After the Great Recession, the number of big-city residents boomed. Flush with jobs and thirsting for modern high-rises, young adults and families moved into dense metro areas with amenities at their doorsteps and strips of restaurants blocks away.
But those walkable urban areas have become less affordable in recent years, and the quintessential dream of a single-family home, especially after the coronavirus-induced quarantine, may be multiplying.
In the last few years, population in larger metropolitan areas such as New York, Los Angeles and Chicago declined, while more people moved into mid- and smaller-sized metro areas.
Now, as local economies and subsequently corporate offices re-open with more leniency on working from home, demographers, Realtors and even companies like Redfin predict that this movement from high-cost-of-living urban cities to more affordable areas – whether suburbs of the same area or smaller metros altogether – will accelerate.
“Redfin is preparing for a seismic demographic shift toward smaller cities,” said Redfin Chief Executive Officer Glenn Kelman in a May 15 press release announcing a new survey of 900 homebuyers and sellers. “The whole narrative of the past 200 years, of the young person moving to the big city, may turn a little upside down in the years ahead.”
In the Redfin survey, 61% of respondents from the New York City metro area said they would consider leaving the metro area if they could work remote permanently, Redfin said. More than 50% surveyed from Boston, San Francisco and Seattle echoed that sentiment. Their top reasons for wanting to move: to live somewhere less expensive or somewhere with more land.
Census data shifts
In the early 2010s, following the Great Recession, populations grew in these big metro areas, including the nation’s three largest – New York, Los Angeles and Chicago, according to Census Bureau data compiled and analyzed by demographer and Brookings Institution senior fellow William H. Frey. But those cities’ growth slowed over the last decade. The three largest cities, in fact, lost population in the last few years.
Meanwhile, metro areas including Austin, Texas; Raleigh, N.C.; Jacksonville, Fla.; Phoenix; Nashville, Tenn.; and Las Vegas grew in residents, according to the Census data.
Realtors and real estate associations in mid- and small-sized metros – and economists who track their data – point to common themes among these cities for why they’ve gained new residents in recent years and why they’ll continue to attract more post-coronavirus.
One is an economy buoyed by several industries.
“We’ve always had a diverse economy,” said Kristy Hairston, president of the Greater Nashville Realtors and a native who’s seen the city exponentially expand. “Some places have all of (their) stock in one industry.”
Nashville, which has grown in population every year since 2010, has a mix of education and health services, trade and transportation, business services and leisure and hospitality, Hairston said. It’s benefited from corporations relocating part or all of their operations, such as Lyft, which moved its customer service headquarters from San Francisco, and asset manager AllianceBernstein, which announced its move from Midtown Manhattan two years ago.
Good-paying, stable jobs, and a diversity of them, have also lured new residents to Austin, Texas, from New York, California, Chicago and Florida, Realtor Leonard Guerrero said. Of the top 53 metro cities in the U.S., Austin had the highest population growth every year for the last 10 years, according to Census data.
Guerrero, a manager with JB Goodwin Realtors, pointed to national players like Dell, Apple, Amazon, Google, Facebook and Indeed – all with offices in Austin. Tesla has even chosen the city as a finalist for its new U.S. assembly plant, the Associated Press reported May 15.
“That would be quite a feather for the local market here,” Guerrero, a regional vice president for Texas Realtors, said.
Several Realtor associations, agents and demographic researchers predict that the way state and local governments have reacted to the pandemic will set the tone for residential growth in the coming years.
In addition to Austin, several Texas cities such as Houston, Dallas and San Antonio grew in population in recent years. The business-friendly regulations and affordable corporate taxes that have drawn companies and their jobseekers throughout Texas will continue even more post-coronavirus, said Cindi Bulla, Texas Realtors’ chairman of the board.
The state government has been “laser-focused” on safely lifting stay-at-home orders and reopening businesses, and has “open arms” for small business owners from other states to move in, she said.
Another theme of migration into some metro areas and out of others is simply housing affordability.
“The cities that people are moving out of are really quite expensive, and there’s been a housing shortage,” said Jessica Lautz, National Association of Realtors‘ vice president of demographics and behavioral insights. “The housing that’s being built in those cities is really the luxury high-end condo that very few Americans can actually afford to live in.”
In particular, Lautz said, NAR recently found that Millennials especially are attracted to smaller urban areas that balance close-at-hand amenities of a big city and the ability to buy a single-family home they can afford.
That’s echoed by Jordan Levine, California Association of Realtors‘ deputy chief economist. While Census data shows that Los Angeles and the San Francisco Bay Area have seen declines in the last few years, “it comes down to an affordability issue,” he said.
“We know pretty consistently, even in good economic times and bad economic times, people still desire homeownership,” Levine added.
He predicts the migration will continue to suburbs and exurbs of larger California cities, particularly as companies permit more employees to work from home permanently or reduce their number of days in the office. Instead of living and working in Los Angeles, for example, workers may commute from San Bernardino.
Redfin cited this example in its recent survey results: The price per square foot in the Seattle area falls from $327 within a 30-minute round-trip commute of downtown to $120 for a 75-minute commute. A worker coming into the office two days a week would then still commute a total of 150 minutes per week versus the 5-day, 30-minute commute.
That’s a trend that Justin Onorato, the chief investment officer for BTI Partners, is anticipating. Onorato said the Fort Lauderdale, Fla.-based land investor and developer’s strategy has been investing in large tracts of land in Sarasota, Jacksonville and suburban Orlando. The company recently received the first phase of approvals for a 1,400-acre residential community about 25 miles south of Orlando that will have about 4,000 single-family detached homes and townhouses plus multi-family housing.
With rail transportation already planned between Miami, Orlando and Tampa in the coming years, Onorato said he now expects to draw home buyers from higher cost-of-living areas who could then commute into the larger cities.
“Our view is that if you could buy a home for 30 to 50% less (than larger Florida cities), a new home, in southern Orlando and get a yard and have good public schools … really it’s about space,” he said. “Affordability is really just the driver.”