Has buyer demand for a home's location shifted since the pandemic began in early 2020?
- Demand for living in suburban areas has increased. (47%, 43 Votes)
- Demand for rural homes has increased. (33%, 30 Votes)
- Demand for living in urban areas has increased. (11%, 10 Votes)
- No, demand for a home's location has remained the same. (10%, 9 Votes)
Total Voters: 92
Have you heard? The suburbs are trending.
Don’t worry, we were, perhaps, just as surprised as you were to hear that suburban McMansions are making a comeback in 2021.
firsttuesday has long forecasted a growing swell in urban demand. Fueled by Millennials’ desire to be near job centers and amenities, cities have seen increased demand over the past decade of recovery from the 2008 recession. In fact, during the Great Recession, downtown areas experienced fewer job losses and quicker recoveries than their suburban neighbors, according to Brookings.
Further, as Baby Boomers continue to reach retirement age, many have chosen to sell and relocate near their Millennial-aged children. The result has been decreased demand for the suburbs, and a turn toward the bustling urban cores.
But this trend hit a massive wall in 2020, with the arrival of COVID-19.
The pandemic response resulted in a few factors that caused an abrupt about-face in demand, including:
- a sudden shift to remote work;
- the shuttering of restaurants, retail outlets and other amenities;
- social isolation and distancing; and
- demand for outdoor space.
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As a result, Millennial homeowners and renters with the ability and means to move to larger homes with yards have pushed a demand renaissance on the old suburban — and even rural — homes that their Boomer parents used to occupy. The question for real estate professionals seeking to get a handle on the trends is: will this path continue once the pandemic is in the rearview mirror?
Home is where the job is
The future of city centers comes down to jobs.
In fact, 70% of office space is located in downtown areas, according to Brookings. All of these office workers provide the fuel to support downtown businesses. But, as discovered at the pandemic’s outset, most office work can be completed remotely. Thus, the need for office space has been called into question.
The future of the office industry may well be a hybrid environment, a mix of remote and on-site work. Many workers have abandoned their daily commutes and moved further away from their jobs, while remaining within driving distance for the occasional run into the office. Thus, they remain within the same metro area, but are able to access more space provided by the suburbs.
Here in California, we have seen this type of move to less dense bedroom communities, like Riverside in the south and Sacramento in the north. In fact, Riverside has experienced the steepest decline in home inventory in California, with 32% fewer listing available in April 2021 compared to a year earlier. This extremely low-inventory environment is followed by Sacramento, with 23% fewer homes for sale.
Is this demand shift a passing fad? Or a permanent sea change for California real estate?
The coming years, through about 2024, will continue to experience a distortion in demand, with suburban areas seeing an influx of Millennial-aged adults. But once the economic recovery takes off beginning in 2024-2025, demand will return to those crowded metro areas, along with jobs. Boomer-aged adults seeking retirement amenities and young adults from Generation Z seeking job opportunities will lead the return to cities.
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