The suburbs may be red hot when it comes to the real estate market, but the data shows that urban areas may be white-hot. Zillow reports that metropolitan areas in the Midwest, which tend to be less expensive than the surrounding suburbs, are busting the urban exodus myth to pieces.
While it’s true that more people are leaving New York and San Francisco than arriving, the same can’t be said for cities in the Midwest region. For the last several months, urban home values have been growing faster than those in the suburban areas including St. Louis, Cincinnati, Cleveland, Kansas City, Columbus, and Indianapolis.
"The for-sale housing market is experiencing a pandemic-fueled surge in both urban and suburban areas," says Alexandra Lee, Zillow economist. "Home has become more important than ever, and buyers are eager to hit the market to find their next place to live, many newly freed from their commute and suddenly finding themselves in need of more space for a home office or gym. More often than not, buyers are flocking to homes in affordable areas and pushing up prices.”
More expensive housing markets do show more growth in the suburban areas. New York, Washington, D.C., Atlanta, Boston, San Francisco, Seattle, and Denver all experienced stronger home value growth outside of the cities during parts of 2020.
However, on a national level, things are even when it comes to big cities versus the surrounding areas. In fact, Zillow web traffic for urban areas matched or exceeded suburbs when the entire country was taken into account. And when it comes to home values, they grew at nearly identical rates—urban homes went up 8.8% and suburban homes went up 8.7%.
When it came to renting, the cities and the suburbs tell a different story. Suburban rent swelled 5.2% from 3.8% during 2020, while urban rent fell to 1.5% from 3.6%.
Zillow economists suspect the drop in urban rent may be due to the three million Americans who moved back in with their parents during the pandemic. Mostly from Generation Z, they’re the age that tends to live in urban rentals. With the implementation of COVID-19 vaccines and the reopening of the economy, they’re expected to return to the cities.
All in all, the trends we’re seeing now will most likely continue into the year.