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Residential Real Estate Becoming More Attractive In The Suburbs

This year has culminated in a number of factors that are reshaping the landscape 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 in the current climate, knowing the difference between a condo and a house and the aspects of city living that are appealing to millennials and young professionals, such as theaters, bars, and restaurants, are either closed or restricted.
Real estate analysts say the outward-bound residential trend could continue as the pandemic persists. For anyone considering a move out of the city, there are some key factors to consider, says Jadon Newman, CEO of Noble Capital (www.noblecapital.com), a private lending and private equity firm.
“The demand to live in rural and suburban areas is increasing compared to urban demand, which marks a big change from where it’s been,” Newman says. “But the cost of city living was getting expensive before the pandemic, and now the exodus is being expedited.”
People are rethinking whether they want to live in high-rise rentals with common spaces as amenities, as opposed to being in a single-family house of their own with space and a backyard, Newman says.
“Sellers in the suburbs and rural areas are realizing the surge in new demand, and it may increase if there’s a second wave of the virus this fall,” he says.
Newman says those considering a new home or a second home should keep in mind these trends in the current economic climate:
Good values in suburbia. Depending on geography, some areas took a hit early in the pandemic, the housing market is surging back and median home prices have risen recently. Newman agrees with analysts who say suburban housing could be a better investment for homebuyers than an urban dwelling, given the uncertainty around the coronavirus and its multiple effects on dense population centers. “Much of the value of homes outside of the central city is in the structure and the fact that there is room to build more of them,” Newman says. “Home prices outside of densely populated urban areas tend to follow construction costs, so there shouldn’t be much movement in those prices.”
Falling urban home prices. 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,” Newman says. “We’ve had other periods in history where cities survived societal and technological transformation. Meanwhile, relative bargains may be had in some markets if one wants to consider a city condo or property to rent out.”
Low interest rates. “Interest rates are the lowest in history,” Newman says, “if you’re looking to own a home it’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, limited supply, and low interest rates are creating an incentive to buy. Homes in many regions aren’t staying on the market for long.”
Investing in small-town rental properties. Newman says because major cities have been disproportionately affected by the virus, smaller towns that have been far less impacted 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 larger shift away from urbanization toward investment in remote locations,” Newman says. “For buyers of second homes, those well removed from urban centers can be reasonably priced and make more sense as people prioritize safety and more space.”
“Home ownership has traditionally been a way for families to build equity which is more difficult now in densely-populated areas where home prices are high,” Newman said, “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
Jadon Newman is the Founder & CEO of Noble Capital Group, LLC (www.noblecapital.com). 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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