Home prices have been climbing nationally for more than a year. The Trulia Price Monitor, Case-Shiller, and other price indexes show price gains for nearly all large metro areas. But within a metro, the city and the suburbs are often totally different housing markets. In last decade’s housing bubble and bust, most of the overbuilding and foreclosures happened in the suburbs and outlying areas, but many downtowns are dotted with vacant buildings or even vacant blocks. Which areas are seeing a stronger recovery – cities or suburbs?
To answer this, we looked at (1) price gains, based on the change in median price per square foot among all non-foreclosure homes for sale on Trulia, and (2) population growth, based on the U.S. Postal Service’s count of occupied households in each ZIP code. Both measures are year-over-year, with prices through the end of May 2013 and population through mid-June 2013. We classify urban and suburban neighborhoods based on the kind of housing they have – urban neighborhoods are mostly condos, apartments, and townhouses, while suburbs have mostly detached, single-family homes – which we think is more accurate than using big-city boundaries (see note).
Urban Neighborhoods Have Stronger Price Recovery, but Slower Population Growth
Here’s the punch line: urban neighborhoods had faster price growth in the past year, while suburban neighborhoods had higher population growth. The median asking price per square foot was up 11.3% in urban neighborhoods, versus 10.2% in suburban neighborhoods. (The overall national increase, including urban and suburban neighborhoods, was 10.5%.) But despite faster price growth in cities (by williams here), the suburbs are where people are moving: suburban neighborhoods had faster population growth than urban neighborhoods did, 0.56% versus 0.31%.
| Change in home prices, Y-o-Y | Change in population, Y-o-Y | |
| Urban neighborhoods |
11.3% |
0.31% |
| Suburban neighborhoods |
10.2% |
0.56% |
But shouldn’t price gains and population growth go hand-in-hand? Not necessarily: there’s more room to build new housing for a growing population in sprawling suburbs than in dense urban areas, so suburbs can more easily accommodate growth with new construction. In contrast, the more people want to live in dense, urban neighborhoods, the more they bid up the price of existing homes. Even with the recent rebound in construction of urban multifamily buildings, most new housing is still in the suburbs.
Urban versus Suburban in the 20 Case-Shiller Metros
This morning, the Case-Shiller index reported on metro-level price changes. The table below shows the urban and suburban price changes for the 20 Case-Shiller metros using our median price per square foot measure. In 16 of the 20 Case-Shiller metros, urban neighborhoods saw bigger price increases than suburban neighborhoods. The gap was biggest in Detroit, Phoenix, and Miami, where urban neighborhoods had price gains of five percentage points or more than in suburban neighborhoods. Suburban neighborhoods had faster price growth than urban neighborhoods only in Seattle, Dallas, San Francisco, and Minneapolis.
| U.S. Metro* | Urban home price change,
Y-o-Y |
Suburban home price change,
Y-o-Y |
Difference: urban minus suburban |
| Detroit |
28.8% |
22.0% |
6.8% |
| Phoenix |
27.2% |
22.1% |
5.1% |
| Miami |
18.1% |
13.1% |
5.0% |
| New York |
7.3% |
2.7% |
4.6% |
| Boston |
10.1% |
6.1% |
4.0% |
| Las Vegas |
33.8% |
30.0% |
3.8% |
| San Diego |
20.8% |
17.3% |
3.5% |
| Los Angeles |
20.6% |
17.6% |
3.0% |
| Cleveland |
7.8% |
5.0% |
2.8% |
| Tampa |
15.1% |
12.4% |
2.7% |
| Portland |
15.7% |
13.1% |
2.5% |
| Chicago |
8.8% |
6.6% |
2.2% |
| Atlanta |
20.2% |
18.1% |
2.1% |
| Washington DC |
7.7% |
6.8% |
0.9% |
| Denver |
11.6% |
11.1% |
0.6% |
| Charlotte |
9.5% |
9.0% |
0.5% |
| Seattle |
12.8% |
13.2% |
-0.5% |
| Dallas |
9.3% |
11.2% |
-2.0% |
| San Francisco |
18.9% |
21.4% |
-2.5% |
| Minneapolis |
9.1% |
11.7% |
-2.7% |
| Note: metros follow Case-Shiller definitions. Urban and suburban are defined in the note below. | |||
Where Homeowners Can Take Pride in the Price Rebound
Urban neighborhoods had bigger price gains than suburban neighborhoods, but certain types of neighborhoods have seen an even bigger price recovery than urban neighborhoods overall. In “high-rise” neighborhoods, where more than half the housing is in buildings with 50 or more units, prices rose 11.9% year-over-year, compared with the overall national increase of 10.5% and the urban-neighborhood increase of 11.3%.
The biggest price gains over the past year, however, were in gay/lesbian and racially diverse neighborhoods. Racially and ethnically diverse neighborhoods, where no group makes up a majority of the population, saw home prices increase by 14.3%. Neighborhoods where same-sex male couples account for more than 1% of all households (that’s three times the national average) had price increases, on average, of 13.8%. In neighborhoods where same-sex female couples account for more than 1% of all households, prices increased by 16.5% – more than one-and-a-half times the national increase. That means homeowners in America’s gayborhoods have yet another reason to celebrate this June, which is Gay Pride month.
Note: To compare “city” versus “suburb,” we group neighborhoods as either urban or suburban based on how dense or spread out the housing is. We define urban neighborhoods as those where a majority of the housing is apartments, attached townhouses, or other multi-unit buildings; suburban neighborhoods are those where a majority of the housing is single-family detached houses. We used this methodology rather than simply identifying the biggest city in a metro as “urban” and treating the rest of the metro as the “suburbs,” as other reports on cities-versus-suburbs often do. The problem with using city boundaries is that many neighborhoods outside of the biggest city are actually much more urban than some neighborhoods within a city’s boundary. For instance, our definition classifies Hoboken, NJ, Central Square in Cambridge, MA, and Santa Monica – which are all very dense – as urban neighborhoods, even though they’re outside the city boundaries of New York, Boston, and Los Angeles, respectively.
National figures in this post are based on all neighborhoods in the 100 largest metros.
