Jim Paolino of Lodestar: By the Numbers–Did Increased WFH Opportunities Help Spur Home Buying in Metro Suburbs?
Jim Paolino is co-founder and CEO of LodeStar Software Solutions, New York, which has provided state, county and municipality tax and fee data for closing cost estimates and loan estimates on millions of residential real estate transactions in all 50 states and the District of Columbia since 2015. The company also has access to average sales price and other closing-related data points. Unless otherwise cited, the data provided has been collected through LodeStar Software Solutions’ database.
Two years after the height of the COVID lockdown, there’s lots of new data available to prove (or disprove) some of the early predictions and observations regarding home buying patterns and trends. One fairly common assertion was that, empowered by a newfound ability to work from home, millions of Americans renting their homes in major urban centers would quickly purchase homes in the suburbs. After comparing our own purchase price and home closing data with other national indicators, it appears this did happen, and that the trend continued through the first quarter of 2022.
A Zillow study prepared during the height of the pandemic (August 2020) suggested the option of increased work-from-home opportunities could give 1.92 million American renters the ability to leave their current metropolitan homes and buy starter home’s in cheaper locations, such as the suburban counties near those urban centers. The same study confirmed that starter homes tend to be more expensive in 37 of the 50 largest U.S. metros, providing additional impetus for first-time homebuyers.
Today, the data suggest this has, indeed, taken place. According to the National Association of Realtors quarterly report for Q1 2022, “[t]he top 10 areas with the highest year-over-year price gains were made up of midsize and small markets, with half of the sites located in Florida. Those include Punta Gorda, Fla. (34.4%); Ocala, Fla. (33.8%); Ogden-Clearfield, Utah (30.8%); Lakeland-Winter Haven, Fla. (30.1%); Decatur, Ala. (28.9%); Tampa-St. Petersburg-Clearwater, Fla. (28.8%); Fort Collins, Colo. (28.4%); North Point-Bradenton-Sarasota, Fla. (28.0%); Myrtle Beach-Conway-North Myrtle Beach, N.C.-S.C. (28.0%); and Salt Lake City, Utah (27.9%).”
According to NAR Chief Economist Lawrence Yun, “”Traditionally, homes in these markets were viewed as relatively inexpensive, but with recent migration trends, prices have increased significantly. As more families relocate to various areas, we may see some surprising markets on our top 10 list.”
“Price gains in many smaller, tertiary cities are now outpacing those in the more expensive primary and secondary markets,” Yun continued. “This is due to buyers looking for less expensive housing and also a result of more opportunities to work from home, making relocation to smaller markets possible.”
A U.S. Census Bureau webinar in late 2021 provided additional support to the idea that a suburban migration trend existed and provided further explanation. “It’s important to call out the relationship between housing and jobs, and how intertwined these things are,’’ said Nicole Bachaud, a Zillow economic data analyst who presented during the Census Bureau webinar. “When an area gets an increase in jobs, people will move there to work putting pressure on the housing market, which will often result in an increase in prices.”
This could well be a major shift in what factors have the most influence on homebuyers as they make their decisions. A pre-pandemic survey reported that, in 2017, in 20 of the top 35 largest markets, over half of urban workers were reverse commuters. Additional research indicated that, as of 2017, 40% of U.S. residents living in urban areas commuted to non-urban areas for work, suggesting proximity to work might not be a major impetus for all homebuyers before widespread lockdowns and almost universal WFH became reality. The survey further noted that more than 70% of urban residents work outside of urban areas in markets like Orlando, Tampa and Riverside, California.
What our data suggests
LodeStar’s own residential transaction data supports the premise that a significant percentage of Americans did purchase homes in counties and municipalities that are considered suburbs to the nearest major metropolitan area. In fact, we saw significant movement in 2021 and 2022 into the suburbs of Orlando, Tampa and Atlanta. However, the “hot” urban markets seemed to remain hot, especially in Raleigh-Durham and Austin.
If we consider the relative increase of average home sale by county or municipality to be a significant indicator of real estate activity, our numbers support the argument. From our data, the largest relative increase in average sales price (ASP) in a comparison of Q1 2021 to Q1 2022 took place in Osceola County, Fla. (suburban Orlando), where the average price rose over 95% from $381,702 in 2021 to $744,363 in 2022. Fulton County, Ga. (Atlanta suburbs) saw a 51.46% increase, rising from $871,843 to $1,320,535.
Wake County, N.C. (the Raleigh-Durham region) at 50.16%; Travis County, Texas (Austin) at 38.09% and Manatee County (Sarasota-Bradenton), Fla. at 37.81% rounded out the top five biggest increases in ASP in our data. (They were followed, respectively, by Cook County, Ill.; St. John’s County, Fla,m and Maricopa County, Ariz.).
On the opposite end of the spectrum, our research shows that, in comparing Q1 2021 to Q1 2022, the counties which saw an actual decline in ASP (the only counties, in fact) were Chesapeake City, Va. (near Norfolk) with a 13.99% decline in ASP year over year, and Bergen, N.J. (Hackensack, Paramus), which saw just under 1% in decline. From Q1 2020 to Q1 2021, Baltimore County, Md., saw the greatest ASP decrease at 27%.
Assuming that a larger increase in average home sales price relative to other counties is an indicator of the “desirability” of that location, our data supports the assertion that, post 2020, a significant number of Americans moved from metro areas to the suburbs, although we are not able to fully conclude that the majority falls into the almost 2 million which Zillow research indicated would relocate if given increased WFH opportunity. The data do not suggest by any means, however, that all Americans were seeking to flee urban centers. The strong relative ASP indicators in “hot” urban markets like Raleigh-Durham, Austin, and even cities such as Chicago suggest that many were satisfied to remain in or relocate to major cities and regions.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at email@example.com; or Michael Tucker, editorial manager, at firstname.lastname@example.org.)