A new Zillow study found that homes in U.S. suburbs have recently been appreciating faster than urban homes, reversing historic norms and highlighting buyers’ preferences away from urban areas even as the COVID-19 pandemic continues to ease.
Home values in suburban zip codes have been rising faster than in urban areas since July 2021, flipping the script from traditional appreciation patterns that include the first 15 months of the pandemic. Urban homes had gained value faster than their suburban counterparts from January 2013 (when home values began to rebound after the housing crash and ensuing recession) through June 2021. But in the past year, the typical suburban home gained $66,490 in value, Zillow found, while the typical urban home gained $61,671.
“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,” said 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.”
Metro areas where the trend has notably gained steam include Nashville and Raleigh, both of which saw urban home values grow faster than suburban ones last year. But in the year ending in March 2022, the typical suburban home around Tennessee’s capital gained $7,350 in value, more than the typical home closer to the city center. This divide was even more pronounced in Raleigh, where the typical suburban home saw $9,800 more in appreciation than the typical urban home.
Zillow made sure to note that suburban homes aren’t gaining value at the expense of urban properties. Rather, the brokerage described it as “something akin to one world-class sprinter edging out another,” signaling that price growth in both areas remains robust.
Moreover, there are already some signs that the needle may be shifting back toward urban real estate. The gap between annual home value growth in the suburbs and in urban zip codes has narrowed in each of the first three months of this year. In December, suburban residential real estate values surpassed urban ones by roughly $7,250. In March, this gulf had shrunk to $4,820.