Since March, more and more Americans have found themselves working from home and no longer tied to daily commutes to their offices in city centers. With more time spent indoors, people have been looking for larger properties, resulting in significant shifts in residential real estate markets. While it may seem like these changes came about only due to the COVID-19 pandemic, they were actually already underway before the health crisis started.
Mansion Global’s first Luxury Real Estate Conference, a three-day virtual series, addressed these trends, as well as the pandemic’s role in them. The following are some of the insights on residential real estate that were shared at the event.
Migration Out of Big Cities
COVID-19 has undoubtedly led to an increase in the number of U.S. residents moving away from big cities. Still, this migration is something that has been happening for a while now. According to Jonathan Woloshin, head of U.S. Real Estate, Global Wealth Management at the Chief Investment Office of UBS:
“Between 2010 and 2018, the five biggest states that have lost domestic population are New York, New Jersey, Connecticut, Illinois, and California.”
Many residents and business owners had already been moving to areas such as Nashville, Texas and South Florida, as well as cities like Salt Lake City, Las Vegas and Phoenix, from higher-priced and more heavily taxed states. Rather than a new or temporary trend, this migration is likely to continue, particularly as more companies allow their employees to work remotely full-time.
Even earlier on in the pandemic, surveys showed that residents moving out of big cities weren’t necessarily doing so for pandemic-related reasons. A Pew Research Center survey from June found that just 3% of those surveyed said they moved because of COVID-19.
Most likely, residents who were planning to move before the pandemic only got an extra push from the health crisis. While they were already searching homes in less densely populated areas or just wanting more living space in general, working remotely helped sped up their moving decision.
Many city dwellers who left the urban lifestyle for larger second homes in rural areas are now treating their “vacation” homes as primary residences. And while some have held onto their city properties, others are looking to downsize.
In fact, over the past several years, developers have been shifting toward smaller units, which fits well in this new reality where urban spaces that were once primary residences are now secondary ones. Rather than have large square footage homes in the city, buyers seem to be looking for smaller units here as they spend more time in the country.
Given the shift to remote work, smaller towns or resort markets with more attractive tax laws and higher quality of life have been particularly appealing to buyers.
Big Cities Still Offer Something Special
Experts seem to agree that part-time or full-time work-from-home setups are likely to stay post-pandemic, but that doesn’t necessarily mean that large cities, like San Francisco and New York, will lose their luster.
As demand changes, developers are adjusting. Consequently, some markets may grow while others may experience a plateau. Whatever the case, remote work will likely continue to play a key role in where people decide to move, as living in the suburbs becomes a more viable option.
That being said, people love cities for a reason. They offer attractive places to live, seemingly endless entertainment options, unique dining experiences and much more. They are also hubs for business networking, arts and culture.
With current travel restrictions in place, domestic buyers in large cities have the market cornered, which means there could be real estate deals out there to choose from. For instance, bargain hunters will be happy to know that experts believe pre-pandemic pricing in cities like New York will likely not be seen for a while yet.
There is a chance that, once a vaccine is available, big-city housing markets may see a resurgence, with record-high home prices surfacing once more. But until then, it’s a bit of a waiting game to see how things play out with both the health crisis and its effect on real estate.