The coronavirus (COVID-19) pandemic has disrupted our economy, healthcare systems, and day-to-day lives. But what about the impact on the residential real estate markets across the United States?
A recent study by AceableAgent found several links between COVID-19 and the housing market. Notable findings include:
The effects of the pandemic are causing large percentages of the population to consider relocating.
Buyers’ values and preferences are shifting away from “proximity to work” and toward “more living space”.
The suburbs are seeing increased interest from buyers compared to the cities because homes in the suburbs better align with the needs and desires of buyers in the coronavirus-era.
Despite the negative impacts of COVID-19 on the urban housing market, the future outlook is positive, with 70% of survey respondents believing that cities will bounce back post-pandemic.
In this report, we’ll explore the findings of this recent survey and analyze the results to better understand the new patterns emerging in residential real estate.
COVID-19 is Causing Residents to Relocate
Of those surveyed, 37% of Americans say that the effects of the pandemic have caused them to consider moving. But people aren’t just considering moving. Twenty-three percent of respondents say that they have decided they are moving within the next six months due to the effects of the pandemic.
But what is it about the COVID-19 pandemic that is resulting in such a large percentage of the population either considering moving or being determined to relocate? Here are just a few of the ways in which the effects of the pandemic are causing relocations:
Having spent more time at home than expected in 2020, many residents are interested in more space, both living space and outdoor space.
People are also interested in living in areas with lower-density populations as being around crowds now feels risky for many people.
Having established that working remotely is feasible for many office workers, more people are willing to live further away from their places of employment.
With the pandemic launching us into a recession, financial uncertainty is causing some people to seek less expensive housing.
Unemployment may have forced some into finding housing with friends or family.
Let’s take a closer look at where people are moving and why.
Increased Interest in the Suburbs
Seventy-seven percent of survey respondents say that, for 2021, they prefer to live in a suburb over a city. Real-world actions support this survey data. Home searches in suburban zip codes jumped 13% in May of 2020 as the housing market began to recover from the initial shock of the coronavirus outbreak. This 13% represents double the pace-of-growth for urban zip codes.
This makes sense, given the way many of us are re-thinking what makes a home valuable. 62% of those surveyed report that the effects of the pandemic have caused them to reevaluate what they value in a home. Most of us are now looking for more living space, larger outdoor areas, lower population density, and increased affordability.
Experienced Realtor®, Pascale Nejaime of Coldwell Banker Realty in Avon, Connecticut, reported, “People are starting to rethink the functionality of their homes. If this virus, or any other virus, forces another quarantine, will I be OK being confined in my house for a couple of months?” Nejaime has been seeing an increase in the number of buyers in her Connecticut market, which lies about a two-hour drive from both New York City and Boston. Nejaime expects that more city dwellers will be relocating from their small urban apartments to larger homes with yards in the suburbs.
How the New Work-From-Home Culture is Shifting Real Estate Markets
It’s not only the desire for more space and lower population density that is driving interest in the suburbs. The suburbs have also suddenly become more accessible thanks to the work-from-home shift caused by the pandemic.
Working from home has been possible from a technological standpoint for years now. But employers were hesitant to embrace remote work, thinking that it would result in lower accountability and reduced productivity. But in ordering “non-essential workers” to stay home, we’ve seen a substantial increase in the number of people working from home part-time or full-time. COVID-19 effectively created a large-scale social experiment to test employers' hypothesis that working from home was not as productive as working from an office.
The data is still coming in from this social experiment, but preliminary findings indicate a 47% increase in productivity when working from home. With so many jobs successfully being done remotely, and employers getting used to the idea of remote work, many workers have decided to continue working from home (even if only a few days per week) post-COVID. And many employers have agreed to this arrangement. Because of this work environment shift, proximity to the workplace has become a far less important criterion for many people, and home office space has become more significant.
Where Exactly Are People Moving?
New York City was notoriously hit hard by the pandemic, with nearly 20,000 deaths from March 2020 to May 2020. So it’s no surprise that New Yorkers are leaving the city for the suburbs and even rural communities.
But we’re also seeing a migration out of New York State in favor of states like Texas and Florida. In fact, more Americans are relocating to Texas than to any other state. The influx of people to Texas isn’t solely attributable to the pandemic; job opportunities, affordability, and a lack of state income tax have all attracted residents to Texas for the last few years. But the large homes and wide-open spaces are certainly contributing to the appeal of Texas in the age of COVID-19.
Optimism for the Cities and the Future of Residential Real Estate
Despite the current interest in the suburbs, 70% of Americans say they are optimistic that major cities will bounce back post-COVID 19. There may come a day when the virus is under control, and people once again want to live in city centers with the excitement of fine dining, luxury shopping, and nightlife just blocks away.
Real estate experts are optimistic that the economic fallout of the pandemic will not have a severe negative impact on the housing market. While we did see a slight housing market slump in the spring of 2020, some of which can be attributed to real estate showings being seen as non-essential business in some states, the housing market is already showing a quick recovery Both home prices and the number of residential transactions have returned to near-pre-pandemic figures as of August 2020.
Strong housing market factors, including buyer demand, low mortgage interest rates, and general real estate stability, have led some analysts to predict virtually no long-term interruption to residential real estate sales. These experts point out that, while so many workers have been devastated by unemployment, those most likely to buy a home (office workers in stable industries) have seen little, if any, financial setback from the recession. So many would-be buyers are still in a position to buy, and may actually be further incentivized to do so by the low interest rates and ability to live further from the office thanks to work-from-home opportunities.
The COVID-19 pandemic is causing shifts in the residential real estate market. We’re already seeing increased interest in the suburbs where there is more space, lower population-density, and greater affordability. The new corporate culture of working from home is further enabling people to relocate from cities to suburbs as commute times are no longer of critical importance.
We’re seeing people relocate from cities to suburbs, but also between state lines as people flock to states like Texas with its affordability, large homes, and low population-density.
Despite the shift, real estate experts are optimistic about the future of the housing market. Buyers are taking advantage of low interest rates and increased mobility afforded by the ability to work remotely. And real estate professionals are still seeing high-demand from buyers and subsequent strong seller’s markets. So despite the many negatives of the coronavirus pandemic, the outlook for residential real estate is bright.
Methodology: The survey for AceableAgent’s 2020 COVID-19 and Residential Real Estate Impact Report was conducted online using Survey Monkey. The national sample of 1,050 adults spans across U.S. geographic regions and income levels and was weighted to reflect the gender distribution and the age distribution across the 18-44 and 45+ age brackets in U.S. census data.