Urban Housing Markets Keep Pace With Suburbs, With a Few Major Metro Exceptions

Analysts at Zillow have found that, with a few noteworthy exceptions, the housing market remains strong in the United States in urban as well as suburban areas amid the ongoing coronavirus pandemic.

The time a property spends on the market has decreased slightly more in the suburbs since February, but urban and suburban areas have nearly identical trendlines for the slowdown and subsequent acceleration in newly pending sales, the analysts found.

Meanwhile, StreetEasy’s July Market Report shows that the high-priced markets of New York City and San Francisco are exceptions to the trend of urban resilience. Buyer demand has not kept pace with inventory in New York City, the report found, with sellers accepting offers well below asking price. In Manhattan, homes are staying on the market almost twice as long as they did in 2019.

For-sale inventory across the five boroughs was up 6.1% year over year in early August, a sharp contrast from the national average, which is down more than 25% in the same period. Rental inventory has spiked 63% compared to 2019. In San Francisco, for-sale inventory was up 97% while list prices have fallen 4.9%.

In the metro area surrounding New York City, homes are selling quickly, with the median days to pending three weeks shorter than in the last week of July 2019.

Elsewhere in the Northeast, newly pending sales in urban areas have yet to recover as fully as the suburbs, but supply, not demand, seems to be the limiting factor. Fewer urban homes are going on the market in the Northeast compared to the rest of the country, but the available homes have spent less time on the market compared to homes in the suburbs.

“When you step back and look at the bigger picture, it seems that those writing off urban real estate have done so prematurely,” Zillow economist Jeff Tucker said. “There is some localized evidence of a softer urban market, particularly in the highest-priced markets, San Francisco and Manhattan, and an eye-catching divergence in sale prices, but no evidence of a widespread flight to suburban pastures. The primary issue in much of the country is the inventory drought, both urban and suburban, that’s failing to meet the surprisingly robust demand from buyers eager to lock in record-low mortgage rates.”

Zillow’s total page views increased 42% year over year in June, but the increase was distributed across urban, suburban and rural markets, indicating that demand for housing is high across the board.

Year-over-year growth in the median sales price has slowed much more in urban areas than in suburban areas, mostly due to challenges in coastal markets and especially in the Northeast. Median sales price growth is down 9.3 percentage points (now flat year over year) from pre-pandemic to the end of June in urban areas, compared to a 3.1 percentage point decrease (from 6.4% to 3.3% growth) in the suburbs.

The median sales price comes with caveats, including that sales figures tend to lag. The most recently available data mostly reports sales that went under contract in May, during a more acute phase of the pandemic in most of the country.