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Zillow.com recently published some research where they looked at U.S. home prices broken down according to location: urban, suburban, and rural.
Here’s what they found:
As you can see, urban homes across the U.S. largely trailed their suburban counterparts in terms of absolute value up until the end of 2014. At that point, urban homes then surpassed suburban homes for the first time in the last two decades. (I wonder if this is a first or there was another crossover point before the late 1990s.)
But if you dig a little deeper and look at both the rate of appreciation and prices per square foot (as opposed to just absolute value), urban home prices appear even stronger.
Here’s a snippet from Zillow’s post:
“Over the past five years (2010-2015), average urban home values have grown 28.4 percent, compared to 21.1 percent for suburban home values. In the past year alone, U.S. urban home values grew 7.5 percent, compared to 5.9 percent for suburban homes.
On a per-square-foot-basis, homes in urban areas nationwide used to be worth roughly the same as suburban homes, before a gap started emerging in the late 1990s which has become progressively wider over the past roughly two decades. Currently the gap stands at 24.5 percent, with suburban homes valued at $156 per-square-foot and average U.S. urban homes worth $198 per-square-foot.”
And here is that same chart showing per square foot prices:
Everyone who reads this blog knows that there is a growing interest in urban centers. But if you look at the above charts for specific cities, there are still many cases where urban home prices are well below suburban ones.
To me, that serves as a reminder of the spikiness of this urban transformation, but also that it is likely still in its infancy. As recent as 20 years ago, Toronto largely didn’t believe that people would want to live downtown in modern apartments. Today we take that for granted.
So even with all of the gushing about urban centers, I still think we are only just getting started when it comes to creating the great urban neighborhoods of the future.
This afternoon I was chatting with some friends about Toronto real estate (which is something that happens a lot in this city), and we started talking about “The Starbucks Effect.”
Basically, we were talking about how this neighborhood just got a Starbucks and how that neighborhood already has one. We were, like a lot of people, using Starbucks as a proxy for neighborhoods that are emerging and neighborhoods that have already arrived.
There’s been a lot of discussion about the correlation between home prices and the presence of a Starbucks. But the big question is what comes first: the home prices or the Starbucks?
Earlier this year, the CEO, Spencer Rascoff, and Chief Economist, Stan Humphries, of Zillow.com argued that the mere presence of a Starbucks can cause gentrification.
They argued that Starbucks knows the next hot neighborhood before anyone else does and that they are “the fuel, not the follower.” And through their data they demonstrated that homes (in the US) near a Starbucks appreciated significantly faster than homes not near a Starbucks, or even homes near other coffee shops such as Dunkin’ Donuts.
But I – as well as others – wonder if this isn’t an oversimplification.
I certainly believe that Starbucks could help fuel home prices in a neighborhood. I think it gives people a comfort level that the neighborhood has arrived and that there are people in the area who are willing and able to spend money on discretionary items.
But I suspect that for Starbucks it’s a balancing act. They would never want to be late to an emerging neighborhood (and miss that prime corner property), but they also don’t want to be in the business of placing bets on neighborhoods with very few vital signs.
So I think it’s both. I think Starbucks is analyzing the data and watching home prices like a hawk (the follow) and when it reaches a certain point, they move. And that likely causes a further acceleration of neighborhood change (the fuel).
What do you think? I would love to learn more about their site selection process.
Earlier this month, the Royal Bank of Canada and the Pembina Institute co-published a report on Toronto’s housing market called "Priced Out". The overarching argument is that homebuyers in the Greater Toronto Area (GTA) are being “priced out” of the areas in which they really want to live, which happen to be walkable and transit-oriented neighborhoods.
In fact, according to their research, 80% of residents in the GTA would be willing to sacrifice space (size of house and yard) if it meant they could live in a more walkable and urban neighborhood. But at the same time, more than 70% of GTA residents say that they live where they do because of affordability reasons, not because of actual preference. This, of course, isn’t new. It’s the whole “drive to affordability” notion—just keep driving until you can afford the housing.
Overall though, the report does reinforce a macro tend that I’ve discussed many times here at Architect This City. People are returning to cities in droves (or would at least like to, if they can afford it).
If you’re interested, the report also has some good data on Toronto and Canada’s housing markets.
Here’s how average home prices in Canada trended between 1980 and 2012. Vancouver became a total outlier starting in the early 90s (thanks Hong Kong).
And here’s a look at housing completions (so new construction) by product type in the Greater Toronto Area. Note how apartments/condos surpassed single-detached houses in and around 2008.
Zillow.com recently published some research where they looked at U.S. home prices broken down according to location: urban, suburban, and rural.
Here’s what they found:
As you can see, urban homes across the U.S. largely trailed their suburban counterparts in terms of absolute value up until the end of 2014. At that point, urban homes then surpassed suburban homes for the first time in the last two decades. (I wonder if this is a first or there was another crossover point before the late 1990s.)
But if you dig a little deeper and look at both the rate of appreciation and prices per square foot (as opposed to just absolute value), urban home prices appear even stronger.
Here’s a snippet from Zillow’s post:
“Over the past five years (2010-2015), average urban home values have grown 28.4 percent, compared to 21.1 percent for suburban home values. In the past year alone, U.S. urban home values grew 7.5 percent, compared to 5.9 percent for suburban homes.
On a per-square-foot-basis, homes in urban areas nationwide used to be worth roughly the same as suburban homes, before a gap started emerging in the late 1990s which has become progressively wider over the past roughly two decades. Currently the gap stands at 24.5 percent, with suburban homes valued at $156 per-square-foot and average U.S. urban homes worth $198 per-square-foot.”
And here is that same chart showing per square foot prices:
Everyone who reads this blog knows that there is a growing interest in urban centers. But if you look at the above charts for specific cities, there are still many cases where urban home prices are well below suburban ones.
To me, that serves as a reminder of the spikiness of this urban transformation, but also that it is likely still in its infancy. As recent as 20 years ago, Toronto largely didn’t believe that people would want to live downtown in modern apartments. Today we take that for granted.
So even with all of the gushing about urban centers, I still think we are only just getting started when it comes to creating the great urban neighborhoods of the future.
This afternoon I was chatting with some friends about Toronto real estate (which is something that happens a lot in this city), and we started talking about “The Starbucks Effect.”
Basically, we were talking about how this neighborhood just got a Starbucks and how that neighborhood already has one. We were, like a lot of people, using Starbucks as a proxy for neighborhoods that are emerging and neighborhoods that have already arrived.
There’s been a lot of discussion about the correlation between home prices and the presence of a Starbucks. But the big question is what comes first: the home prices or the Starbucks?
Earlier this year, the CEO, Spencer Rascoff, and Chief Economist, Stan Humphries, of Zillow.com argued that the mere presence of a Starbucks can cause gentrification.
They argued that Starbucks knows the next hot neighborhood before anyone else does and that they are “the fuel, not the follower.” And through their data they demonstrated that homes (in the US) near a Starbucks appreciated significantly faster than homes not near a Starbucks, or even homes near other coffee shops such as Dunkin’ Donuts.
But I – as well as others – wonder if this isn’t an oversimplification.
I certainly believe that Starbucks could help fuel home prices in a neighborhood. I think it gives people a comfort level that the neighborhood has arrived and that there are people in the area who are willing and able to spend money on discretionary items.
But I suspect that for Starbucks it’s a balancing act. They would never want to be late to an emerging neighborhood (and miss that prime corner property), but they also don’t want to be in the business of placing bets on neighborhoods with very few vital signs.
So I think it’s both. I think Starbucks is analyzing the data and watching home prices like a hawk (the follow) and when it reaches a certain point, they move. And that likely causes a further acceleration of neighborhood change (the fuel).
What do you think? I would love to learn more about their site selection process.
Earlier this month, the Royal Bank of Canada and the Pembina Institute co-published a report on Toronto’s housing market called "Priced Out". The overarching argument is that homebuyers in the Greater Toronto Area (GTA) are being “priced out” of the areas in which they really want to live, which happen to be walkable and transit-oriented neighborhoods.
In fact, according to their research, 80% of residents in the GTA would be willing to sacrifice space (size of house and yard) if it meant they could live in a more walkable and urban neighborhood. But at the same time, more than 70% of GTA residents say that they live where they do because of affordability reasons, not because of actual preference. This, of course, isn’t new. It’s the whole “drive to affordability” notion—just keep driving until you can afford the housing.
Overall though, the report does reinforce a macro tend that I’ve discussed many times here at Architect This City. People are returning to cities in droves (or would at least like to, if they can afford it).
If you’re interested, the report also has some good data on Toronto and Canada’s housing markets.
Here’s how average home prices in Canada trended between 1980 and 2012. Vancouver became a total outlier starting in the early 90s (thanks Hong Kong).
And here’s a look at housing completions (so new construction) by product type in the Greater Toronto Area. Note how apartments/condos surpassed single-detached houses in and around 2008.
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