What are suburbs?
The suburbs are primarily residential areas located on the outskirts of an urban city. Suburbs usually have lower population density, larger homes with larger lots than the city, and lower home prices for equivalent space than you would find in the city. In the past, living in the suburbs often meant long commutes into the city to work in exchange for a quieter and more comfortable home life. With many working from home now, living in the suburbs no longer means a daily required commute.
What have the trends shown?
Overall the real estate market is booming. National inventory is down 39%, days on market is 12 days less, and list price is up 11% since last year. When comparing the major urban cities to the suburbs, we find even higher demand. The inventory is declining faster in the suburbs, with a staggering 41% decrease in new homes listed compared to the same time last year, whereas the cities have only seen a decrease of 34%. Pair this with the rapidly narrowing price gap, which historically has seen higher prices in the cities than the burbs, and you have a clear increase in demand.
Why does investing in the suburbs make sense?
The suburbs have long been designed to help residents get the best of both worlds and serve as the meeting point of urban and rural living. The city offers abundant high-paying jobs and access to luxuries typically only found there, which can include a diversity of restaurants and shops, good schools, healthcare, access to shows, museums, and more, but it comes with a high population density, considerably higher living expenses, and significant transportation issues.
On the opposite extreme end there is rural living, offering plenty of peace and quiet, large comfortable homes with land, and a low cost of living, but more often than not comes with very few jobs, limited access to social scenes, and minimal options for necessities like grocery stores, childcare, and healthcare. The suburbs are the ideal blend of the two, providing access to amenities of the city, allowing residents to maintain a social network, and offering comfortably sized homes near the city and amenities.
As stated above, COVID-19 has made working from home a near necessity for many in the workforce. Most of the people and businesses who were able to shift to a work-from- home scenario did just that. It's still early to tell for sure whether it will last, but this widespread and lengthy adoption has made it not only socially acceptable but eye opening for business owners. The expensive office space, support staff, and all of the associated costs can potentially be greatly reduced if not eliminated while maintaining the productivity of staff for a fraction of the cost.
This complete shift in lifestyle, mindset, and the ability to work remotely has given many folks the opportunity to think about what matters most and how they can create the most comfortable living situation possible. Regardless of whether COVID is here to stay or is something that will soon be better controlled, there has been a lightbulb moment for business owners and employees that will likely create a lasting change.
Working from home in modern society is completely achievable and allows people the luxury to live where they want, which means bigger houses and more space living in the suburbs is a trend that in all likelihood is here to stay. Shifting your investing focus to capitalize on this shift just makes sense. With a little bit of due diligence, as with any investment, you could begin to generate strong cash flow from investing in the suburb real estate market.