Buoyed by a suburban shift, the pandemic housing market continues to soar


In the Houston area and affordable metros and small- and mid-size cities across the U.S., sales of single-family homes are on pace to hit record highs. How much of the boom can be attributed to the COVID-19 crisis?

Buoyed by a suburban shift, the pandemic housing market continues to soar

In the Houston area and affordable metros and small- and mid-size cities across the U.S., sales of single-family homes are on pace to hit record highs. How much of the boom can be attributed to the COVID-19 crisis?

Was 2020 the “Year of the Suburbs”?

It certainly seems like a lot of people have spent more time than usual this year thinking, talking and writing about the suburbs.

In the run-up to the November election, President Donald Trump shared his predictions about what would happen to the suburbs if Joe Biden was elected.

This post is part of our “COVID-19 and Cities” series, which features experts’ views on the global pandemic and its impact on our lives.

Trump’s warnings were based in part on the widespread protests against racial injustice and police brutality that were brought back into focus after George Floyd was killed by a Minneapolis police officer on Memorial Day. Support for the protests and the Black Lives Matter movement was more far-reaching following the deaths of Floyd, Breonna Taylor and Ahmaud Arbery than the protests in response to the deaths of Michael Brown and Eric Garner in 2014. Demonstrations against racial injustice in 2020 moved beyond urban centers and into suburban cities and small towns across the nation.

The suburbs also received a lot of attention on election day. Before Nov. 3, academics and journalists speculated about the chances of dependably red states such as Texas and Florida swinging blue, which hinged on how the suburban vote fell. In the end, neither state was flipped by the Democrats; however, Arizona and Georgia, typically easy wins for Republicans, were both won by Biden because of the support he got in the Atlanta region’s large suburban counties and suburban women in Arizona. The margins were small, particularly in Arizona, and both states could return to red four years from now.

Moves away from expensive cities

Then there’s the COVID-19 crisis, which arguably did more to amplify the urban-versus-suburban chatter than anything else in 2020. The question of whether the pandemic would be the death of large cities began popping up in March, around the same time the U.S. saw its first diagnosed cases of the disease. When those cases mushroomed into the first wave of the disease and the death toll began to climb in populous areas of New York, New Jersey and Massachusetts, fingers quickly were pointed at the dangers of density. (Though density is not the problem.)

Yes, in the first six months of the pandemic, quite a few people decided to leave densely populated urban areas such as Manhattan, Brooklyn, Chicago, San Francisco and Los Angeles, according to change-of-address data from the U.S. Postal Service. These are also some of the most expensive cities in which to live.

When businesses transitioned employees to working remotely and workers didn’t have to worry about transportation and commute times, they had more flexibility in choosing where they lived. Add to that the fact that many urban amenities such as theaters, concert halls, galleries, museums, bars and restaurants shuttered operations to slow the spread, and it’s understandable that changes in how people work led to changes in how and where they chose to live — even if for just a short while.

Overall, permanent change-of-address requests in 2020 were mostly static compared to 2019, up about 2%, but USPS data shows that temporary change-of-address requests increased by almost 27%. Temporary address changes are for those moving to a new location for six months or less. Spikes in these requests were seen in March and April, and likely include those who didn’t expect their remote-work situation to be permanent and college students who returned home to take classes online.

Another analysis of change-of-address requests — this one of data from Jan. 1 to mid-September — showed almost 90% of the moves made in the first nine and a half months of 2020 were to addresses in the same county. The most popular destination for people moving out of Houston was Katy, which accounted for 33% (4,083) of the total outflow. Cypress, Spring, Richmond and Humble were the four other “top mail forwarding locations” of those who left Houston.

Looking for more space and affordability

With so many American workers working from home, there was bound to be some shifts in housing choices, not because of COVID-19 fears, but in response to the demands of the new normal, including the desire for more space, amenities and design features to accommodate working from home and learning from home. Real estate experts and research indicate the uptick in moves to suburban areas was a trend that began before COVID-19, and has only been accelerated by the pandemic.

“We believe that the strong housing market is more the result of historically low-interest rates and longer-term demographic trends, though the COVID-19 crisis may have influenced buyers to move sooner than they might have otherwise, while also temporarily causing some younger renters to double up or move home,” said Gregg Logan, managing director of the real estate advisory firm RCLCO, in an article about the coronavirus' impact on the housing market.

In a year-in-review column for the Wall Street Journal, Richard Florida had a similar take: “This pandemic, like pandemics through all of human history, is not a fundamental disrupter but an accelerator of trends already underway: ‘pull forces’ that draw certain groups, like families with children, out of cities, and ‘push forces’ that impel others, like the young and the ambitious, techies and artistic creatives, into cities, especially as they become more affordable.”

Florida calls it the Great Urban Reset: “a once-in-a-century opportunity to create more equitable and inclusive communities of all sizes and shapes.”

In the “2021 Emerging Trends in Real Estate” report from the Urban Land Institute and PwC, it’s called the Great American Move. Key trends cited in the report as being fast-tracked by COVID-19 include "were work from home," "suburban migration" and "move to Sun Belt states." Whatever you want to call it, no one can argue the single-family-housing market has shown any signs of pandemic fatigue.

Low inventory and sky-high demand

In the four weeks leading up to Dec. 6, the median home sale price in the U.S. increased 15% year over year reaching a record high of $322,000, according to the latest housing market update from Redfin. During that time (Nov. 9–Dec. 6), the median sale price across the Houston metro area climbed 10% to $270,000, and pending sales increased by 53.6%.

Changes in the median sale price among counties in the Houston region varied from a 1% decrease in Waller County to an 18% increase in Austin County. The median sale price in Harris County increased 12% year over year to $259,000.

Year-over-year changes in median sale price of homes in Houston-area suburban counties (Nov. 9–Dec. 6)

18% in Austin County ($357,000)
6% in Brazoria County ($260,000)
-3% in Chambers ($266,000)
10% in Fort Bend ($303,000)
1% in Galveston ($265,000)
2% in Montgomery ($272,000)
-1% Waller ($278,000)
14% Liberty ($233,000)

In November, nearly 8,000 single-family homes in the Houston area were sold, according to the Houston Association of Realtors’ housing report — a 25.6% increase over November 2019.

The strongest increase in activity for the month was at the high end of the market. Sales of homes priced at $750,000 or more soared 88% over November 2019, HAR reported. Homes priced from $500,000–$750,000 jumped 72%; and homes priced between $250,000 and $500,000, spiked 50%.

“In my 50 years in the real estate business, I have never seen a market defy supply and seasonality the way Houston has — amid a pandemic, no less,” HAR Chairman John Nugent said in the report.

Sales are strong but new listings are scarce, leading to a historically low 2.2-month supply of single-family homes. By comparison, the inventory in November 2019 was a 3.6-month supply.

As of Dec. 5, the inventory of homes for sale in the Houston area was one-third less than the year before. According to Redfin data, the inventory of single-family homes in Harris County was down 34% compared to October 2019.

Compared to October 2019, the inventory of single-family homes in Houston-area counties in October 2020 was down significantly:

Brazoria County: -33.6%
Fort Bend County: -52.5%
Galveston County: -36%
Montgomery County: -30%

Pandemic rent drops concentrated in principal cities

From November 2019 to November 2020, Houston rents dropped 3.2% overall. When the increase seen in rent prices back in March are factored in, the rent drop in the city from April to November is actually more like 3.7%. November was the eighth consecutive month rent went down in the city. Year-over-year rent growth in Houston trails the state average of -2.0% in Texas, as well as the national average of -1.3%, according to Apartment List data.

Five of the nine largest suburban cities in the Houston metro area saw rent increases from November 2019 to November 2020. The biggest year-over-year rent growth for November was the 3.4% increase in League City. Median rent also rose in Pasadena (1.1%), Pearland (1.2%), Baytown (1.5%) and Tomball (0.4%).

Rent dropped in Sugar Land (-2.2%), Conroe (-0.6%), Galveston (-2.3%) and Webster (-1.9%).

Among the 10 largest cities in Texas, the fastest rent decline was experienced in Austin, where it dropped 5.6% compared to November 2019, and 5.9% since the pandemic began.

Apartment vacancies have remained mostly static in Houston in 2020, beginning the year at 8.8% and peaking at 9.5% in April, but never fluctuating outside of that range. Rent prices in the city have been declining since March, down to 3.2% below the start of the year in November.

What’s next for cities is uncertain

COVID-19 vaccinations are being rolled out, and while we can more clearly see the pandemic’s finish line, experts say it could be as much as another year before we cross it. Right now, a lot of uncertainty is swirling around 2021, but the expectations for home prices remain positive.

Home prices in the U.S. are projected to rise another 7.9% through October 2021. That’s the same increase expected in Harris County. They are expected to grow 7.8% in Houston and 5.2% across the entire metro area.

Projected increases in home prices for 2021:

Austin County: 6.6%
Brazoria County: 6.8%
Chambers County: 6.4%
Fort Bend County: 6.6%
Galveston County: 7.2%
Liberty County: 7%
Montgomery County: 7.2%
Waller County: 6.4%

Not everyone will continue to work remotely 100% of the time, though many would prefer to continue doing so at least part of the time on a permanent basis. Still, work from home isn’t going away, which could be an opportunity for people to make stronger connections to their communities. As Kinder Institute Director Bill Fulton proposed back in March when he wrote about how the pandemic will change our cities: “If office workers work remotely more often, then the neighborhoods where they work — their home neighborhood — will become more important. They may choose, for example, to work in their neighborhood coffee shop. Even if they work at home, they’ll need to get out more during the workday, so public spaces — bars and restaurants, parks and trails — will become more important to daily life, not just after work or on the weekends.”

While the pandemic won’t be the death of cities, it has changed the way we live, which is why we must make the most of this opportunity to make these changes count, and ensure the changes are changes for the better.

Here's what Fulton predicted: “The world after COVID-19 will be different — as it is after any disaster. And COVID-19 will accelerate changes that have been brewing in cities for a long time. The result will be a new kind of city, different than what we have seen before. A city that should be able to withstand shocks like COVID-19 in a sturdier fashion.”



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