What is the Future of the Exurbs?
During the 1950s, vast numbers of American families entering the middle-class fled from city centers and moved to the suburbs. Today, a similar movement is taking place to the exurbs. If the term is not familiar, that’s because the word is of recent vintage. In brief, an exurb is an area further from the central city than the suburbs, but still within a commutable distance.
Exurbs usually offer more space at more affordable prices than either the city or the suburbs. Given these facts it is not surprising that exurbs have grown faster than cities or suburbs over the last ten years.
Beyond the price and space factors, the pandemic has played a role in the explosive growth of the exurbs. While the suburbs have seen population increases in the last decade (but growth has reversed recently), many cities have seen a decline in population. Consciously and unconsciously, people seemed to believe that moving further away from the cities (and the more and more congested suburbs), could offer some safety from the pandemic.
With these financial and pandemic reasons on people’s minds, it’s easy to see why the exurbs are becoming the big winner in terms of growth.
Another important factor related to the pandemic, is the dramatic increase of workers who can work remotely, mitigating the headache of a long commute to city corporate and government offices.
Although much of the country has reopened for business, the city out-migration to the exurbs is continuing at a healthy clip. Occupancy in the exurbs continued to climb in May and June of this year by 20,000 people each month. These same past two months have seen population declines in America’s cities and suburbs.
According to Robert Dietz, chief economist for the National Association of Homebuilders (NAHB), the share of Americans working remotely before the pandemic was in the low single digits, but it is expected to grow and normalize at around 30% even after the pandemic ends.
Additionally, the pandemic caused a slowdown in home building, as strict laws were passed by many municipalities limiting builder’s ability to construct new homes. This has led to a severe housing shortage which is still very much with us. The shortage, as the laws of supply and demand state, sharply drove up housing prices. Hence, as the prices in the city and suburbs rose to out of reach levels for many prospective buyers, the exurbs began looking more and more appealing.
Lastly, let us remember that interest rates (and mortgage rates) are expected to rise in the near term. This factor also adds to the financial attractiveness of the exurbs, where prices are lower. The lower your mortgage, the less is your monthly payment.
NAHBs Dietz adds that the exurbs may provide the silver bullet to end the housing crisis, adding that these areas are perfect for building the single family homes the country desperately needs. “… Ultimately, this is a way that we can protect housing affordability.”
Zillow (one of the preeminent real estate websites), has coined the phrase for the exurban boom, “The Great Reshuffling.” This reshuffling stands to flood the once neglected regions with new wealth.
While the 1950s saw vast numbers of Americans move to the suburbs for a private home, fewer neighbors, and a yard, the current move offers the home buyer even fewer close-by neighbors and an even larger yard, not to mention more square footage within the home at a reasonable price.