As Trends Shift, Urban Home Values Outpace Those in the Suburbs

City living is hot, and its popularity has been boosting home values in urban areas over the past several years.

- The average urban home is now worth two percent more than the average suburban home--a recent phenomenon. In 2013, the average urban home was worth 1.2 percent less than the average home in the suburbs.

- The trend is particularly prevalent in top-tier cities with young populations, such as Boston, Seattle, and Washington, D.C.

- The new data reflects shifting preferences and changing demographics within cities, and the higher cost of building in big cities.

News provided by

Zillow

Jan 29, 2016, 08:00 ET

SEATTLE, Jan. 29, 2016 /PRNewswire/ -- Urban home values are outpacing the value of homes in the suburbs in most top-tier metros, as city life gains popularity and high-end condos fill the sky in Boston, Washington, D.C., Seattle, and other cities with fast-changing downtowns.

Homes in the suburbs – a longstanding symbol of the American Dream – have typically been worth more, on average, than homes in urban areas. That's still true in much of the country. Suburban homes in Nashville, Tenn., Cincinnati, Ohio, and Richmond, Virginia have a higher price tag than the average home in the city.

But in Boston, Washington, D.C., and San Francisco, the meanⁱ value of urban homes has recently surpassed the mean value of homes in suburban areas. And urban homes are gaining ground in Denver, Phoenix, and Chicago.

The shift reflects demographic trends of millennials delaying family life and choosing condos, and shifting preferences, as people seek walkable neighborhoods with urban amenities.

It has vast implications for low-income people who have traditionally lived in cities to be near services and employment. Zillow recently found that, in San Francisco and Seattle, high-income people are making shorter commutes to downtown, while low-income people are traveling much further to get to work in the urban coreⁱⁱ.

Zillow based its analysis of urban and suburban home values on a surveyⁱⁱⁱ of how people define their own neighborhoods – as either urban, rural, or suburban – and then used characteristics of those places to extrapolate the results and define ZIP codes all over the country. By looking at home values within those areas, Zillow could see how home values have fared in each type of place over the years.

"This trend, in part, reflects home buyers' changing preferences, as they seek amenity-rich, dense and walkable areas that are often closer to their workplace," said Zillow Chief Economist Dr. Svenja Gudell. "In the future, this lifestyle trend will change some suburbs as we know them, and they'll start to feel more urban as buyers move further from city centers in search of affordable housing in communities that still feel urban."

Nationally, suburban home values grew 5.9 percent in 2015, while urban homes gained 7.5 percent in value. In 1997, urban home values grew at 3.8 percent -- slower than suburban values, which grew 4.1 percent that year.

On a per-square-foot basis, home values for urban areas are way up, indicating that people are willing to pay more for less space to live in the city. In Washington, D.C., for example, urban homes in 1996 cost 6 percent more per square foot than suburban homes. Today, they cost 41 percent more per square foot.

Metropolitan Area	2015 Urban ZHVI	Urban 1-year ZHVI Change 2014-2015	Urban 5-year ZHVI Change 2010-2015	2015 Suburban ZHVI	Suburban 1-year ZHVI Change 2014-2015	Suburban 5-year ZHVI Change 2010-2015
United States	$269,036	7.5%	28.4%	$263,987	5.9%	21.1%
Los Angeles, CA	$604,006	7.6%	42.1%	$706,925	7.2%	33.9%
Chicago, IL	$198,982	2.0%	2.3%	$231,008	1.1%	5.1%
Dallas-Fort Worth, TX	$192,404	13.4%	38.8%	$210,338	13.9%	38.9%
Philadelphia, PA	$134,449	1.1%	3.4%	$259,863	1.1%	1.3%
Washington, DC	$425,611	2.9%	23.8%	$409,194	0.7%	14.4%
Miami-Fort Lauderdale, FL	$240,015	7.8%	53.1%	$262,079	8.6%	50.2%
Atlanta, GA	$205,353	7.4%	25.6%	$204,687	6.5%	23.2%
Boston, MA	$440,869	9.6%	37.1%	$426,356	6.2%	20.5%
San Francisco, CA	$927,890	14.0%	65.3%	$910,306	13.7%	58.7%
Detroit, MI	$70,781	1.1%	18.7%	$176,030	4.6%	45.0%
Riverside, CA	$292,666	5.9%	45.2%	$323,927	5.0%	43.2%
Phoenix, AZ	$218,595	8.7%	64.6%	$255,070	6.6%	50.8%
Seattle, WA	$437,813	11.4%	36.9%	$410,991	9.4%	33.3%
Minneapolis-St Paul, MN	$206,921	3.6%	20.5%	$244,019	3.3%	18.6%
San Diego, CA	$468,597	6.5%	41.2%	$630,877	6.6%	34.2%
Tampa, FL	$160,144	9.4%	35.8%	$180,963	7.9%	32.9%
Baltimore, MD	$176,092	1.1%	3.9%	$297,691	0.7%	2.7%
Denver, CO	$330,932	14.4%	54.5%	$338,801	14.1%	49.1%
Pittsburgh, PA	$109,152	3.8%	21.6%	$148,575	2.7%	15.8%
Portland, OR	$340,413	12.5%	36.4%	$332,050	11.3%	35.3%
Charlotte, NC	$170,506	6.4%	18.0%	$186,922	6.0%	18.1%
Sacramento, CA	$317,778	8.2%	39.4%	$360,400	7.5%	42.5%
Orlando, FL	$167,585	6.8%	40.9%	$201,576	6.0%	34.6%
Cincinnati, OH	$114,760	4.2%	8.5%	$159,789	3.4%	9.8%
Cleveland, OH	$76,986	0.4%	-6.6%	$150,132	2.7%	4.9%
Las Vegas, NV	$166,080	9.3%	62.7%	$232,452	7.5%	51.3%
Columbus, OH	$102,837	5.0%	8.2%	$171,031	7.0%	17.8%
San Jose, CA	$1,119,156	13.2%	73.7%	$1,179,781	14.6%	70.3%
Virginia Beach, VA	$155,999	1.4%	-6.6%	$250,433	3.3%	2.6%
Nashville, TN	$189,877	9.0%	26.8%	$234,483	9.7%	29.7%
Jacksonville, FL	$133,336	5.8%	13.3%	$183,612	6.1%	17.4%
Oklahoma City, OK	$134,405	2.8%	15.1%	$132,318	2.4%	15.5%
Hartford, CT	$142,817	0.2%	-13.2%	$231,201	-1.3%	-5.4%
Richmond, VA	$159,902	5.2%	1.3%	$218,506	3.9%	8.5%

About Zillow
Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ:Z and ZG), and headquartered in Seattle.

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ⁱ Weighted mean of ZHVI in urban, suburban or rural zip codes weighted by the number of properties in each zip code
ⁱⁱ http://www.zillow.com/research/seattle-san-fran-affordable-housing-11297/
ⁱⁱⁱ The 2014 survey asked 2,008 adults whether they considered their ZIP code to be urban, rural or suburban.

SOURCE Zillow