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The Economy & Strategies

The Return to Suburbia

Aug 24, 2020

There was a time when many urban dwellers – singletons, couples, and families alike – would have found the notion of leaving the city unthinkable. But the pandemic has people changing their minds – fast.

Typical is one young family who recently traded life in a townhouse in the District of Columbia for a house in Silver Spring Maryland, a suburb about six miles north of the city. The couple, who have a 4-year-old, liked the diversity of the city, their quick commutes, and the ability to walk out from their townhouse and pop into a coffee shop around the corner. But when coronavirus hit, and stayed, the couple found they wanted more space. “With playgrounds closed, we were going crazy with no yard. Our son couldn’t run around,” noted the wife.

As it has so many things, the pandemic has upended the notion of what a home is for many people as they’re forced to spend more time between four walls. For urban dwellers, the appeal of city living—walkability to shops, restaurants, public transportation, parks and more—has waned as such places remain closed or present health safety issues. And as remote working shows that many white-collar workers may not need to live so close to their offices, some people are rethinking their urban lifestyles.

“The tether between work and home just got infinitely longer,” says Jonathan Miller, president and CEO of Miller Samuel, a real estate appraisal and consulting firm based in New York. “If people aren’t anchored to where they work like before, why wouldn’t you live elsewhere?”

Indeed, with real estate experts saying housing has held up remarkably well compared to other industries, relocation is emerging as a tenet of COVID. A Pew Research Center survey found that one in five Americans have either relocated due to the pandemic or know someone who has.

At the same time, a recent study from Realtor.com found that Americans are showing more interest in suburban and rural areas. Views of online home listings for suburban ZIP codes grew 13% in May 2020 compared to May 2019, roughly double the rate of views for urban areas. Real-estate technology firm Zillow reported that listings mentioning a home office—something that wouldn’t stick out as a hot amenity pre-2020—have jumped 10% since 2019. Zillow also found that when survey respondents were asked why they would consider a move, the top reasons revolved around a home’s characteristics—such as space—not its location or affordability.

While such data are still nascent in terms of trends, the findings are curious during an economic downturn. People typically don’t move during recessions, when unemployment numbers are high, and uncertainty of paychecks cause even financially comfortable folks to hit the pause button on major purchases. But the pandemic appears to be causing different consumer reactions than those that came in the wake of 9/11 or the 2008 financial crisis.

Such a shift could have a ripple effect on pockets of consumerism. Consumers made a run on chest freezers this spring—a purchase that only someone with space can buy. Interior design and furniture businesses are reporting staggering growth; online furniture seller Wayfair’s second-quarter revenue grew nearly 84%, with nearly five million new customers, as some of people’s discretionary spending shifted from dining out and entertainment costs to home goods. And even automakers are trying to read the tea leaves of relocation, with some surmising that an exodus to the suburbs could boost auto sales in the coming year.

Such consumerism goes hand in hand with suburbia, which for decades offered space as a tradeoff for proximity. As Ian Bogost, a professor at the Georgia Institute of Technology, wrote in The Atlantic in June: “Above all else, the suburban life is one of independence, a self-contained homestead where the American family can realize its desire and potential, unperturbed by others. Even the family car gets its own bedroom.”

For a time, it appeared that Americans were opting to be close to where the action was. In 2011, for the first time in nearly a century, the rate of urban population growth outpaced suburban growth, author Leigh Gallagher wrote in her book, The End of the Suburbs: Where the American Dream is Moving. Much of the creative class and urban-design architects focused on “new urbanism,” in which mixed-use properties and walkability reigned. While that worked for a while, Miller says it ultimately made city housing too expensive.

However, even before the pandemic, a slow but steady reverse toward outbound migration was occurring. According to an analysis by the Brookings Institution, some of the country’s largest cities, including New York, Los Angeles and Chicago have been losing population in recent years, driven by young adult movers “more willing and able to locate to smaller areas in all parts of the country and increasingly to suburbs.”

Thus, the return to suburbia has only been sped up by coronavirus. Many purchases in the suburbs are coming from the rental market, via first-time buyers who have been mulling a mortgage and decided to get a toehold in the real estate market with interest rates at record lows. “A lot of the outbound migration would’ve happened over the next five years as young professional couples get married, have kids, and start thinking about space and affordability,” Miller says. “What COVID did is accelerate five years into six months.”

One issue that could throw a wrench into the revitalization of suburbia—and its consumer-related infrastructure—is housing supply. Real estate watchers say there’s a significant housing shortage in the suburbs, where the after-effects of the 2008 housing crisis have left inventory extremely low, causing prices to jump. That’s a problem particularly for people looking for starter homes or mid-market inventory.

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At some point if inventory continues to be down year over year and home sales continue to increase, you’re going to see bidding wars or home prices really inflated and eventually the market will just pause.
Managing Director and House Analyst, Stephens

What this could mean is that only affluent professionals get a toehold in the suburbs and start a new trend of what real estate appraiser Miller calls “co-primary” housing. Luxury homeowners who rent a vacation home for several weeks each year, or are in the market for a second home may decide to purchase a home in the suburbs and live half the year in one place and half in another—particularly if work and school remain online endeavors. Sales in Aspen, Colorado, for example, seem to support such a trend: new signed contracts in July in the ski resort town were up 557% year over year, with the majority of contracts being north of $5 million.

A local newspaper even reported that some second homeowners were deciding to enroll their children in school near their vacation homes instead of returning to the city. Such long-term residents could also help prop up local economies that were decimated by a lackluster ski tourism season and help shift them away from their high dependence on seasonal spending. Year-round residents could even help change the mix of stores and services offered in such places. “There are so many ripple effects and trends that could come from migration outside of the city,” Campbell says. “You’re talking about income taxes, better roads, perhaps more stadiums.”

While housing trends related to the pandemic still have to play out, it’s clear that the crisis has forced people to rethink what they want in a home and where that home needs to be – or even where it can be. And for some people, that may mean calling the suburbs home.

About the Expert

Alyssa Abkowitz

Contributor, This Is Capitalism