Zillow and Census Bureau data show pandemic’s impact on housing market

But lower-income households more likely to rent were also more likely to have experienced job loss in hard-hit industries, such as retail trade, accommodations, and food services.

Those facing financial pressures turned to alternatives, including “doubling up” or moving back in with their families, according to Zillow’s research. That shift, in turn, added to a decline in rental demand.

Did COVID-19 Change Cities?

Despite some concern that a pandemic-related mass exodus from metro areas was changing U.S. cities, cities are still very much alive and the housing market in some has even grown.

Zillow economists found pandemic’s impact on where people live varied across regions.

To clearly define urban and suburban, the Zillow Group used a ZIP code classification system for urban, suburban, and rural areas. It then combined them with Census Bureau variables, such as population density, age of housing stock, and other variables.

In cities in the Northeast and West regions like New York and San Francisco, home value growth trailed the suburbs but the opposite happened in markets in the Midwest. For example, home values surged the city in the Kansas City and Cleveland metro areas, where urban prices were relatively affordable.  

Basically, it appears that people in larger, more expensive metros were not willing to pay premium prices for proximity to amenities that were no longer available during the pandemic, like restaurants, museums, and theaters. But demand boomed in more affordable urban areas.

Connection Between Jobs and Homes

“It’s important to call out the relationship between housing and jobs, and how intertwined these things are,’’ said Nicole Bachaud, a Zillow economic data analyst who presented during the Census Bureau webinar. “When an area gets an increase in jobs, people will move there to work putting pressure on the housing market, which will often result in an increase in prices.”

According to a Zillow survey, most people are willing to commute 30 minutes one way and placed a lot of importance on the proximity of their home to their work.

One surprising finding: Pre-pandemic remote workers were more likely to buy in urban areas.

In 20 of the top 35 largest markets, over half of urban workers were reverse commuters. More than 70% of urban residents work outside of urban areas in markets like Orlando, Tampa, and Riverside, Calif., according to the survey.

Metros that had higher urban growth in 2020 had a bigger share of reverse commuters in 2017. A metro area’s share of reverse commuters can signal how it might fare during a pandemic because it reveals the slice of population willing and able to pay for and keep urban amenities.

The graph above also shows that reverse commuters are not specific to one generation. Both the younger and older generation have been staying in metro areas like Charlotte, N.C., San Jose, Calif., and Washington, D.C.