UPDATE 10.05.2020: On 29 September, The Economist released an episode of their podcast show "Money Talks" called "A plague, but not on houses - why is the global housing market booming?" Starting approximately 5 minutes in, hosts discuss not only the nature of the current post-pandemic suburban housing boom, but also the factors contributing to the relentless upward surge in housing prices. Regular readers of this site will recognize the points made.
Though you may not see the previously contained-to-downtown phenomenon of hipster beards over brewing vats in your suburban neighborhood, there is truly nothing hipper in 2020 than personal space and the safety & security that comes from being able to distance oneself from one’s neighbors. Further, space - which has always been a luxury - is becoming the lead driver in determining the price of homes. A lower price for less space has always been a given, but never more so, and never more significantly, than when that space is in a high-density area during a public health crisis.
If you’ve got a private space outside of your house, be it a yard, deck, porch, etc., you are now living in a prime piece of pandemic real estate. Mixed-use neighborhoods that have restaurants and shops within walking distance have seen substantial increases in pedestrian activity as the work-from-home workforce has been rewarded with the delights of moving about their neighborhoods as pedestrians, chatting with neighbors they’d previously only been able to wave to, and spending their day in comfortable clothes instead of business casual. These neighborhoods continue to increase in value as the permanence of our new reality settles in.
Why the Suburbs?
Suburbs were the original destination of ex-urbanites who wanted a higher quality of life than they were receiving in the city. In Raleigh, the suburbs were the prime focus of development for over 30 years, meaning more people in Raleigh have lived in the suburbs than have ever lived downtown in the history of the city. This makes the majority of people in the city of Raleigh suburban dwellers.
As most of these suburban dwellers will attest to, the suburbs have never really lost their charm; they’re just being discovered anew by those for whom urban living, with all its current restrictions from what came before, no longer offers the same quality of life. How many of these new suburbanites are coming from having settled for less space because they “were just sleeping there”? Now that our homes are where we do just about everything, new calculations determine value.
Though Downtown Raleigh does not have the population density of an LAX, NYC, or ATL, until recently, Raleigh’s density was ever-increasing as constant new construction added units that brought people closer to an increasingly active downtown scene. The rejuvenation of downtown Raleigh, with the removal of warehouses and single-story structures in favor of apartments, condominiums, and entertainment venues which began 20 years ago, has been so successful that gentrification of surrounding neighborhoods was in full force until March.
Now as you drive through Downtown Raleigh, many homes that previously appeared to be wonderful “fix ‘n’ flip” opportunities are now stagnant. Their dilapidated state and high prices spoke to their anticipation of buyers certain yet to come. Though those buyers may return in a time we cannot yet determine, these properties will sit idle, subject to a stuttering market while the suburbs flourish around them.
Certainly some new construction projects are still being completed 6 months after COVID-19, but few of these were not started before COVID-19 changed the world. Builders are savvy; they make what sells. They realize that densely packed living spaces are not the way of the future.
How many are currently having to install walls in open floor plans, be it in homes with whole families trying to work from the same shared space, or removing previously constructed common areas from commercial spaces, as a contactless workspace is now the future?
More downtown areas are going to remain unrenovated and property values will continue to decline in high-density areas, regardless of the city. Urban living spaces previously serving their residents only for a small portion of their days, as the residents enjoyed the multitude of public spaces available, will now have their value reduced to what people value in the pandemic age.
Since no one can say when the pandemic will end, we must consider these current trends as indefinite until proven otherwise. Projecting forward off the trends we’ve experienced over the first six months of the pandemic, we can see that it’s become a hot seller’s market with suburban houses having the highest rates of return, price increases, and successful closings.
One thing is for certain, though; Raleigh is going to make the best of every situation. Perhaps this renaissance of suburbia will lead to a more dynamic and enticing pedestrian-friendly design of malls that can become a High Street or town square-style setting for communities. Certainly, home values will be increased by homeowners putting their discretionary income into their houses in the form of landscaping, decks, pools, and more.
I’ll leave you with this question: can anyone tell me when the suburbs are going to be less enticing than they are right now?