Affordable cities are making a comeback
Over the last several months, America’s cities have waned in popularity as the suburbs found new life. But, recent data shows that cities are making a comeback, and young white-collar workers are seizing the moment of low mortgage rates and work-from-home policies to move to affordable cities, Bloomberg reported on Tuesday.
Urban U.S. markets saw a 15 percent increase in home prices during the three months through late January, outpacing annual price growth in the suburbs, according to data from Redfin (via Bloomberg). The growth shows a stark reversal from just a few months ago when prices in some cities were falling, causing many to wonder how long some cities would survive.
But recent strides made with the COVID-19 vaccine may be giving homebuyers renewed optimism that city life will return someday soon.
“People are anticipating that now is a great time to buy,” Redfin Chief Economist Daryl Fairweather told Bloomberg.“They’re not thinking about the short term. They’re looking forward to eating inside restaurants and going to concerts.”
The housing market has been remarkably resilient during the pandemic, boosted by low interest rates and a renewed desire for the sanctuary that a home can provide. About one year after the first case of COVID-19 was reported in the U.S., housing demand has finally spilled beyond just rural and suburban areas, and now urban areas in some parts of the country are actually outperforming their suburban and rural counterparts.
For instance, in Louisville, Kentucky, property values in densely populated urban areas rose twice as much as values in the suburbs over the last three months. In downtown Detroit, meanwhile, home prices jumped 43 percent, nearly four times as much as less densely populated parts of the city. Baltimore saw urban prices increase 34 percent while the metro’s outskirts only increased in price by 10 percent.
The country’s most expensive urban hubs, however, aren’t getting the same love from homebuyers as more affordable cities. Places like New York, San Francisco and Boston are still less appealing with their top-dollar prices, especially now that many workers can work wherever they want. Instead, cities like Austin, Texas; Boise, Idaho; and Columbus, Ohio, are gaining residents from those pricey cities, where real estate is more affordable and there’s more room to spread out.
Some metro areas, on the other hand, are seeing downtowns empty out while surrounding urban neighborhoods flourish. In downtown Louisville, high-end units are slow to sell and office workers have vacated the area, but townhomes and single-family homes in the neighborhoods surrounding downtown like Highlands, Butchertown, Crescent Hill and St. Matthews are flying off the market, Keller Williams Louisville East agent Libby Loeser told Bloomberg. In 2020, Loeser’s team sold $15 million in transactions, an increase of 25 percent from the year before, and her best year in her 12-year career.
“You can list a house two minutes from downtown and will probably have five offers in the first 24 hours,” Loeser told Bloomberg.“There is a younger contingent that is happy to be in those urban areas and will buy that house from the person who wants to vacate.”
Likewise, buyers in Pittsburgh are seeking out homes in neighborhoods just outside of downtown equipped with yards and more square footage — and they’re willing to pay for the extra space.
“Buyers in the city have to be ready to go — they can’t pause,” Kelly Hanna Riley, vice president of residential sales at Howard Hanna Real Estate Services, told Bloomberg.“They have to know they might go over asking price.”
As of January 24, overall homebuying demand was up 60 percent from the same time last year, according to the Redfin Homebuyer Demand Index, a metric that measures requests made to Redfin agents for homebuying services.