Urban flight is a myth, says a new study from Freddie Mac.
“While demand for urban living decreased in 2020, prices and sales overall have recovered beyond their pre-pandemic levels as of May 2021,” the report asserts.
The pandemic accelerated existing migration out of big cities into lower-density communities across the US and boosted demand for larger homes and increased residential mobility across neighborhoods, but it did not bring about the end of urbanization, the study stressed.
The authors point out the urban housing inventory has fared significantly better than that for suburban and rural locales over the last year.
In May, urban housing inventory was down 6% year-over-year compared to 34% and 37% declines, respectively, for suburban and rural housing.
“The pandemic swiftly accelerated the trend of urban population dispersal that was already underway in the housing market,” says the study.
The change was accelerated, according to the report, by pandemic-driven realities of working from home, businesses shutting down, and social distancing—the main factors driving residential satisfaction in the “urbanest” of cities.
“We see evidence of shifting household preferences as many consumers reconsidered the role of homes and the altered landscape of their preferred residential environment,” say the authors.
In one shift, inventory of one-to-two-bedroom homes—which started increasing month-over-month at the onset of COVID-19—remained at its pre-pandemic level of 16% while three-to-four-bedroom and five-or-more-bedroom housing inventories were down 33% and 30% for the year ending this May.
Looking regionally, Freddie says demand is shifting to urban areas in more affordable cities across the Midwest, South, and West.
Earlier this year, Freddie Mac reported the nation’s housing deficit soared 52% from 2.5 million in 2018 to 3.8 million in 2020 thanks in part to the effects of the COVID-19 pandemic.
The deficit in the supply of entry-level homes is even more acute, declared the mortgage GSE, with their share of overall construction down from 40% in the early 1980s to around 7% in 2019.
A contributing author to both reports, Sam Khater, vice president and chief economist at Freddie Mac, has said the entry-level home construction shortage has strong implications for the wealth, health, and stability of prospective first-time homebuyers who have been harmed by the 12% increase of housing prices in the past year.