The pandemic-era home market has been marked by frenzied competition among buyers. But one arena in particular has been hardest-fought.
After spending the first part of the pandemic bidding up prices in cities and suburbs alike, homebuyers have spent recent months keying in on one arena in particular — the American suburb.
The typical home in a suburban ZIP code saw its value rise $66,490 over the last year, compared with a $61,671 price in urban areas, a new report from Zillow Research suggests.
These suburban home markets recorded 20 percent price growth year-over-year in March, compared to 17 percent in urban areas and 16 percent in rural ones.
“The rise of remote work has had a tangible effect on where and how people live, as seen in the changing relationship between housing and commute times,” the report points out. “Homebuyers have placed a greater emphasis on affordability and space than proximity to work.”
In the first year-plus of the pandemic, home prices grew most quickly in cities and suburbs alike. Rural home markets, although unusually hot in their own right, saw price growth that lagged that of more densely populated communities.
But since the summer, price growth in urban markets has failed to keep pace with what’s been happening in the suburbs, while rural communities have closed the gap.
Zillow’s research team visualized this trend in the chart below.
The free-for-all in the suburban home market is a relatively new phenomenon.
Throughout most of the recovery from the Great Recession, home prices recovered fastest in urban areas, Zillow’s report says. This observation covers most of the period from 2013 to present.
And even during the first 15 months of the pandemic, city neighborhoods were similarly in demand as suburban ones.
But in most of the country’s biggest metros, that dynamic has now flipped.
The majority of America’s 50 largest metro areas have seen more home value growth in the suburbs than in their urban ZIP codes, Zillow’s analysis suggests.
These gains were most pronounced in the Detroit, Philadelphia, Birmingham, St. Louis and Minneapolis areas. All of these saw the typical suburban home value grow twice as fast as that of a home in the city.
That’s not true everywhere, though. In cities that saw a particularly large exodus from their urban centers during the earlier stages of the pandemic, there have been signs of a reversal.
In Seattle, the typical home in 2018 in the city was $315,000 pricier than the typical home in the suburbs. That gap has since closed to $217,000, Zillow said.
New York has seen a similar reversal in recent months.
While some residents left the Manhattan city center in the early parts of the pandemic, the fastest price growth since then has been occurring in ZIP codes closer to the heart of the city once again, Zillow found.
“As the affordability trade-off for living in the suburbs becomes less of a factor in markets like Seattle, we may see similar demand shifts become more common,” the report reads.