For the first time since the Great Recession, buyers may have an easier time buying a home in the city than in the suburbs. That’s because homes in the suburbs recently have been appreciating faster than urban homes, according to Zillow, indicating stronger demand and fiercer competition.
Home values in suburban areas have been growing faster than in urban regions since July 2021. The typical home in the suburbs gained $66,490 in value in the past year, compared with $61,671 for the typical urban home. That is a reversal from the first 15 months of the pandemic. From January 2013 through June 2021, urban homes were generally gaining value more quickly.
“In the beginning of the pandemic, home values in urban areas generally outpaced suburban areas, counter to what many expected during the rush for more space,” Zillow Economist Nicole Bachaud. “And while urban home value gains have continued to accelerate, the suburbs are even hotter, showing just how strong demand is for limited suburban inventory. That could mean competition for homes will be lighter near city centers this home shopping season, something we haven’t been able to say for nearly a decade. That’s not to say shopping for a home in the city will be a leisurely affair, but any sliver of opportunity for buyers is welcome in this market.”
Faster home value growth in the suburbs comes as remote work becomes a mainstay. The National Bureau of Economic Research found the shift to remote work is responsible for more than half of the gain in home prices since late 2019 and is likely to have a major impact on future home values.
Urban real estate has seen incredible growth as well, according to Zillow. In each of the first three months of this year, the gap between annual home value growth in the suburbs and in urban areas has shrunk. Annual suburban home value growth outpaced urban home value growth by about $7,250 in December, but by about $4,820 in March.
The shift has been more pronounced in metro areas including San Francisco, Seattle, Boston and Columbus, Ohio.
Nashville, Tenn., and Raleigh, N.C. are two counterexamples. In those metros, urban home values rose more than those in the suburbs in 2021. However, after the first three months of 2022, those positions have been reversed. In the year ending March 2022, the typical suburban home in Nashville gained $7,350 more than the typical urban home, and in Raleigh, the typical suburban home gained about $9,800 more.