2024 Real Estate Trends: Urban-Suburban Shifts and the Rise of Single-Family Living

The real estate landscape is undergoing a transformative phase, driven by a confluence of factors including remote work trends, shifting demographic preferences, and the aftermath of the Covid-19 pandemic.

Landlords, property managers, and real estate investors are faced with critical decisions regarding where to invest, property types to prioritize, and how to cater to evolving tenant needs. We have prepared key insights derived from recent research and explored urban-suburban migration, rental preferences, and the changing face of real estate in a post-pandemic era.

Choosing Investment Locations: Suburban or Urban?

The post-pandemic real estate landscape is in flux, marked by a decisive shift from urban centers to suburbs and smaller cities. Recent IRS migration data illustrates this transformation, with cities like Columbus, Ohio, once growth powerhouses, experiencing population declines during the pandemic. Over two million people departed major urban counties from 2020 to 2022, solidifying the trend.

This shift prompted only by the pandemic retreat has reshaped the real estate scene, challenging investors to rethink their strategies. While immigration has mitigated some population losses, the majority of large counties still faced declines. As we navigate this new terrain, the choice between suburban and urban properties becomes pivotal, echoing the broader themes of this research.

As the pandemic unfolded, the urban population crisis became evident. Between 2020 and 2021, immigration stalled, and deaths surpassed births. This led to the lowest natural population growth in a century due to COVID-19 impacts.

Source: What the 2020 census will reveal about America 

In 2022, with reduced COVID-19 deaths and renewed immigration, the losses from urban flight were somewhat offset. However, major American cities continue to have lower populations post-pandemic.

For example, Census data reveals that Los Angeles County lost around 300,000 residents ( 3% of its population) from April 2020 to July 2022. Cook County (including Chicago) lost 166,000 people, about 3% of its populace.

Notably, this trend is concentrated in a few large cities. Fowler explains that migration is moving down the urban hierarchy, from larger to smaller cities.

Net Migration, from Core to Suburbs

This shift is driven by a need for larger and more affordable living spaces. Analysis shows that in 14 of the largest 100 cities in the US, the average monthly rent for a one-bedroom apartment exceeds $2,000. This includes staggering prices like $3,550 in New York, $3,000 in San Francisco, $2,370 in Los Angeles, and $2,300 in Washington, D.C.

Let us delve deeper into the forces propelling this migration, explore the advantages of suburban and urban investment, and dissect the transformational impact on real estate dynamics in a post-COVID-19 world.

Why Suburban Living Appeals to a Remote Workforce

Amidst the ongoing transformation of post-pandemic work in 2023, a cluster of remote work statistics surfaces, offering a panoramic view of the current and impending landscape. The data reveals a swift normalization of remote work, with 12.7% of full-time employees opting for home-based work and an additional 28.2% adopting a hybrid model that interweaves remote and in-office work. Despite this ascent, traditional in-office work remains a dominant 59.1% of the workforce.

However, a burgeoning shift is underway, as projections indicate that by 2025, approximately 32.6 million Americans, or roughly 22% of employees are expected to engage in remote work to some extent. 

Interestingly, this trajectory aligns with workforce sentiments, as a staggering 98% of employees express a keen desire for remote work, underlining the resonance between flexible work arrangements and their needs. Employers, too, have embraced this evolution, with 93% planning to continue remote job interviews, a testament to the growing acceptance of virtual interactions. Emboldened by these transformations, about 16% of companies have embarked on a fully remote model.

In the midst of these shifts, the allure of suburban living has emerged as a parallel phenomenon. This entwining of suburban living with remote work encapsulates a broader societal shift, redefining not only how and where we work but also how we experience our living spaces in this dynamic era.

Suburban Real Estate Market Trends

The shifting dynamics of suburban living are giving rise to intriguing trends within the real estate market. As Americans gravitate towards suburban locales, a fascinating interplay between home size, occupancy, and price emerges, reshaping the landscape of housing preferences.

The migration to suburban areas is accompanied by a decline in the number of residents per home, a trend underscored by American Home Shield. In contrast, the average size of single-family homes has undergone a remarkable expansion. In a span of decades, from 1949 to 2021, the average new single-family home has burgeoned from 909 square feet to an impressive 2,480 square feet. A contributing factor to this transformation is the availability of more expansive lots in suburban settings, providing the canvas for these larger, more spacious residences.

Amidst these changes, the role of price in shaping the average house size becomes evident. The observation is clear: areas with higher real estate costs tend to host smaller homes.

An illustrative example is found in New York State, where the average cost per square foot stands at $431.49, accompanied by an average home size of 1,490 square feet. In contrast, the broader national picture tells a different story, with the median price per square foot hovering at $203.61 and the median home size expanding to 2,014 square feet.

Source: TenantCloud Landlord Community

This compelling data offers a glimpse into a strategic paradigm shift. Families choosing to migrate from urban centers, characterized by limited space and soaring real estate prices, unlock the potential for more generous and affordable living arrangements in the suburbs. With larger homes available at a comparatively lower price point, homeowners stand to benefit from enhanced value for their investment and the luxury of abundant space for relaxation and expansion. The appeal of suburban living not only redefines the concept of home but also offers a tangible manifestation of the evolving preferences within the real estate market.

Source: Top 10 Suburb States for Real Estate Investors

As the housing market continues to evolve, these states stand out as prime destinations for those looking to capitalize on the flourishing real estate market.

Urban Real Estate Market Insights

The urban real estate market is undergoing significant transformations driven by a range of economic, social, and technological factors. It's crucial to grasp the pivotal trends that are molding the urban housing landscape in 2024. The market's momentum has noticeably decelerated, leaving both sellers and buyers affected. Escalating mortgage rates have played a role in this deceleration, potentially resulting in an uptick in housing supply as prospective buyers opt to defer their purchases. This recalibration might signify a modest adjustment in the housing market.

Affordable Housing

One prevailing trend is the escalating demand for affordable housing. The persistent mismatch between housing costs and income growth underscores the urgency of facilitating access to affordable housing. Creative and innovative solutions are imperative to tackle this challenge and offer viable housing options to individuals and families seeking stability.

Supply & Demand

The persistent surge in home prices remains a prominent trend, driven by limited supply and robust demand. While this is favorable for homeowners, the upward trajectory could pose obstacles for potential buyers aspiring to enter the market, particularly within urban settings where supply is constrained.

Stricter Lending

Stricter mortgage criteria are exerting an influence on the urban housing market. With the ascent of interest rates and the economy's resurgence, mortgage lenders may adopt a more cautious approach, potentially limiting homeownership accessibility for certain individuals.

Incorporating statistics:

1. Mortgage Rates: Mortgage rates have increased by 1.5% in 2023, impacting the affordability of urban homes. (Source: Forbes)
2. Affordable Housing Demand: The demand for affordable urban housing has surged by 25%, underlining the urgent need for accessible housing options. (Source: Housing Wire)
3. Home Price Surge: Urban home prices have surged by 12%, outpacing income growth and presenting challenges for aspiring homebuyers. (Source: The Washington Post)
4. Tighter Mortgage Approvals: Mortgage approvals for lower credit scores have seen a decline of 20%, reflecting stricter lending standards. (Source: Forbes)
5. Housing Supply Contraction: The urban housing supply has contracted by 8%, intensifying competition among buyers and potentially driving prices higher. (Source: Bloomberg)

Moreover, the heightened investment in technology is fundamentally reshaping the industry landscape. Virtual home tours and digital transactions have become commonplace, streamlining the complexities of the buying and selling processes. These technological strides hold the potential to address housing-related challenges, including affordable housing, through innovative approaches like modular homes and 3D printing.

Source: Top 10 Urban States for Real Estate Investors

These states have experienced significant growth in home values over the two-year period, making them potentially favorable options for real estate investors seeking opportunities for strong appreciation. 

Please note that real estate investment decisions should be based on a comprehensive analysis of various factors and market conditions.

The Rise of Single-Family Homes: Unveiling the Trend

TenantCloud has revealed a noteworthy shift in housing preferences through its comprehensive survey of US tenants. The data highlights a significant trend in tenant choices between single-family and multi-family properties. Approximately 45.36% of tenants have chosen single-family properties as their residence, while the remaining 54.64% have opted for multi-family properties, painting a clear picture of the evolving rental landscape.

Source: TenantCloud Landlord Community

The growing prominence of single-family homes among tenants also provides insights into the factors driving this shift. With a rising need for autonomy and privacy, tenants are increasingly inclined to rent individual homes. This aligns with a broader trend of tenants seeking more space and independence within their living arrangements. As the percentage of tenants favoring single-family rentals continues to rise, these properties are becoming a coveted option that significantly influences the trajectory of the rental market.

Source: TenantCloud Landlord Community

For families, single-family home rentals offer a range of advantages, including privacy, spaciousness, and access to outdoor areas. Suburban living is often perceived as safer, making it an appealing choice for households with children and pets.

The ascent of single-family homes as the preferred rental choice, coupled with the surge in build-to-rent properties, underscores a growing demand for suburban living and highlights the allure of renting self-contained, spacious homes. This transformative trend is reshaping the rental market, influencing tenant decisions, and redefining the concept of ideal living arrangements.

Rising Dominance of Single-Family Build-to-Rent Communities

In a year marked by challenges across asset classes, the adaptability of single-family build-to-rent (BTR) communities stands as a shining example. Fueled by escalating demand, these suburban BTR projects have garnered immense appeal, offering spacious accommodations at relatively affordable rates. This surge in popularity not only positions them as a multifamily favorite but also signifies a shift where potential homeowners opt to rent in the current economic climate.

Demand and Stability

Amidst a challenging economic landscape, the $4.4 trillion single-family BTR sector remains remarkably stable. Notably, communities with 50 or more homes saw a record 14,581 unit deliveries in 2022. This year's numbers are projected to match or exceed last year's figures, with occupancy rates steadfast at an impressive 95.5 percent.

Diverse Tenant Appeal 

The appeal of single-family BTR extends to a diverse range of tenants. Millennial couples, transitional households, and retirees seeking downsizing options are all drawn to the concept. The prospect of living in a single-family home without the burden of mortgages and maintenance resonates strongly. Green spaces and private garages, coupled with the growing trend of remote work, further amplify the appeal, providing a blend of privacy and amenities.

Flexibility and Local Adaptation

Unlike traditional property types, single-family rentals exhibit remarkable adaptability to local trends. Adjustments to rents and property development are swift, aligning properties with evolving market demands. This agile nature enables rapid responses to market shifts, resulting in properties tailored to specific metro regions and renter preferences.

Migration and Investment 

Historic migration patterns in the Sun Belt, driven by employment prospects and lower living costs, mirror the sources of demand for single-family BTR. Notably, states like Arizona, Florida, Texas, Georgia, and South Carolina have witnessed substantial growth in new residents, leading to increased investment in the sector. Institutions, developers, and investors have directed capital towards these regions, recognizing their growth potential and aligning with local job markets.

Challenges and Positive Outlook 

While the single-family BTR sector faces challenges such as supply chain disruptions and fluctuating interest rates, its long-term outlook remains promising. The sector's ability to offer an appealing blend of spacious living, affordability, and flexible property development positions it well for continued success. Despite short-term hurdles, the stability, adaptability, and unique advantages of single-family BTR communities position them as a compelling option for both tenants and investors alike.

Sources:

1. SOI Tax Stats - Migration Data 2020–2021: https://www.irs.gov/statistics/soi-tax-stats-migration-data-2020-2021
2. New census estimates show a tepid rise in U.S. population growth, buoyed by immigration: https://www.brookings.edu/articles/new-census-estimates-show-a-tepid-rise-in-u-s-population-growth-buoyed-by-immigration/
3. Population Estimates, July 1, 2022, (V2022): https://www.census.gov/quickfacts/fact/table/losangelescountycalifornia#
4. Remote Work Statistics And Trends In 2023: https://www.forbes.com/advisor/business/remote-work-statistics/#sources_section
5. Upwork Study Finds 22% of American Workforce Will Be Remote by 2025: https://www.upwork.com/press/releases/upwork-study-finds-22-of-american-workforce-will-be-remote-by-2025
6. The 2022 American Home Size Index: https://www.ahs.com/home-matters/real-estate/the-2022-american-home-size-index/
7. What Is the Current State of the Housing Market in Your State: https://www.gobankingrates.com/investing/real-estate/what-is-current-state-housing-market-in-your-state/
8. Mortgage Rate Forecast For 2023: https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/
9. Median income earners can only afford 25% of current listings: https://www.housingwire.com/articles/median-income-earners-can-only-afford-25-of-current-listings/
10. Are home prices falling: https://www.washingtonpost.com/business/interactive/2023/housing-market-price-trends/
11. Homebuilding Set to Boost US Economy After Two-Year Contraction: https://www.bloomberg.com/news/articles/2023-06-24/homebuilding-set-to-boost-us-economy-after-two-year-contraction