Value of Suburban Homes' Space Tops That of Urban

As remote work continues to attract Americans to the suburbs, prices in cities are falling quickly from their peak as the overall housing market cools amid rapidly rising mortgage rates

As home prices fall fastest in cities and mortgage rates rise, “the value of a square foot in the suburbs has caught up with that of urban centers,” in September for the first time, according to a new report from Redfin.

But by just a buck. The typical home in suburban neighborhoods nationwide was worth $206 per square foot during the four weeks ending Sept. 25, just slightly higher than $205 in urban neighborhoods,” Redfin said.

Hamptons real estate agent, Mia Calabrese, Nest Seekers International, tells GlobeSt.com that during the pandemic, “buyers were moving to the suburbs because they wanted more space. After years of having this space, not all buyers are ready to scale back and loose the square footage they have in the suburbs.”

Buyers Can’t Afford Everything on Their Wish Lists

Redfin senior economist Sheharyar Bokhari tells GlobeSt.com that urban home prices soared in 2021 as homebuyers gravitated back to city centers as the pandemic waned and affluent Americans–motivated by record-low rates–decided they wanted the best of both worlds.

“They wanted homes with plenty of space for working from home, but located in walkable areas near shops and restaurants,” he said. “Today’s buyers can’t afford everything on their wish lists, so many are prioritizing space over walkability.”

Bokhari estimated that urban neighborhoods will likely see prices–and price per square foot–fall on a year-over-year basis before suburbs and rural areas.

“House hunters may want to shift their search to urban neighborhoods, where they may find lower prices to help counteract the costliness of today’s mortgage rates,” he said. “And now that space is just as valuable in the suburbs, it’s less likely that they’ll sacrifice space.”

Price per square foot has declined from a year ago in urban parts of nine of the 91 metros in Redfin’s analysis.

Price per square foot increased most from a year ago in urban parts of Florida, especially in places hit hard by Hurricane Ian in September.

Comparisons Can Become Apples to Oranges

Jeff Benach, principal of Chicago-based Lexington Homes, tells GlobeSt.com that in his market, “one can’t really compare single-family homes in the city to single-family homes in the suburbs.

“It is a more relevant comparison in markets that have grown into large markets during the past 25 years such as Denver, Phoenix, Dallas, etc., where city neighborhoods and suburban neighborhoods don’t differ as much in terms of feel and product/housing type built.

He said it’s hard to “make a blanket city-suburbs comparison” because there are so many different pocket-markets within each.

“In terms of condos, there are a lot more upscale buildings in the city with rich amenities than there are in the suburbs or the outer neighborhoods. In Chicago, the market is further broken down in terms of Downtown/North Side, West Loop, South Loop and then other neighborhoods.

“For example, at present, the more upscale buildings in the Downtown Core are getting $700 – $900/sf. Regarding single-family, anything in the more upscale city neighborhoods such as Lakeview are generally in the $500 – $600 range, whereas newer construction single-family in the neighborhoods run closer to $300.

“In the suburbs, most of the newer single-family homes tend to hover in the low to mid $200s/sf, with the higher-end product in the more upscale suburbs like Highland Park, Winnetka or Hinsdale getting $300 – $500/sf. Townhomes follow similar patterns.”

Price Per Square Foot Can Signal a Market’s ‘Direction’

Terry Fernandez, buyer specialist, Houwzer, tells GlobeSt.com that many of his clients are drawn to the benefits of living in a suburban setting.

“With the popularity and demand of suburban life on the rise, so has the average price of the square footage of suburban homes,” Fernandez said.

Muoki Musau, buyer specialist, Houwzer, tells GlobeSt.com that price per square foot can also signal the sort of direction that future home prices could be heading.

“The important thing is to analyze neighborhoods against regional trends and have a process to organize the data in a way that helps each person move their project forward,” Musau said.