Home Buyers are Trading Expensive Metro Areas for Suburban, and are Even Developing a Third Way

This trend has several implications for real estate. On the one hand, it has made suburban housing more affordable. The cost per square foot of suburban houses is much lower. On the other, employers are allowing their staff to work remotely over the long term, allowing them to relocate to a smaller house just two hours away. This trend has helped suburban sellers, as the price of a four-bedroom Carmel, Ind. house sold for $25k over its listing price, and the sellers received five offers – including one buyer who hadn’t seen the home before submitting a bid.

Urban renaissance

It’s not hard to understand the resurgence of urban areas. Between 1997 and 2012, the housing market soared across America, as the tech, finance, and other industries flooded the metros, attracting people from all over. Not only did these cities become more beautiful and safe, but there was also an explosion of cool things to do. Sadly, the supply of housing was not keeping up.

COVID-inspired flight to larger houses

The COVID-inspired flight to larger homes has increased home prices and reduced rents in the city. It has also driven out businesses downtown. In many areas downtown bars, restaurants, and museums have closed as people relocate to less-populated areas. It has also made living close to an office less valuable. The pandemic has been a punishment for the typical new entrant, as immigrants and other workers have been forced to relocate.

This net migration is not limited to coastal cities: the Pacific Northwest and California are not on the list. The “Best Of” list is dominated by suburban communities. In fact, the first flight from coastal cities may be fossilizing, since many of these places have high real estate prices. Meanwhile, New York City, Chicago, Philadelphia, and Honolulu are in the basement. This net emotional migration is away from urban locations with high taxes, lockdowns, and high prices.

Cheaper per sqft suburban homes

In small markets, housing prices are cheaper per square foot than in larger metros. This is an especially good thing for people who want to avoid paying premium prices for a smaller space. For example, if you want to buy a 2,000-square-foot house in Fullerton, California, you should know that it costs $300,000 less than a similar one in Los Angeles. The price difference is even greater if you want to live near popular theme parks and attractions.

A typical “Build on Your Lot” home in Houston is 3,000 square feet, with four bedrooms, 3.5 bathrooms, a two-car attached garage, and a 10 foot wide covered back porch. A typical Zander Home in Houston costs $165 per square foot, which is about the cost of a mid-range production home in the suburbs. If you want a more luxurious home, you can pay $280 to $300 per square foot.

Yahoo Finance notes there is a 3rd way growing in the quest for more affordability and more space for the money.  It is pursuing the small town that is a reasonable distance from a larger city, where they can go shopping, have entertainment, etc..  The article notes “In an environment where prices are going up, mortgage rates are going up, buyers are facing higher costs, they’re really looking for affordability,” Danielle Hale, chief economist at Realtor.com, told Yahoo Live (video above). “And the fact that they’ve got more flexibility than they’ve had in the past means they can go beyond the suburbs all the way out into these smaller towns.”