Big Cities Are Back: The Surprising Return of NYC Real Estate—and Why San Francisco Is Still Struggling – News

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During the early days of COVID-19, many were quick to declare that the reign of the large, pricey cities on the coasts was over.

For a moment, it seemed possible. News outlets were rife with stories of a mass urban exodus across the U.S. Urbanites in large numbers were packing up their their apartments and fleeing to small towns and suburbs. Images of boarded-up storefronts and homeless encampments in once-busy downtowns flooded the screens.

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Nearly four years after the supposed demise of the American City, the housing markets of nearly all of the nation’s big cities have roared back. Home prices and rents have soared over the past few years as restaurants, schools, and offices have reopened and the nation has returned to some semblance of normalcy.

“The death of cities has been announced multiple times over the last 50 years,” says Lisa Sturtevant. She is the chief economist of the Bright MLS, which covers the mid-Atlantic region, including Washington, DC. “But even in the bigger cities, we’re seeing more interest and people returning.”

Urbanites have been lured back by the same things that have drawn people to cities for generations: the trendy places to eat, the entertainment, the culture, the buzz. Many who have been called back to their offices don’t want to deal with long commutes. The increase in the number of available apartments (and slight price decreases) has also enticed some to trade the sleepier suburbs and smaller cities for the energy and amenities of the larger urban centers.

Even places like Manhattan, which became a ground zero of sorts during the early days of the pandemic, have recovered—and then some. Meanwhile, Miami, which became a pandemic hot spot, has experienced meteoric growth over the past few years.

“People have remembered why they love cities,” says Ali Wolf, chief economist of Zonda. And the housing prices reflect that.

The rebound of the New York City and Miami housing markets

While much of Manhattan gave off ghost-town vibes during the worst of the pandemic, the city has since rebounded.

In the earliest days of COVID-19, renters broke leases or didn’t renew them. Those who could afford second homes in the country retreated to them. Many purchased spacious homes in the suburbs or in warm-weather locales like Florida, if they could move back and work remotely. Housing prices plummeted.

Then, as the city reopened and rents remained low, younger folks began moving in. Some were college students or recent grads, as well as entry-level workers who were eager to get out from under their parents’ roofs to live in a big city—at a discount.

“Initially, I called it a youth renaissance,” says national real estate appraiser Jonathan Miller, who is based out of New York City. “When city prices—mainly rents—fell, it brought in a new population that had been priced out.”

In mid-2021, the rental market exploded. People flooded back into the city, and rents soared. Even with rents coming down a little since the summer, they are now about 20% higher than they were during the pandemic, says Miller. That’s significant as about two-thirds of New York City households are renters.

Median sale prices in Manhattan also grew. They shot up about 12.2%, to $1.15 million, in the third quarter of this year compared with the same quarter in 2019. (The data is from Miller’s firm Miller Samuel, which prepared it for Douglas Elliman.) Prices peaked in summer 2022 but have been ticking down in the wake of soaring mortgage interest rates.

“We’ve reached some sort of affordability threshold,” says Miller. Rental prices and mortgage rates soared to such heights that many looking for housing hit their financial limits. “It’s just too much.”

Other cities in warmer weather, traditionally more affordable states like Florida and Texas have also grown greatly over the past few years.

That’s why the housing markets in cities such as Miami and those in Texas have done so well. There are more homes on the market and builders constantly adding to that inventory. Plus, the job markets are booming and the cost of living is lower.

Over the past four years, Miami’s housing market has boomed. Many companies and people have moved to Florida drawn by the warmer weather, the ability to work remotely, and the lower cost of living. Builders have taken note, adding more new homes to the market.

But that’s led to increased demand in Miami. Home prices in Miami rose 63%, to $729,500, in October compared with the same month in 2019, according to® data.

San Francisco and Washington, DC, are still recovering

But not every city has seen a full rebound—yet.

The highest-profile city that hasn’t fully recovered from its pandemic-era declines is San Francisco. The Bay Area city seemed to empty out during the rise of COVID-19 and has since been plagued by tech layoffs, business closures, homelessness, and high-profile murders.

Median home list prices in the city, one of the nation’s most expensive places to live, are still down about 10% from the pre-pandemic October 2019 to October 2023, according to data. Prices had fallen to almost $1.3 million in October.

Rental prices are down about 12% from before the pandemic, says Patrick Carlisle, chief market analyst for the Bay Area for Compass.

“San Francisco is still recovering from the massive onslaught of doom loop stories,” says Carlisle. “But that’s starting to turn around.”

He pointed to the area’s growing artificial intelligence industry and the slowdown in folks moving out of the area.

Home prices in Washington, DC, aren’t back to their pre-pandemic heights either. They were down about 3% from October 2019 to October 2023, according to data.

Part of the reason that prices in Washington, DC, are lower is more cheaper homes are going up for sale today than before COVID-19, says Sturtevant. She’s seeing more condos, row homes, and townhomes hit the market versus stand-alone, single-family homes that cost more.

And with more apartments coming online in the nation’s capital, she believes more folks are choosing to rent instead of battle it out for a home when prices and mortgage rates are so high.

“That’s keeping price growth more muted,” says Sturtevant.

There are still challenges facing cities

While the housing markets of most large cities have recovered, cities are still facing challenges.

Many aren’t experiencing the kind of high salary growth that would support the high home and rental prices, says Devyn Bachman, senior vice president of research at the real estate consulting firm John Burns Research and Consulting. That could keep prices from rising too much higher.

And more residents are still leaving cities like New York, San Francisco, and Washington, DC, than there are new people moving in.

Another thing holding back the larger, pricier cities is the lack of homes for sale. It’s not like there is much land available to put up new homes on either.

“Those cities have just gotten so crazy expensive to live in and be in, and it’s not just housing,” says Bachman.

However, she doesn’t envision another big exodus from the larger, urban areas or the cities losing their luster.

“They’re megacities, they’re never going anywhere,” says Bachman.

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