Home values within a short commute of the country’s biggest downtown job centers are growing more slowly than those farther out, a new analysis from Zillow and HERE Technologies shows.
Homes within a 10-minute commute of a metro’s downtown job center are among the most expensive in 18 of the 35 metros included in the analysis, yet these areas had the fastest-growing home values in nine of those metros as of 2017. Now, homes closest to downtown are growing fastest in only three of those 18 metros, and they are growing slowest or even falling in 11.
“Home buyers are placing less of a premium on a short commute thanks to the rise of remote work,” says Zillow economic data analyst Nicole Bachaud. “Americans are searching for a combination of affordability and more space, whether that’s outdoor space or an extra bedroom to turn into a home office. In expensive, dense markets, that usually means a home farther out from the downtown core, which is more palatable when you don’t need to commute every day, if at all. In more sprawling metros, buyers are flocking to less expensive downtown cores, bringing a renewed interest to these city centers.”
In metros where home values in the urban core have typically been lower than in the suburbs – places such as Cleveland, Detroit, Baltimore and Indianapolis – home values are trending up near downtown. A home within a 10-minute commute of downtown Detroit is now $101,228 more expensive than it was in 2019, and the price of living within a 10-minute commute of downtown Indianapolis has grown $54,025 over the same period.
While these two forces seem to be in opposition, they are really two sides of the same coin, says Zillow: Americans are seeking larger, more affordable homes as flexible work opportunities bring new expectations for what they want and need in a home. As people seek affordability, they are willing to live with a longer commute if they can save on housing costs. And less expensive downtown cores are gaining in popularity relative to the pricier suburbs nearby.
“The pandemic significantly impacted roadway congestion levels, traffic patterns and the timing of traditional ‘rush hours’ across America,” says HERE traffic data scientist Kyle Jackson. “Remote work flexibility has contributed to morning rush hours being less congested and, in some markets, morning rush hour moved 60 minutes later. While highway traffic congestion plummeted in the early stages of the pandemic and is now rising rapidly across the country, local streets have been much less affected. Traffic levels have stayed stable at around 80 percent of pre-COVID levels since fall 2020. These traffic trends will be critical to examine as communities continue the Great Reshuffling.”
Metros where values are growing the slowest, or even falling, for homes within a 10-minute commute of the downtown job center include New York, San Francisco, Boston, Chicago and Dallas. A home with a 10-minute commute in New York is $73,673 cheaper than in 2019, and a home with the same commute in Boston is $21,175 cheaper. While these metros are geographically diverse and have wildly differing price points, the trait they share is that home values are most expensive near downtown and generally decrease the farther away a property is located.
In the markets that saw the most net inbound moves in 2020 – Phoenix, Charlotte and Austin – home values are growing quickly everywhere you look, the report points out. In Phoenix and Charlotte, buyer demand is driving up prices all around both metros, regardless of commute times. In Austin, buyers appear willing to pay up to be near the urban core. Austin home values are growing fastest for properties within a 40-minute commute of downtown, which are also the most expensive areas of the metro. A home with a 10-minute commute in Austin is now $229,553 more expensive than it was two years ago, by far the biggest increase among the 35 metros in the analysis.
More on the report can be read here.
