The debate over the big move from urban centers to suburban or small-town locations is heating up. Investors who focus on secondary and tertiary real estate markets have been laser-focused on this demographic trend amidst the pandemic. On one side, data shows us interest in small-town, rural, and suburban living is increasing, but some commentators disagree. So where are we at?
New data suggests that interest continues to grow in small-town and rural areas of the U.S. Further, rural and small-town markets are seeing increased buyer demand and fewer shifts in intended buying locations. Here's an overview of the suburban move trend and what it means for real estate investors who are in acquisition mode.
According to new data from the National Association of Realtors (NAR), listing views in suburban zip codes jumped 13% between April and May 2020. The data shows that the national market has slowed compared to 2019 but that suburban and rural areas are seeing less of a slowdown.
According to the report, out of the almost 20,000 zip codes, suburban ones saw a median improvement of 404 spots in rankings and rural zip codes enjoyed a jump of 846 spots.
NAR Economic Data Analyst Nicolas Bedo comments on the data, noting that "May data shows that rural and suburban zip codes have been more resilient to this slowdown compared to urban areas. Time on market in rural and suburban areas has slowed, increasing by 25 and 30 percent, respectively, while urban zip codes have slowed even more, increasing time on market by 35 percent."
Bedo continues, "With suburban and rural markets seeing relatively stronger trends in both views per property and days on market, Hotness rankings of these areas spiked in May, outpacing urban markets dramatically."
In their 2020 Market Recovery Survey, NAR found some striking differences between buyers and sellers in urban and small-town settings. Here are the key takeaways from this study:
- Small town/rural markets were more likely to report that no buyers had paused transactions and were also more likely to report a stronger return of buyers.
- More respondents reported less urgency to purchase a home in urban areas than in suburban or small town/rural areas.
- Of those who reported having buyers shift their intended location, 47 percent cited that their buyers want to purchase in suburbs, 39 percent cited rural area, and 25 percent cited small town.
So what about investors?
As interest continues to move away from urban centers, real estate investors must seriously consider where they are investing. Buyers and renters are thinking more and more about remote work options and therefore rethinking the need to reside in expensive urban markets.
The draw to secondary and tertiary real estate markets over the next several years is appealing: reduced property prices, lower taxes, and increased demand. Now is the time for investors to take stock of their markets and explore the opportunities this trend presents.