The urban exit ramps up
The urban exit is fueling suburban residential construction.
And as COVID-19 lockdown conditions have lessened, the housing industry has put it into fourth or possibly fifth gear.
Housing starts, building permits, new home sales and existing-home sales all took off in the past three months as home builders and real estate agents played catch-up. Demand is there and growing.
Proof of a suburban shift for home buyers is evident in the second quarter Home Building Geography Index (HBGI) released by the National Association of Home Builders (NAHB).
Small metro suburbs accounted for the fastest growing geographical areas for single-family construction during the second quarter, up 10.6% on a four-quarter moving average basis. This was followed by small towns (9.3%), small metro core areas (7.5%) and exurbs (5.6%).
“The increasing demand for construction in more suburban neighborhoods is being driven in large part by the coronavirus outbreak,” said NAHB Chairman Chuck Fowke. “The growing trend for working at home is enabling more families to choose to live in lower cost, lower density communities.”
At the same time, mortgage rates remain flat and at record lows, according to Freddie Mac.
“The changing geography of housing demand - and home construction – has multiple causes,” NAHB Chief Economist Robert Dietz told HBSDealer.
Dietz says the underlying driver is declining housing affordability, which is due to a lack of attainable housing, particularly in high regulatory cost environments in large metro markets.
Compounding affordability is the impact of the public health crisis associated with COVID-19, including health concerns, lockdowns, density effects, schooling decisions, and transit, combined with a significant rise in working-from-home.
“We have economic changes that are increasing demand for single-family and multifamily housing, and for-sale and for-rent housing in lower density markets,” Dietz says.
Rising crime rates in major cities such as Chicago, New York, Portland and Seattle are also fueling urban flight.
An Aug. 31 article in the New York Post points to moving companies being overwhelmed as New Yorkers flee the city for the suburbs and beyond. Sales of Manhattan properties were down 56% last month as home sales in the city’s suburbs rose 44%.
Show Up Movers, a New York moving company, told the newspaper that business is up 70% and the company has had to rent U-Haul vehicles to keep up with demand.
Housing data from last month backs up the surge to suburbia.
Pending home sales increased 5.9% in July and are up 15.5% year-over-year while existing-home sales jumped 24.7% and single-family existing-home sales were up neary 24%.
New single-family home sales climbed nearly 14% in July as total housing starts surged by 22.6% and single-family starts rose 8.2%.