Walkability Lost Its Appeal in 2020, So Homebuyers Embraced the 'Burbs

Home prices in car-dependent neighborhoods are surging due to low inventory and fast sales, sparking fierce competition between buyers in suburban and rural markets. A recent report by Redfin shows that car-dependent neighborhoods in the United States rose 14.9% year-over-year to a median sales price of $345,000 in October. It happens to be the largest increase and highest median price tag since Redfin and Walk Score started tracking this type of data in 2014.

Walkable neighborhoods, while still moving up in value, decreased in price growth from September, falling from 13% to 11%. A red-hot national housing market has allowed for these gains, but there’s no doubt that the appeal of city living has taken a dip.

Remote Work Fuels Shift Toward Suburbs

Urban metros have been increasing in population for decades, but with the pandemic forcing many businesses into remote work, the need for living in close proximity to reduce commute times has gone out the window. Furthermore, with recent reports that Americans are craving more space in their homes, suburban neighborhoods are just the place to find such space. These factors combined contribute to low inventory, fast sales, and higher prices as buyers compete with higher bids.

Are Downtown Areas Suffering?

The common theme of walkable urban areas is that all the necessary amenities you could ask for are right around the corner. The grocery store is a block away, entertainment options are nearby, and your favorite restaurant is just below your apartment. But most of these businesses have taken a hit due to COVID-19.

“With restaurants, bars, and shops temporarily or permanently closed due to the pandemic, much of what makes walkable neighborhoods so desirable and valuable has been diminished this year,” said Redfin chief economist Daryl Fairweather. “Even though walkable, urban neighborhoods aren’t as hot as suburban and rural places this year, low mortgage rates have continued to fuel voracious homebuyer demand just about everywhere.”

“While I expect proximity to retail and restaurants to be higher on buyers’ priority lists once the pandemic has passed, the landscape of walkability may be forever changed,” Fairweather continued. “New businesses may open in previously unwalkable areas given increased demand for neighborhood restaurants and coffee shops from residents who moved in during the pandemic. That would make suburban and rural places permanently more attractive to buyers seeking walkability.”

The pandemic has given greater exposure to suburban and rural areas. As buyers continue to flock to them, everything else will follow—even as life returns to business as usual. The real estate market as we know it could be restructuring, and savvy investors should take notice.

Miami and New York City Show the Largest Gaps in Suburban and Urban Growth

You would think that the largest global pandemic in over 100 years would slow things down, but it’s been just the opposite. 2020 has seen tremendous growth in the real estate market with little sign of slowdowns in the near future. As we stand, suburban housing inventory has fallen almost 40% amid greater competition. Miami, Florida, and New York show the greatest gaps between car-dependent and walkable neighborhood growth among all metros. Car-dependent areas of Miami saw home prices increase by 14.6% compared to an 8.2% increase in walkable parts. New York City, on the other hand, saw the same growth in car-dependent areas but even lower growth, 7.3%, in walkable areas.

San Francisco actually saw a decline in urban home prices, falling 1.2% in October while car-dependent parts rose 4.9% year over year.

“There has been a migration from heavily urban neighborhoods in San Francisco and Oakland due to remote working, remote learning, and public transportation becoming unnecessary for most people,” said Bay Area Redfin agent Suzanne Masella. “People are selling homes in urban places and moving to the suburbs because they’re more interested in single-family homes with yards than condos that are close to offices and urban amenities. Walkability is irrelevant for a lot of buyers right now, as offices, restaurants, and shops are either closed or not the same as they used to be. But once the pandemic comes to an end, I expect people to move back into cities—and we’re already seeing the first signs of renewed interest in urban areas.”

Detroit and Kansas City Go Against the Trend

Some metros have seen a different story pan out. Detroit, Michigan, and Kansas City, Missouri saw walkable areas outpace car-dependent areas in the month of October, with both cities breaking 20% growth in walkable places.

“The majority of my clients in the last six months have been remote workers moving in from out of state, looking for affordability and a slower pace of life,” said Kansas City Redfin agent Jo Grammond. “People coming from San Francisco or Seattle are used to the convenience of walking to neighborhood shops and restaurants, and they can afford a home in a walkable location here even if they couldn’t in their home state. They’re also prioritizing a sense of community, and that’s easier to find in the center of Kansas City than the suburbs, where homes are typically more spread out and it can be difficult to meet people.”

There seems to be a common trend in cities that are not as densely populated. Among the top 10 metros with higher walkable neighborhood growth, Fort Lauderdale, Florida; Providence, Rhode Island; and Warren, Michigan make the cut. All of which have lower population densities than cities like Detroit, New York City, or San Francisco.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.