(BLOOMBERG) – Affluent New Yorkers used to pay a premium to live in apartments that are within walking distance to their offices in the city. The pandemic has turned that calculus upside down.
That is the conclusion from AEI Housing Centre research, which found that all but two of the 20 sharpest declines in metro-area home values from 2018 to 2021 are in Manhattan zip codes, including drops of about 10 per cent in parts of Greenwich Village and Soho.
The trend may not reverse any time soon. Higher earners, who are more likely to have the opportunity to work from home, are now looking away from city centres in search of amenities such as greater living areas, office space, lots and access to open spaces, according to the AEI Housing Centre, which is part of the American Enterprise Institute think-tank in Washington.
A new survey published recently by the Pew Research Centre confirmed the trend. Some 60 per cent of respondents – up 7 percentage points from 2019 – said they prefer living in a community with bigger houses, even if that means shops and schools are farther away.
A shift was already under way before Covid-19 hit, with affluent families moving out and younger people with lower incomes moving into some of the most walkable parts of big cities, according to Mr Tobias Peter, director of research at the AIE Housing Centre.
“We’re seeing this has just been turbocharged” by the pandemic, he said. Higher earners “are freed from being shackled to their desk or their employer. So now they can move virtually across the entire country”.
In the second quarter, net migration out of urban neighbourhoods continued to be more than double the pace observed before the pandemic, according to a report by policy economist Stephan Whitaker at the Federal Reserve Bank of Cleveland. “This flow of middle-aged people moving out to purchase homes in the suburbs is balancing a swelling return of young renters to urban neighbourhoods,” he wrote.
From 2012 to the start of the pandemic, housing values in the most walkable areas in New York City had appreciated cumulatively by about 45 per cent. Walkable is defined as a 10-minute distance by foot from commercial amenities and maybe a transit station.
The pre-Covid-19 boom gave New Yorkers arbitrage opportunities that the AEI Housing Centre quantified by tracking buyers through public records and changes of address at the post office. People selling a property in the New York City metro area and buying one in Florida spent about 70 per cent to 80 per cent of the proceeds on the new home, based on the median price. Whether they moved to Orlando, Fort Myers or Sarasota, they lost on “walkability”, the data shows.
Ms Danielle Hale, chief economist at Realtor.com, cautions against writing off the attraction of lively city centres. Even though the coronavirus and its variants are here to stay, at least for now, many people will still want to be in close proximity to others, where they can benefit from the culture and the social interactions.
“My expectation is that it’s likely to be temporary,” she said.