When the coronavirus pandemic hit, city dwellers fled to the suburbs. But that trend may be slowing, according to some experts.
Housing activity slowed the week ending November 7 (for the second consecutive week) from its peak in October, when home prices plateaued at a record $350,000. There were 13.5% fewer price increases in October than in September, and there were 6.1% fewer price hikes in September than August, according to Realtor.com monthly housing data. The declines follow four straight months of markups.
“Suburban markets that were benefiting from inbound migration from urban markets are actually level, plateauing or declining. Still well above year ago levels, but that sort of rocket ship trajectory has not been able to be sustained,” said Jonathan Miller, president and CEO of New York-based real estate appraiser Miller Samuel.
The housing market boomed this summer after lockdowns lifted, unleashing pent-up demand from the spring homebuying season. Plus, record-low interest rates and new demand for suburban living, which can offer a better quality of life during lockdown, added additional demand to the market, driving down inventory and driving home prices up.
“Everybody that was looking to buy or looking to sell during the normal spring, which is the most robust period of any housing year, was kicked, the can was kicked down the road into the summer. So you had that combined with this outbound migration from urban markets out of concerns [for] safety [and] close proximity to others,” said Miller.
Possible urban comeback
Meanwhile, cities are attracting new residents. Home purchases are still down in major cities, but as rent prices fall, bargain-hunting renters were attracted to big cities in October. Landlords with vacant Manhattan apartments offered lower rent prices than they had in almost a decade ($2,868 median net effective rent), and they offered more concessions like discounts or added amenities than ever before. Their incentives worked — Manhattan leasing surged 33.2% in October compared to the same time last year, after 14 months of no year-over-year gains, according to Douglas Elliman, a New York-based residential brokerage.
“We're seeing a tremendous influx of younger consumers and, you know, we may end up seeing some sort of Renaissance that we can't really imagine at this point. I'm very optimistic about that aspect of the city's future,” said Miller. “You're actually having a break even or an uptick in activity from last year, which was unthinkable two or three months ago, given how far behind the rental market is.”
Sarah Paynter is a reporter at Yahoo Finance.
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