Residential Magazine

Goodbye, City Life

Emerging trends in where and how people live could become permanent

By Laura Brandao

The COVID-19 pandemic could spark societal changes to how people work and live. Some experts are already predicting that urban residents will start moving farther away from city cores as work-from-home trends morph from temporary fixes to permanent arrangements. Although it’s still early to predict what exactly will happen, mortgage originators would do well to consider a line of financial products that could match this new reality. 

Nearly one-third of Americans are considering moving to a less densely populated area because of the novel coronavirus outbreak, according to a Harris Poll survey. Urban dwellers said the COVID-19 crisis has prompted them to consider leaving for a less-crowded place, according to the survey of 2,050 U.S. adults this past April.

As another example of this emerging trend, the housing market just beyond New York City’s limits was booming this past June, according to a Wall Street Journal report. Real estate agents shared that home shoppers were looking to buy outside of the city, fueled by concerns about a second wave of pandemic-related restrictions. House hunters had begun swarming the villages, rural communities and small towns outside New York City, from the Hudson Valley to southeast Connecticut.

The report noted that New York City residents with plans to move to the suburbs in the coming years are hastening their timelines. Many of these shoppers for suburban and rural homes are looking for second residences and plan to keep their properties in the Big Apple, according to real estate agents.

Realtors and demographers say this is an acceleration of a trend that was already taking place. As a recession takes hold and mortgage rates remain anchored at all-time lows, dreams of wide-open spaces inspire action. Will America see a rural sprawl, facilitating the social distancing of a country struggling to find its new normal?

Of course, it’s hard to predict just how heavily the virus will continue to impact real estate. What is known is that before public health officials mandated social distancing, home sales were at their highest pace in more than a decade. Many experts believe home prices will continue to increase, just at a slower pace than seen in the past few years.

Resilient industry

The COVID-19 pandemic has caused volatility in seemingly every industry except housing. Immediately after the outbreak, housing demand fell as buyers either lost their jobs, lost a portion of their income or simply didn’t want to shop for a house in the middle of a health crisis. 

Usually, a sizable drop in demand would put downward pressure on prices as home sellers would be competing with one another by dropping their asking price to attract a limited number of buyers. Although housing demand dropped substantially, housing supply also dropped in lockstep as potential home sellers pulled out of the market for many of the same reasons as buyers. Although both supply and demand dropped, these declines were generally proportional to each other. By comparison, the relationship between supply and demand was much different before and during the 2008 financial crisis.

Any mortgage lender can confirm that demand metrics such as mortgage applications have been consistently higher while pending home sales have returned close to their normal levels in cities less impacted by the pandemic. Many are speculating that households will seek to move to areas with more open space, and away from high-density central business districts and high-rise residential properties. 

Also, the adaptation to remote working, accelerated by the pandemic, may lead to demand for larger homes that include a separate office and are not dependent on transit or employment accessibility. That’s a major shift in preferences for many families compared to pre-pandemic times. 

Accelerated trend

Public health is now top of mind and the No. 1 reason why people might be looking to make a move. The coronavirus pandemic divided the world into red zones and green zones, denoting viral hot spots and areas with lower prevalence of infection. It’s now abundantly obvious that staying in big cities can be a health risk. 

The density of social contact in urban areas makes them petri dishes for the spread of contagious diseases. Early in the COVID-19 crisis, the infection rate in New York City was five times higher than the national average. Plus, many city folks have realized during quarantine that they might prefer living in a place where they can enjoy a nature walk while isolated from the world.

Health care, however, isn’t the only factor motivating this migration. Cost of living is a decisive issue as well. New York, Los Angeles and Chicago — America’s three largest metro areas — have been losing residents for nearly a decade. Some of the outflow has been replaced by new arrivals but not enough to keep population levels in these cities from dropping. A new influx of arrivals into our most expensive cities is far less likely today, with unemployment potentially above 10% for the foreseeable future and immigration grinding to a halt. Populations in America’s largest cities could plunge. 

Urban studies professor Joel Kotkin told The Washington Post that current migration patterns are not simply a reaction to the pandemic. Rather, it’s an acceleration of a process that was already starting. “The work-at-home trend was already building, the small towns were already becoming much more cosmopolitan, with more and better coffee places and restaurants, and the big cities were already becoming prohibitively expensive,” said Kotkin, who wrote about “The Coming Age of Dispersion” at

No one expects cities to completely empty out, but some businesses undoubtedly will look back on this time of enforced work-from-home policies and figure that maybe they do not need to spend as much on pricey downtown office space. Some of the cultural amenities that drew people to cities during the past generation will struggle to return, having been damaged by this year’s economic paralysis and by a new wariness about large gatherings.

Emerging opportunity

Some see the coronavirus crisis as a tipping point for people already wanting more space or a different quality of life outside of urban cores. Lawrence Yun, chief economist for the National Association of Realtors, called the coronavirus’ impact on the real estate market a “temporary softening” and believed that a strong rebound would likely follow. Where there is change, there is opportunity. 

As more home shoppers are considering a relocation to rural areas, originators should become familiar with loan programs such as those of the U.S. Department of Agriculture (USDA), which are available in a surprisingly large number of areas throughout the country. Manufactured housing also is a potential growth area for your business. And originators should become familiar with downpayment-assistance programs that can be used to help a variety of eligible borrowers.

USDA provides loan guarantees for lender programs that are similar to those of the Federal Housing Administration (FHA) but are for buyers in eligible areas across the nation, with special underwriting criteria catered to rural communities. The Single Family Housing Guaranteed Loan Program, for example, assists approved lenders in providing low- and moderate-income households an opportunity to own primary residences in eligible rural areas. Eligible applicants may build, rehabilitate, improve or relocate a dwelling in an eligible rural area. The program provides a 90% loan guarantee to approved lenders, thus reducing the risk of extending zero-downpayment mortgages to eligible rural homebuyers.

More than 22 million Americans live in manufactured homes and there is growing demand for this affordable-housing segment, according to the Manufactured Housing Institute, a trade group. Due to the use of modern manufacturing techniques, manufactured homes are often able to deliver higher value than traditional site-built construction. 

Fannie Mae and Freddie Mac each have financing programs for specially designated manufactured homes with features comparable to — and sometimes superior than — traditional stick-built single-family homes. These include interior features such as drywall, energy-efficient appliances and upgraded cabinets, as well as exterior amenities such as porches, garages, eaves and higher-pitch rooflines. 

These programs provide validation for the quality craftsmanship seen for years in manufactured homes. The U.S. Department of Veterans Affairs and USDA offer loan programs for manufactured housing as well. It’s best to partner with a lender that has experience with a full suite of programs and can provide education on the financing options. 

Downpayment assistance that is applicable to FHA loans is available to a wide range of eligible borrowers. These include first-time homebuyers, borrowers whose income is equal to or less than 140% of the median area income or people in certain career fields. 

Hometown heroes — such as first responders, educators, health care providers, military personnel and civil servants ― can buy a home within the community in which they work. Assistance comes in the form of a grant of either 2% or 3.5% of the purchase price and may be combined with a seller concession of up to 6% for closing costs. This is another way to help clients purchase a home sooner.

● ● ●

The perfect storm of the low-rate environment and a post-pandemic rural sprawl may fuel a powerful purchase market for many months to come. This will not be the first time the mortgage industry has risen from the ashes following a crisis. The acceleration in innovation brought about by the pandemic and the favorable rates for shoppers are sure to open doors to new lending opportunities. ●


  • Laura Brandao

    Laura Brandao is chief growth officer and a partner at mortgage lender EPM, where she oversees operations and business development. She also serves as the CEO of Lighthouse Lending Capital, a new division of EPM that specializes in unique loan programs and private lending. She serves with several organizations dedicated to lifting others, including as chair of the visionary program for the National Association of Minority Mortgage Bankers of America (NAMMBA) and on the Mortgage Bankers Association of New Jersey’s women's committee.

You might also like...