Prices reduced by COVID-19 in many major cities
The housing market has been booming during the COVID-19 crisis, but American cities are taking it on the chin.
And while big cities like New York and San Francisco, in particular, are struggling with falling prices, values in less densely populated cities like Phoenix and Charlotte, North Carolina, are holding up fairly well, according to a new analysis.
The study points out that the spread of the virus and the trend towards remote working are boosting the housing market and could continue to dampen price growth in heavily crowded urban areas while boosting earnings in more suburban areas for some time. .
Since the virus began wreaking havoc on public health and the economy in March, many Americans have fled cities for suburban and rural areas both to minimize the risk of contagion and to take advantage of labor-intensive policies. distance during the crisis, explains economist Troy Ludtka of Natixis, an investment bank. These factors, he says, have boosted home sales. Analysts believe the shift in telecommuting will continue at least in part even after the outbreak ends.
Additionally, many Americans, who still spend an inordinate portion of their days at home despite gradual reopening of businesses, are looking for homes with more indoor and outdoor space, according to Redfin, a national real estate brokerage.
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Historically low mortgage rates also underpin the strong sales, said Todd Teta, director of products at ATTOM Data Solutions, a real estate research firm.
In the four weeks ending Sept. 20, home sales rose 13.6% per year in suburbs America, 13% in rural areas and 8.8% in urban areas, study finds Redfin. House prices rose 16.6% in rural areas, 13.7% in suburbs and 13.1% in urban areas, according to figures from Redfin.
In many cases, the most densely populated cities have suffered more pronounced price drops or very modest increases due to a higher risk of contagion, according to a Natixis analysis.
“There is a fork,” says Ludtka. “People are less likely to buy homes in areas where they can get sick.”
Of the 20 cities in the S&P CoreLogic Case-Shiller Composite Price Index, 11 failed to achieve the national price increase of 2.9% from March to July (the most recent data available) while nine did. exceeded this increase. New York and San Francisco, the two most populous cities – with 28,000 and 19,000 inhabitants per square mile, respectively – were the most affected by the drop in prices, according to Natixis analysis.
In New York, prices have fallen for three consecutive months and fell 0.3% in July from March levels, according to Natixis figures. In San Francisco, prices fell in two of the most recent three-month prices and are up less than 1% since March.
Among the other underperformers, prices edged up 1.5% in Miami (ranked fourth in density), 2.4% in Chicago (ranked fifth), 2.6% in Los Angeles (10th) and by 2.6% in Washington, DC (ranked seventh).
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Other measures show even steeper price declines in some regions. Median prices in Manhattan fell from $ 1.7 million in February to $ 1.2 million in June, according to ATTOM Data Solutions, a real estate research firm.
Meanwhile, less dense cities fare better than average. From March to July, prices rose 4% in Phoenix (ranked 34th), 3.2% in San Diego (ranked 23rd) and 3.4% in Charlotte (ranked 37th), according to Natixis data.
“Some of the most popular places to buy a home are in the outskirts of big cities,” says Daryl Fairweather, chief economist at Redfin.
Not all overcrowded cities see house prices suffer because of the pandemic and not all cities with more room to maneuver are thriving, the study finds, as other factors such as a region’s economy may become more important, says Ludtka.
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Home prices in Boston, for example, rose 3.1% during the March-July period, although the city ranks third in terms of population density. And prices only rose 1.8% in Tampa, even though the city is a relatively low density 46th.
But there is no doubt that the pandemic has shaken the real estate market.
In New York City, condo and co-op sales had just started to pick up in January after 2017 tax code changes, which reduced deductions for expensive homes, dampened activity, said Martin Freiman, a Redfin broker. Since the start of the crisis, however, Redfin has managed around 600 sales per month in Manhattan, up from around 1,100 before the pandemic, and prices have been reduced by about 10% on average, according to Freiman.
“Everyone has just left town in droves,” he says. “People just stopped buying houses … You have an open house and no one is showing up.”
If companies like Facebook and Google return to their New York offices to some extent by next spring, Freiman predicts that young professionals will help rejuvenate the market. But another fertile segment of buyers – empty nesters looking to frequent Broadway and other city amenities – may be diminished in the long run, with older Americans more vulnerable to COVID-19.