Urban home values growing faster than ‘burbs in Midwest
A Zillow report released Thursday shows urban home values in Midwest cities — namely, St. Louis, Cincinnati, Cleveland, Kansas City, Columbus and Indianapolis — have risen faster than suburban home values over the past several months.
Urban housing markets in the Midwest are generally more affordable than urban areas in other areas of the country. With the COVID-19 pandemic forcing millions to work from home, Zillow reported that demand is supercharging home values in those kinds of affordable areas as buyers look for homes that offer more room to spread out.
Zillow Economist Alexandra Lee described the demand for urban housing in the Midwest as a “pandemic-fueled surge.”
“Buyers are eager to hit the market to find their next place to live, many newly freed from their commute and suddenly finding themselves in need of more space for a home office or gym,” Lee said. “More often than not, buyers are flocking to homes in affordable areas and pushing up prices.”
Data analysis by Zillow shows an overall home value growth in urban areas of 8.8% in 2020 across the entire United States. That’s virtually even with suburban growth, which was up 8.7%. Several Midwest cities, however, reported double-digit home value increases in urban areas.
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Detroit saw an 11.3% rise in urban home values, and St. Louis reported growth of 11.6%. Milwaukee had 12.1% growth. Two major Ohio cities saw growth of more than 15% — Cincinnati, at 15.5%; and Cleveland, at 16.5%. Columbus, Ohio, was right behind, at 14.5% growth in urban home values.
Kansas City saw a robust increase in urban home values, reporting an 18.2% increase in 2020. But the largest jump in Zillow’s analysis was in Indianapolis, which reported an 18.3% increase.
The reported difference in the increase in urban home values versus suburban home values was astronomic in Indianapolis; suburban home values were only up a reported 9.9%, nearly 10% below urban growth.
Other Midwest cities of note in Zillow’s report were Chicago, with a 6.2% increase in urban home values and Minneapolis-St. Paul, which reported a 7.6% increase.
A panel of economists surveyed by Zillow expects the pandemic to have a lasting impact on some home buyer preferences, including boosted demand for suburban living and homes in “secondary cities.” And with vaccines becoming available and an economic stimulus expected soon, Lee said rental numbers in urban areas should recover in 2021.Urban rental growth also fell to 1.5% from February 2020, per Zillow.
The difference in urban home value growth in the major U.S. cities – most on the East and West coasts – versus the growth in home values seen in the Midwest cities was stark: many top markets like New York (3.3% rise urban home values), Los Angeles (9.5% growth), Houston (5.8% growth), Washington, D.C. (6.7%), and San Francisco (5.6% growth) were below 10% in total urban home value growth in 2020.
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