WFH’s Growing Impact on Home Sales

Almost a year into the pandemic, the effects of long-term remote work are showing up in home sales numbers

A new report from Zillow shows that mid-sized markets, especially in the Midwest, are making up for softness in New York and San Francisco. In the process, the for-sale market in urban areas was on pace with or slightly ahead of red-hot suburban areas.

In the Midwest, where the typical home value is less than other regions in the US, urban home prices have accelerated ahead of the suburbs in recent months. St. Louis, Cincinnati, Cleveland, Kansas City, Columbus and Indianapolis are among the metros where urban home values have recently been growing faster than those in the suburbs.

The picture changes in expensive housing markets, like New York, Washington, D.C., Atlanta, Boston, San Francisco, Seattle and Denver. In those areas, demand for affordable homes has led to strong home value growth in the suburbs.

Nationally, homes in the suburbs spent a shorter time on the market and had a higher share of homes selling above list price than urban areas. Listings in the suburbs were selling four days faster than those in urban areas in August. In December, the gap widened to 10 days.

While the narrative is that people are leaving large metros, Zillow found that homes in those areas kept pace with the suburbs as home value and sales price growth, sales volume and Zillow web traffic matched or exceeded the suburbs on a national basis. In urban areas, home values grew at 8.8%, while those in suburban areas rose 8.7% last year.

A separate Redfin.com report added more color to the 2020 migrations. It found that 27.8% of users looked to move to another metro area last year after 25.5% looked to new metros in 2019.

Redfin estimates that New York lost roughly 275,000 residents to other metros in 2020. It is followed by Los Angeles (lost 125,000 residents) and Chicago (110,000 residents). Following those cities were the Bay Area (45,000 residents), Detroit (29,519 residents), Seattle (25,269), Boston (24,530), Miami (23,886), Washington, D.C. (15,288) and Baton Rouge, La. (14,897)

Phoenix had the largest net inflow in 2020, with 80,000 new residents arriving. Next was Dallas (net inflow of 75,000, Orlando (60,000 new residents), Tampa (47,000), Austin (46,958), Las Vegas (43,262), Atlanta (42,902), Greenville, SC (38,991), Charlotte (37,575) and Knoxville (35,575).

Phoenix, Dallas, Austin, Las Vegas, Greenville, Charlotte and Knoxville gained more residents in 2020 than they did in any year in at least a decade. The other three—Orlando, Tampa and Atlanta—gained more residents than any year in the last decade except 2016.

In these relatively affordable areas, the typical home sells for close to or less than the national median of $335,000. Supply is tightening in these markets, though.  

The number of homes for sale in December fell by at least 16% from the year before in all 10 of the most popular migration destinations, according to Redfin. Housing supply was down 18% year over year in Phoenix, 35.7% in Dallas and 16.3% in Orlando. Inventory was down in 83 of the 88 metros included in Redfin’s housing inventory analysis.