As anticipated, the recent mass exodus out of urban and downtown areas across the US has now finally caused a cascade of price reversals in real estate markets. The sudden and massive influx of city dwellers hightailing it to suburban and rural areas has sparked a noticeable shift in demand for housing accommodations that were once considered inconvenient. As a result, prices have now caught up with the rise in demand, and as the Wall Street Journal points out the revival of the suburbs has arrived.
According to a report released by data firm CoStar Group Inc and then analyzed by the WSJ, apartment rents in suburban areas such as Norfolk, Virginia and Sacramento, California had increased by 3.2% to 4.6% by the end of the third quarter compared to March 2020. Meanwhile, rent in places like San Francisco and Boston fell by a staggering 17% and 9.2%, respectively.
Likewise, vacancy rates in urban and metros across US cities have skyrocketed, while suburban vacancy rates have plummeted to near-record lows. There are several very evident factors that are behind this emerging trend of city dwellers fleeing imploding downtown housing accommodations. Certainly, the risk of coronavirus infection remains at the top of the list as the reason behind the cascading exodus, but so does the stark differences in square footage per dollar spent.
The WSJ also noted that the migration trend has been predominantly focused among millennial couples, which up until now have delayed marriage and starting a family. However, as many companies and businesses revert to remote offices for their employees, the larger living spaces, lower crime, and relative immunity from socio-economic problems offered by suburban and rural areas have become more attractive. As such, the emerging revival of the suburbs has become the most notable real estate trend of 2020, and will likely continue for at least the next several years.
Information for this briefing was found via the WSJ and CoStar Group Inc. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.