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Why residential real estate is becoming increasingly attractive in suburbs

This year has culminated in a reshaping of U.S. real estate. A housing shift is occurring in some cities as some people are trading urban areas for the suburbs or rural places.

As more people work from home, the things about city living that make it appealing to many millennials and young professionals, such as theaters, bars, and restaurants, are being either closed or restricted.

Analysts say the outward-bound trend could continue as the pandemic persists. For anyone considering a move out of the city, here are some considerations.

The cost of city living was getting expensive before the pandemic and is now contributing to an exodus. Also, people are rethinking whether they want to live in high-rise rentals with common spaces rather than single-family house of their own with space and a backyard.

Here are some other things to keep in mind:

  1. You can find good value in the suburbs. Some places took a hit early in the pandemic. The housing market is meanwhile surging back and median home prices are rising. Many analysts say suburban housing could be a better investment for homebuyers than an urban dwelling, given the uncertainty around the coronavirus and its effects on dense population centers. Much of the value of homes outside cities is in the fact that there is room to build more of them. Home prices outside of densely populated urban areas tend to follow construction costs, so there shouldn’t be much movement in those prices.
  2. Urban home prices are falling. As a result of more people leaving the city for the suburbs, economists say, home prices in urban areas may fall as a result. But it’s too early to count out urban areas altogether. We’ve had other periods in history in which cities survived societal and technological transformation. Meanwhile, bargains may be had in some markets if one wants to consider a city condo or property to rent out.
  3. Low interest rates. Interest rates are the lowest in history. So if you’re looking to own a home, now’s a good time to buy. And it’s also a good time to sell. For sellers, with demand especially high to move to the suburbs, short supplies coupled with low interest rates are providing an incentive to buy. Homes in many regions aren’t staying on the market for long.
  4. Small-town rental properties. Because big cities have been disproportionately harmed by the virus, smaller towns may be ideal for investing in a residential property that can be used as a vacation rental and additional source of income. There could be a large shift away from urbanization toward investment in remote places. For buyers of second homes, places well removed from urban centers can be reasonably priced and make more sense as people make safety and space priorities.

Home ownership has long been a way for families to build equity, something that’s hard to do in densely populated areas where home prices are high. This is one of the best times in our country’s history to build wealth with your home in the suburbs where prices are often more affordable.”

Jadon Newman is the founder and CEO of Noble Capital Group. With a 20-year career in real estate and finance, he specializes in private lending, private equity, investment real estate and strategic venture capital.

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