Why pandemic buyers are headed to the ‘burbs

Once viewed as a symbol of 1970s and ’80s urban flight, the suburbs are in demand again, as buyers increasingly look outside of urban areas in the midst of the COVID-19 pandemic and recession.

According to a new report released by real estate firm Marcus & Millichap, the pandemic has not only altered people’s housing choices, it’s also changing where they want to live.

Nationwide lockdowns have been the key driver of the change, according to the study, leading many Americans to seek larger residences in order to accommodate home offices, home gyms, online learning and a wish for private outdoor space.

Practically overnight, the lockdowns have also led to another huge demographic change: the working-from-home phenomenon. In March, millions of American workers, mostly in white collar industries, suddenly found themselves working from home. Nearly five months later, it doesn’t look like they’re going back to the office anytime soon.

According to the Pew Research Center, nearly 60% of American workers are now working remotely. Compared to just 7% of workers prior to the pandemic.

Last month, Google announced that its employees will continue working from home until summer of 2021. Meanwhile, Twitter’s employees have been told they can stay home indefinitely, and Facebook expects half its workforce to be remote within the next 10 years.

Which begs the question: why pay high rents in places like San Francisco and New York City anymore?

“The ability to work remotely has diminished the value of a short commute in the home-search equation, making lower-cost suburban locations more favorable,” read the Marcus & Millichap report.

While some employees might be waiting it out to see if the trend lasts before committing to a home purchase in an “un-commutable” area, a Harris Poll conducted in April showed that 40% of city dwellers across the country were considering moves to less densely populated areas in the face of the pandemic.

“People will be much more cautious about living in high-density areas with so many people nearby,” predicted National Association of Realtors Chief Economist Lawrence Yun in a recent statement.

Although COVID-driven migration is intensifying the shift to suburbia, the preference for suburban locations among older millennials was already happening prior to the pandemic. With 60% of millennials now in their 30s, many of whom are considering children, the importance of public schools is an emerging factor in homebuying decisions, according to the report.

Meanwhile, social unrest and a spike in urban crime rates could lead to more migration to the suburbs, potentially upending and reversing urban trends of the last 50 years.

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Realtors are ahead of the curve on tech

The National Association of Realtors has released its annual member profile, and while the data was gathered prior to the coronavirus outbreak, it shows that Realtors had already begun increasing their use of new technology prior to stay-at-home orders.

More than 90% reported using smart phones and computers and nearly all used email. Ninety-four percent of members said they preferred texting with clients, making it the most popular method of communication, followed by email at 91% and telephone at 89%.

“As members have become more reliant on their smartphones and the internet to stay in touch with their clients, they’ve also found that some of these social media sites are another avenue to reach potential homebuyers and sellers,” Jessica Lautz, NAR’s vice president of demographics and behavioral insights, said in a press release.

Nearly three-quarters (70%) said they have their own website for their real estate business, and they reported being most active on Facebook, Instagram and LinkedIn.

Highlights of the report also noted the following in 2019:

  • 37% were paid a fixed commission split.
  • Median gross income was $49,700, up from $41,800 in the previous year.
  • Realtors who have worked 16 years or more earned a median gross income of $86,500.
  • Median business expenses were $6,290, up from $4,600 in 2018.

Realtors said inventory shortages have hurt the industry and that “difficulty in finding the right property” is the No. 1 reason for not completing a transaction.

“Low inventory continues to be a problem,” Lautz said. “Pre-pandemic, housing supply was the number one hurdle holding back potential buyers, but we continue to be faced with a great deal of pent-up demand but not enough homes.”

Repeat customers made up 15% of Realtors’ business — that figure was much higher (39%) for those who have spent 16 or more years in the industry. Twenty percent of business came from referrals, members reported

Nearly two-thirds of Realtors (64%) were women; the typical member was a 55-year-old white woman.

Race demographics showed that 80% of members were white, 10% Hispanic or Latino, 6% Black and 5% Asian/Pacific Islander.