The Covid-19 pandemic has motivated many American buyers to turn from dense urban centers to smaller cities and suburbs.
Busy high-rise apartment buildings and cramped square footage have lost their luster, as city dwellers who have been living under lockdown seek out more space and security. Moreover, with working from home increasingly the norm and some companies offering their employees the opportunity to work remotely for good, many Americans are weighing a move to areas where they can buy properties with more space, privacy, and security.
Prospective buyers contemplating such a move should act now, real estate experts say, with bidding wars already underway in regions such as the New York City suburbs, South Florida, and smaller cities in the Pacific Northwest. Sellers, meanwhile, should highlight the aspects of their homes most appealing in this new reality, like generous square footage, outdoor space, and room for a home office.
Both buyers and sellers are active again, according to the agents, around 90% of which said that a portion of their buyers have either returned or never paused their home search. https://t.co/JX6odlywvv
— Mansion Global (@MansionGlobal) July 12, 2020
In April and May, 27% of the more than 1 million Redfin users searching for homes did so outside their metro area, a Redfin report found, with cities like Phoenix, Arizona, and Sacramento, California, garnering the most interest from potential homebuyers.
Another Redfin survey found that 50% of respondents from New York, Seattle, San Francisco and Boston said they would move if the option of working from home becomes permanent.
In the New York City area, an exodus is underway, and brokers for suburban areas like Long Island, Westchester and Connecticut say that competition among buyers is fierce.
“When the pandemic began, people were looking for short-term rentals, with plans to vacate the city for a month or two and and then resume their lives,” said Leslie McElwreath, a broker with Sotheby’s International Realty in Greenwich, Connecticut. “Many people have had a change of plans and decided to purchase here. For some, it was always the plan, and the pandemic just accelerated the plan, while others had a change of heart about living in the city.”
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“We’re getting requests from buyers all across the board, though the primary focus is on single-family homes,” said Deb Tebbs, owner and CEO of Cascade Sotheby’s International Realty in Central Oregon. “It’s a very good opportunity for sellers, and we’re seeing sellers capitalize on that.”
That said, buyers must also be mindful of the fact that coronavirus cases are on the rise in many states, including Florida, Texas, Pennsylvania and Arizona, and some smaller towns and cities are facing economic hardship amid the pandemic.
How Smaller Cities and Towns are Benefiting
Before the outbreak of Covid-19, many wealthy buyers were already leaving major urban areas, particularly those in the northeast where the tax burden is high, for states like Florida, which has low property taxes and no income taxes.
“A lot of people from the northeast were moving here prior to Covid due to tax reform,” said Phil Gutman, president of Brown Harris Stevens Miami. “Between that and this pandemic, it’s a perfect storm.”
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In areas such as Palm Beach County in Florida, new contracts on single-family homes are significantly up in every price bracket, according to a June report from Miller Samuel appraisal firm and real estate brokerage Douglas Elliman. At the high end, contracts for homes worth $1 million and above increased by 109.4% from June 2019 to June 2020.
Initially, Mr. Gutman said, people were looking for rentals in South Florida to wait out the pandemic, but now are shifting to buying-and settling in permanently.
“A lot of people are anticipating that their schools will not resume in the fall, so they’re now looking for primary homes,” he said.
West Florida, too, is benefiting, said Niel Allen, a broker with Douglas Elliman in St. Petersburg, with buyers coming not only from the northeast but also California and South Florida, drawn to low-density, smaller cities.
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“People have come over because the lifestyle is more suburban, and they’re realizing they can do what they need to for work on a Zoom call from the privacy of their own homes,” he said.”
In the northeast, prior to coronavirus, buyers were also drawn to the Greenwich area for tax reasons; unlike in nearby New York City, for instance, there is no mansion tax. Now, more wealthy New Yorkers are heading to the affluent suburb amid uncertainty about whether city schools will be open for in-person instruction in the fall. The opportunity to safely enjoy more square footage and amenities is a huge draw, as well.
“Before, it had become very trendy to live downtown in a city where you could walk everywhere, but now buyers don’t want to sacrifice space,” Ms. McElwreath said. “People are looking to have a yard and room for a pool or tennis court. Whatever it is that brings joy and relaxation is being given much higher priority.”
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Buyers are also flocking to upstate New York, with Sullivan, Ulster, Greene and Delaware counties experiencing a particularly busy period, and supply in the Catskills region diminishing.
Chip Murphy, regional vice president of the New York state-based Hunt Real Estate, said he has been seeing an influx of buyers from New York City.
“One couple was subleasing a 1,500-square-foot luxury penthouse in the city, which they’re swapping for a 4,000-square-foot-home in Rochester,” he said. “It affords them the privacy, safety, and amenities they’re looking for.”
On the west coast, smaller cities like Bend, Oregon, are seeing an influx of buyers from the Bay Area, Seattle and Portland looking to escape big city living, especially now that they can work from anywhere.
“In the last 60 days I’ve been dumbfounded,” said Ms. Tebbs who said that in her 30 years in Bend, she has not seen this level of activity. “We don’t have a lot of inventory, so this is raising pricing pretty quickly.”
Opportunities for Sellers in Small Cities
The surge in interest from buyers presents opportunities for sellers in smaller cities, especially those who own homes with the kinds of amenities that have grown in appeal since the onset of Covid: office space, outdoor space, and privacy.
“We’re already seeing bidding wars, especially for homes in turnkey conditions that meet key criteria, like newer bathrooms and kitchens, pools and desirable layouts,” Ms. McElwreath said. “We have lower inventory than we normally would at this time of year, so sellers are seeing a good opportunity.”
Mr. Gutman said buyers can still get favorable deals in South Florida, but he expects the competition to heat up in the coming months.
“I do suspect that as soon as people are more comfortable with flight travel, you’ll see most of our available inventory get picked up quickly,” he said.
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On the west coast of Florida, real estate at the high end is remaining strong, with pent-up demand from the early months of the coronavirus pandemic now getting released.
“Especially with luxury real estate, where financing is less of an issue for buyers, we’re seeing a very robust market,” Mr. Allen said. “We bring a lot to the table with medium-sized cities that have great infrastructure and amenities, and we’ve seen an increase in showing and homes going under contract.”
And though there is plenty of uncertainty around the duration of the pandemic and how it will continue to impact the U.S. economy, the strength of real estate markets in smaller American cities continues to look promising.
“Upstate, we’re seeing a number of offers we’ve never seen in the past, with sellers getting historical top dollar for homes,” Mr. Murphy said. “I think this trend will continue for the next few months, and the housing industry will fare much better than other industries affected by the pandemic.”
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