Outside the Box: Homebuyers fled cities as COVID spread but many are heading downtown again
Downtown is a place to be again. The coronavirus pandemic induced many homebuyers to move away from population centers to suburbs, exurbs, and rural areas. Quite understandably, people wanted to social distance and work from home to keep safe. For example, there was an exodus of people living in high-density areas like New York. The firm I lead processed thousands of applications of those wanting to move to the suburbs.
But many homebuyers are looking at city living again.
Living in cities, being close to people, isn’t as scary as it seemed in the early days of the pandemic. Some two-thirds of Americans are at least partially vaccinated, and there’s hope that brighter days are ahead. Of course, the delta variant is still a concern, and while consumer sentiment has improved, it’s at low levels on a historical basis.
But housing industry data reveals noteworthy trends. Online searches for urban properties have surged. One online brokerage reported a 62% yearly increase in searches in areas with a population over 1 million. Pageviews and web traffic are usually leading indicators of consumer interest and their eventual purchase decisions. What’s more, change-of-address data reveals that the exodus from urban centers has slowed considerably in recent months.
The outflow of residents from cities to suburbs and exurbs has slowed for permanent movers, and cities are once again growing. Urban population growth was steady across all metropolitan areas tracked by one survey. This is a notable trend for cities after several months of plunging occupancy.
Of course, it will take time for populations in these urban centers to recover to their pre-pandemic levels. And the suburbs still appeal to many homebuyers. It also remains to be seen how many employers will recall their workers back to the office on a sustained basis, which would spur population growth in urban areas.
Recent trends in rent prices also show that moving to urban areas is more in vogue. The median rent for a one-bedroom apartment has jumped close to 11% since the beginning of the pandemic. The rise in rent prices is happening nationwide, but it’s particularly acute in cities like New York City, where the median price for a one-bedroom is $2,333 per month. Nor is this limited to apartments in big cities. Rent prices in smaller cities such as Pittsburgh, Raleigh, N.C. and Memphis, Tenn. are among the fastest-growing in the U.S.
It’s easy to see why homebuyers would be interested in city properties. With higher density and better public transit, the urban core is usually walkable, bikeable and livable. City residents also tend to be younger and more educated, which means they’re more likely to be working and stable. For young adults, for example, a return to the city is a way to gain control over their lives, set their own schedules and live in an environment where diversity is embraced. Economists also see opportunity in this migration. As more educated young people move to cities, they create fresh opportunities for cultural growth and economic development.
It may be time to head back downtown.
Sanjiv Das is the CEO of Caliber Home Loans.
More: 3 ways to take stress and anxiety out of buying a new home
Also read: Hopeful home buyers: Here are some signs that you should make your move