Urban home values are outpacing the value of homes in the suburbs in most top-tier metros, as city life gains popularity and high-end condos fill the sky in Boston, Washington, D.C., Seattle, and other cities with fast-changing downtowns.
Homes in the suburbs – a longstanding symbol of the American Dream – have typically been worth more, on average, than homes in urban areas. That’s still true in much of the country. Suburban homes in Nashville, Tenn., Cincinnati, Ohio, and Richmond, Virginia have a higher price tag than the average home in the city.
But in Boston, Washington, D.C., and San Francisco, the meanvalue of urban homes has recently surpassed the mean value of homes in suburban areas. And urban homes are gaining ground in Denver, Phoenix, and Chicago.
The shift reflects demographic trends of millennials delaying family life and choosing condos, and shifting preferences, as people seek walkable neighborhoods with urban amenities.
It has vast implications for low-income people who have traditionally lived in cities to be near services and employment. Zillow recently found that, in San Francisco and Seattle, high-income people are making shorter commutes to downtown, while low-income people are traveling much further to get to work in the urban core.
Zillow based its analysis of urban and suburban home values on a surveyof how people define their own neighborhoods – as either urban, rural, or suburban – and then used characteristics of those places to extrapolate the results and define ZIP codes all over the country. By looking at home values within those areas, Zillow could see how home values have fared in each type of place over the years.
“This trend, in part, reflects home buyers’ changing preferences, as they seek amenity-rich, dense and walkable areas that are often closer to their workplace,” says Zillow Chief Economist Dr. Svenja Gudell. “In the future, this lifestyle trend will change some suburbs as we know them, and they’ll start to feel more urban as buyers move further from city centers in search of affordable housing in communities that still feel urban.”
Nationally, suburban home values grew 5.9 percent in 2015, while urban homes gained 7.5 percent in value. In 1997, urban home values grew at 3.8 percent — slower than suburban values, which grew 4.1 percent that year.
On a per-square-foot basis, home values for urban areas are way up, indicating that people are willing to pay more for less space to live in the city. In Washington, D.C., for example, urban homes in 1996 cost 6 percent more per square foot than suburban homes. Today, they cost 41 percent more per square foot.
For more information, visit www.zillow.com.