Orion’s brokers have noticed how the pandemic-related business interruptions, and social distancing mandates, have sparked a large and sudden shift from renting to homeownership and a movement towards the suburbs and larger homes. Unfortunately, there have been pinch points along the way. Pre-pandemic, large metro areas across the country experienced sustained robust growth. After stay-at-home orders and social distancing measures restricted homebuyers’ mobility and sparked fears of spreading the virus, many sellers pulled homes off the market or declined to list at all, causing U.S. home sales to drop. Orion’s AEs have reported that this is especially in big cities rather than in suburbs and smaller metro areas.
Since June, when new listings began soaring by city-center homeowners looking to sell, inventory has remained much higher than in the suburban areas our brokers serve. The depletion of available units in suburban areas stands in stark contrast to the less-robust activity in city centers. The decreased demand for housing in densely populated areas is particularly prominent in cities and states where the pandemic hit initially and where home prices were the least affordable.
Mortgage brokers know that living in dense, centrally located neighborhoods typically provides residents with the convenience of short commutes and plentiful amenities (easy access to shopping, dining, entertainment, and other social activities). Neighborhoods that have a large number of amenities generally tend to command higher rents and home prices, but throughout the pandemic, high-priced homes with convenient access have become less attractive and greater residential space has become more appealing.
Pandemic-related physical distancing measures (that closed or restricted capacity at nonessential businesses) have prompted a sudden shift toward working from home, motivating more homebuyers to look for larger spaces found in more suburban locations. Many builders and mortgage brokers note that buyers are looking for dedicated office and virtual school spaces in particular, increasing demand for homes with more square footage in cheaper locations. Traffic at establishments in city centers has remained relatively depressed compared with the suburbs, partially reflecting a large reduction of commuting trips to the central business districts.
Orion’s brokers have observed that the pace at which housing demand in city centers recovers depends on the trajectory of the pandemic and the public’s willingness to visit crowded venues, including workplaces. It has been no help that demand for single-family homes has surged relative to condominiums which, like apartments, generally have more communal spaces such as elevators. As employers and employees adapt to permanent remote formats of work, it could depress housing demand near central business districts in the long run.
Still, the demand for leisure and consumption amenities will likely recover once the pandemic ends. As long as consumers’ appetite for food, entertainment, and services returns post-vaccine, activity and demand for housing in city centers will be poised for a recovery. If the pandemic drags on for an extended period, the city center housing market may continue underperforming relative to the suburbs.