The idea of people fleeing to the suburbs isn’t what we thought – an excerpt:
For the week ending on May 10 — which was around the height of the pandemic in New York City — the percentage of search traffic from the New York metro area to out of market areas rose 5.4 percentage points year-over-year, which appears to reflect a minor uptick in people wanting to get out of the city.
But if you take a closer look at the breakdown of searches by population density, the share of search traffic from the New York metro area to suburban and rural areas dropped, while the share of search traffic looking at other urban areas rose. Taken together, this shows that while there was a minor uptick in New Yorkers looking for homes outside of the New York area, it’s slightly tilted toward other urban areas than it has been in the past. The search data, which is already a weak indicator, does not actually reflect an increase in New Yorkers’ interest in moving to suburban or rural areas.
The same is generally true for a number of other cities as well, including Detroit, St. Louis, San Jose, Pittsburgh, Cleveland, Miami, Las Vegas, Boston, Baltimore, Los Angeles, and Philadelphia.
There were other cities that saw a drop in traffic to out-of-market homes, but the share of traffic to other urban areas still rose — Seattle, Minneapolis, Chicago, Phoenix, Washington, D.C., Dallas, Charlotte, Atlanta, Tampa, Sacramento, San Diego, San Antonio, Columbus.
Of the cities that did see a drop in traffic to homes in urban areas, the drop was negligible. The city that saw the biggest drop was Indianapolis, where traffic fell by a mighty 1 percent.
“We just don’t have any basis to claim a boom in the suburbs,” says Jeff Tucker, an economist with Zillow. “There are people who really believe the urban exodus hypothesis. If there’s an evidence for it in the data, it’s very weak.”
This doesn’t mean there won’t be a flight from cities at some point in the future. As the virus continues to rage on across the country, people who have lost their jobs may decide to leave their cities for more affordable areas. Widespread adoption of work-from-home polices may also give people who didn’t want to live in cities to begin with, the option to leave. People in cities like New York and Detroit, which were hit hard by the virus, may decide they’ve had enough.
In New York City, the wealthier parts of the city emptied out after the pandemic hit. Some of those people likely won’t return for the reasons listed above, and that flight has had an impact on the rental market. According to one Douglas Elliman report, residential vacancies in Manhattan rose from 1.61 percent in June of 2019 to 3.67 percent in June 2020, causing median rents in the borough to drop by 4.8 percent year-over-year. This is certainly an indication that housing demand in Manhattan has dropped — though only slightly — and could mean people are leaving Manhattan.
But there is next to nothing to suggest a mass exodus from New York City or any other city is happening yet, and there are good reasons to think it will never materialize at scale. Job losses in urban centers are a problem but, after the pandemic passes, there is evidence to suggest that low-wage jobs like food service and retail will come back fairly quickly. Work from home policies to this point don’t appear to have been adopted on a level that would create a mass exodus. And much to the dismay of stans of suburbia, who find density and city life unappealing, there are plenty of people who enjoy living in cities — and who will happily replace those who leave.
Either way, definitive evidence of the “urban exodus” would likely take at least a year to become visible in real estate data. The clearest indications of the pandemic’s impact on housing markets will be things like home sale volume and home sale prices. And because home sale transactions can take months to execute, even if people do start leaving cities, the shift will likely to play out slowly over time.
And, if that’s so, the trend in the housing data may be eclipsed by other factors and become almost impossible to suss out.
“Any data at this point is gonna be quite noisy,” McLaughlin said.