In 2019, urban centers were among the most in-demand areas for buyers and renters to live, but in 2020, COVID-19 has reversed that trend. At least, that is the hypothesis. In reality, Zillow researchers say, the urban exodus of 2020 is mostly anecdotal in nature.
According to the Zillow research team, “suburban housing markets have not strengthened at a disproportionately rapid pace compared to urban markets.” In fact, they concluded after analyzing page views, listing traffic, and sales price trends, most trends indicating buyers are increasingly interested in suburban homes emerged before COVID-19 arrived in the United States. Furthermore, supply-side constraints also distort the picture in many areas of the country.
“Pending sales trends are relatively even across urban classifications nationally, with some regional exceptions,” reported the team. They added that even in areas of the country where suburban homes were attracting more than three times as much of Zillow’s traffic as urban listings, the trend was evident a year ago also. “Interest in detached single-family (or similar) has not seen a marked increase in the past year, either,” according to the report.
Rising Home Values & Rising Search Volume
It is easy to see why the concept of the urban exodus is taking hold in popular culture and the media. Not only does it make a superficial level of sense, but it also seems to be borne out by the massive number of buyers in the market today. According to Zillow Research, search volumes overall have risen 42 percent over the last 12 months, but that increased volume is still distributed in basically the same proportions now as it was in 2019.
Home sales prices are rising as well, with national sales prices rising 5.5 percent year-over-year in July according to CoreLogic’s Home Price Insights report. This increase was the fastest growth rate since August 2018, likely because of low inventory, strong purchase demand, and historically low, sub-3% interest rates. Interestingly, CoreLogic does not predict that the current housing boom will last. The researchers said they believe national home prices will only rise about 0.6 percent in the next 12 months.
“Lower-priced homes are sought after and have had faster annual price growth than luxury homes,” said CoreLogic chief economist Frank Nothaft. He credited first-time buyers and investors for the boost in this type of housing. However, said Frank Martell, president and CEO of CoreLogic, as home-building activity climbs over the remainder of 2020 and into 2021, the increased supply could cause prices to level out.
“We expect to see more home-building in 2021 and beyond, which should help support a healthy housing market for years to come,” Martell said.
Do you think COVID-19 has spurred an urban exodus in your market?
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