This post was originally published on this site
At the beginning of the pandemic, many people who could work from home left cities, retreating to the suburbs. But as businesses and offices begin to reopen in-person, many people are looking to return to urban areas.
“There’s been an urban exodus from when the pandemic started in February and March of 2020 which hasn’t really reversed until very recently,” Stijn Van Nieuwerburgh, a professor of real estate at Columbia University, said.
Despite slow population growth in cities, rent has continued to rise. The Apartment List National Rent Index for July increased by 2.5%. This year alone rent has grown 11.4% compared with previous years where rent growth averaged 3.3%.
The largest three cities in the U.S., New York City, Los Angeles and Chicago, all had population decreases from 2019-2020, according to early Census projections.
Van Nieuwerburgh said there has been a “big change” in how much more people are willing to pay to live in the city center.
“I think there has been a lot of migration, but it’s mostly been within metropolitan areas, from urban centers to the suburbs and much less between metropolitan areas,” Van Nieuwerburgh said.
Stephan Whitaker is a policy economist at the Federal Bank of Cleveland who researched urban migration. He said a majority of the urban neighborhoods in that same metro area have low housing costs, lower-income households, and declining populations, so when there are fewer jobs outside the city people stay put.
“And so when you look at something like the city of Chicago and see that its total population for the city is declining,” Whitaker said, “that’s because there’s more of these low-cost urban neighborhoods, where when people can afford to leave, they leave. And so that kind of ebbs and flows with the business cycle.”
Olga Zakinova is a realtor in New York who has been helping people buy and sell their homes for over 20 years. She expanded her team to Long Island because she saw a “huge transformation” of buyers looking in the suburbs, especially during the pandemic.
Zakinova’s clients were in the market for housing with more space and land.
But as more people are required to work in person, Zakinova has seen a shift again in people looking for real estate in cities. The S&P CoreLogic Case-Shiller Home Price Index rose to 254.92 in May — the largest growth since the index was started.
“I feel that unless you are really in a position where you are more than a six figures earner, you definitely have no opportunity in New York. You definitely need to double income, triple income in order to qualify for the mortgage,” Zakinova said.
Miranda Penning graduated from college in May and just got a job in New York City that is hybrid, with the option to work from the office or remotely. She has been actively looking for an apartment in New York City using StreetEasy.
“Just a rule of thumb that a lot of people told me for a budget is that you want to spend max like 30% of your annual salary on housing,” Penning said, “So I’ve taken that into consideration when setting my max budget.”
In the U.S. the median price of newly built homes increased by 6% from June 2020 to June 2021 while new home sales fell to a pandemic low, according to data released by the U.S. Census Bureau on July 26.
The low interest rates, shortage of supply of homes and government support have contributed to this rise in home prices.
Buyers that are getting outbid or can’t afford a home in this market are turning to rentals or staying on the sidelines, Bruno Arapovic, a realtor in Phoenix, said.
Phoenix’s population has increased close to 18% in the past decade, according to early Census projections. This is the largest population increase compared with the other top 10 largest populated cities in the U.S.
Arapovic said the low cost of living, affordable housing prices, lack of natural disasters and job opportunities attract buyers to Phoenix. The S&P CoreLogic Case-Shiller Home Price Index in Phoenix rose to 262.13 in May.
But the attraction to city life could change if working from home becomes more of a permanent feature in the economy causing an even greater shift in economic activity to the suburbs.
“As people are moving more towards the suburbs, those areas are going to benefit because there will be more retail for restaurants in those locations,” Van Nieuwerburgh said. ”There’ll be less demand for retail, restaurants and entertainment in urban centers.”
Whitaker said that during the dot-com era many people wondered if it would be the start of work from home for good but that didn’t happen.
“Face-to-face interaction is still important. Building relationships is still really important in a lot of industries,” Whitaker said. “And it seems like there are limitations to how much technology can replace that.”
If remote work does become more of an option for workers, Whitaker said there may be varying migration trends. Those with a city-based job may leave to the suburbs and people with a rural or suburban job may move to the city.
Van Nieuwerburgh said he thinks that the U.S. will go back to closer to pre-pandemic normals but not all the way.
