Big-city apartments weren’t designed to spend 24/7 inside. For those who choose city-life, their homes or apartments serve as crash-pads after work, and brief refuge from bustling city streets, late-nights at crowded bars, and a place to come home to after a large concert.
When COVID-19 first hit in March, the cities were hit the hardest. Millions of Americans in cities such as New York and Los Angeles spent weeks and months working from home inside apartments that barely measured 1,000 square feet. Apartment living comes with shared amenities such as laundry, elevators, and more, that could pose an infection risk for the novel Coronavirus.
Some city dwellers relocated immediately, fleeing to the suburbs or beach towns to stay away from dense urban streets and multifamily dwellings.
People’s desire to leave the city quickly affected the real estate market. Apartment sale transactions fell 81 percent nationally in May compared to the year prior, according to the July Market Insights report by the National Association of Realtors (NAR). In May 2019, more than 768 apartment transactions were completed. In May 2020, just 176 deals sold.
Due to COVID, 13 percent of buyers changed their home type preference from multi-family, most commonly found in cities, to single-family homes, trademarks of suburban or rural areas.
As people flee major cities, real estate prices are surging and dropping. In cities, people are looking for deals, and in the suburbs, some listings barely stay on the market for 24 hours.
“Supply is extremely limited, and there are simply not as many homes for sale to meet the demand among potential buyers,” NAR’s Chief Economist Lawrence Yun said on the company’s website.
Do People Still Want To Live In Cities After COVID-19?
At first, it seemed the Coronavirus would only be here for a short time. Nearly five months later, it seems the virus will be something society will need to continue to reckon with.
The typical draws of cities, such as coffee shops and concerts, don’t currently exist. In New York City, in-door dining is postponed indefinitely. Broadway announced they will not resume shows until at least January 2021. The Mayor of Los Angeles said not to expect concerts until 2021.
On a year to date basis, the Mid-Atlantic metropolitan areas saw the biggest apartment sales declines, at -55 percent, the Northeast saw a -30 percent decline, the West region had a -24 percent decline, and the Southeast saw a small 3 percent increase in apartment sales, according to NAR.
NAR Realtors reported that 24 percent of their clients changed the location they wished to buy their home because of COVID-19, according to NAR’s 2020 Market Recovery report. Of the Realtors who reported clients who want to relocate because of COVID-19, 47 percent said their buyers wanted to purchase a home in the suburbs, 39 percent wanted to be in a rural area, and 25 percent wanted to buy in a small town. Fourteen percent of all buyers were interested in purchasing in a city.
“Fear of density, and of subways and trains in particular, plus a desire for safer, more private surroundings may pull some toward the suburbs and rural areas. Families with children and the vulnerable, in particular, may trade their city apartments for a house with a backyard.” Richard Florida, a professor at the University of Toronto’s Rotman School of Management, wrote in Foreign Policy. “But other forces will push people back toward the great urban centers. Ambitious young people will continue to flock to cities in search of personal and professional opportunities.”
Does Working From Home Change Where People Want To Live?
Some companies, such as Twitter, are switching to work-from-home permanently, where others tell workers they do want to resume office work, but it is unclear when. If people don’t need to live in cities for work, it’s hard to justify paying expensive rents for small living areas and no outdoor space.
For home buyers, this affects the type of house they want to purchase. NAR’s 2020 Market Recovery Report cited 35 percent of buyers changed the features they’re looking for when buying a home. Twenty-four percent of buyers want a home office as a critical feature, which represents the most significant change buyers are looking for.
“A number of potential buyers noted stalled plans due to the pandemic, and that has led to more urgency and a pent-up demand to buy,” Yun said. “After being home for months on end – in a home, they already wanted to leave – buyers are reminded how much their current home may lack certain desired features or amenities.”
Despite buyers’ change in location or home feature preferences, one thing is clear: people are buying up homes quickly.
“The outlook has significantly improved, as new home sales are expected to be higher this year than last, and annual existing-home sales are now projected to be down by less than 10% – even after missing the spring buying season due to the pandemic lockdown,” Yun said.
Will Cities Ever Rebound?
As the world waits for the arrival of a COVID-19 vaccination, metropolitan areas hesitantly start to re-open, and some residents and businesses are gone forever.
“Some dispersion of the population might also allow jobs to spread out and reduce urban housing costs. The next generation of suburbs, however, will have to be designed for lower emissions, more home-based work, and shorter commutes,” Joel Kotkin, a fellow at Chapman University, the executive director of the Urban Reform Institute wrote in Foreign Policy.
While many businesses will likely resume operations in cities over time, some workers may work from home forever, and others may want a short commute in exchange for a backyard.
“Predictions of the death of cities always follow shocks like this one. But urbanization has always been a greater force than infectious disease,” Florida said.