandemic, and not price discounts. As the pace of sales picks up, Zillow anticipates the price differences between urban and suburban areas to narrow.
Larger homes aren’t attracting more buyers
Zillow’s data shows that in June the traffic share of single-family listings dropped to 81.1%, nearly two percent lower than in 2019. At the same time, condo page views grew by about one percent. While these statistics seem to contradict the assertion that home shoppers are leaving cities en masse, land listing views increased one percent, perhaps cuing to the appetite for new construction.
Furthermore, Zillow found no evidence that home buyers are now flocking to larger homes (which usually populate the suburbs) that have more space to meet their new pandemic-induced needs. Searches for homes priced above the $1-million mark, though, increased, while abodes priced up to $200,000 saw the largest year-over-year decrease in page views.