Last week, the Census Bureau reported a huge surge in July and August new home sales while the National Association of Realtors reported a parallel growth of existing home sales. Total homes sold is the greatest since the 2006 housing bubble while the year-on-year growth in sales was the greatest since 1983, when the economy was recovering from a recession.
The growth in sales in 2020, however, isn’t due to a bubble or an economic recovery. Instead, it represents a major demographic shift. Financial blogger Wolf Richter arguesthat it is more evidence of a movement “taking place from some densely populated cities, and especially city centers, and especially from rental apartments, to houses a little further out, or in more distant suburbs.”
The Census Bureau and Realtor data don’t indicate whether the sales are in cities or suburbs, but both agree that the greatest increases are in the South and Midwest, while increases in the Northeast and West are much smaller. This would fit Richter’s guess that people are leaving expensive apartments in New York City and San Francisco and buying homes in more affordable places in Florida, Georgia, Indiana, Minnesota, North Carolina, and Ohio, states that already had some of the fastest-growing urban areas before the pandemic.
Since at least the 1950s, urban planners have decried decentralization and encouraged states and cities to pass laws and ordinances aimed at fighting it. At most, they merely slowed it down, while the pandemic appears to have accelerated it far beyond the power of state laws, as people are set to make one of the largest interstate migrations in history.
One part of the shift is that people are trying to escape from dense cities that they see, rightly or wrongly, as contributors to the spread of disease. But a bigger factor is that, with more people working at home, they need more space than they could afford in a central city apartment, whose monthly cost is much greater than that of a large suburban home outside of Orlando, Raleigh, or San Antonio.
Some people worry that places like downtown San Francisco and midtown Manhattanwill become ghost towns. That won’t happen, though rents in those places will definitely decline which will discourage new construction. The biggest declines, however, may be in places like Stockton, California and Binghamton, New York, where people moved so they find affordable housing and supercommute to the Bay Area or Manhattan. A decline in central city housing prices will allow those people to move closer in while the people who move further out will probably not target Stockton or Binghamton for their new homes.
We won’t know the details of this demographic shift for awhile. But I would argue that this is a good time for states and cities that have tried to stop decentralization to give up on this goal, as their efforts have not only failed, they’ve done far more damage than good.
Article originally posted by Antiplanner
