More Space, Higher Prices: Home Sales After COVID-19

The coronavirus outbreak made many homebuyers rethink their housing needs. We analyzed home sales data in hundreds of cities following the pandemic. What we found surprised us.

Despite economic fallout across many sectors, the housing market remained incredibly resilient in the wake of the coronavirus pandemic. When state and local economies started opening up following spring lockdowns, home prices skyrocketed.

Why did this happen? Supply was low and demand was high, thanks mostly to hyper-low mortgage rates.

This imbalance, along with a lot of newfound desire for more space, created a seller’s market. In certain areas of the country, buyers began snatching up homes at record speed. Median home prices reached an all-time high in major cities all around the country. To anyone thinking about selling their house, the post-pandemic period proved to be a great moment.

What happened to housing after coronavirus lockdowns?

We reviewed home sales data from more than 500 of the largest Metropolitan Statistical Areas (MSAs) in the U.S. from June to August 2020. We looked at prices, lot size, and square footage to see what the data say about buyer behavior after the virus.

MSAs serve as a great proxy for the greater geographical area of cities. They capture areas with relatively high population density as well as a large chunk of suburbs.

We compared this time period, which represents the housing market’s reaction immediately following the initial shock of the virus, with the same period last year.

What we learned was surprising. We expected to see higher prices. But the breadth and depth of the increases was remarkable. And the trends in home size were even more interesting than we expected.

Home prices exploded in America’s largest cities

Based on Sundae’s data, 49 out of the top 50 cities saw price increases in the three months after COVID-19 lockdowns in March 2020, compared with the same time last year.

The Hartford, Connecticut, metro area sat at the top, with a 23 percent increase in home price from 2019 to 2020. Pittsburgh was the only top 50 city to see a year over year decrease, with prices dipping 2.6%.

Here are the 50 largest cities in the U.S. in order of percentage in price change.

Higher prices correlate with…less square footage?

Doubtless, you’ve heard the narrative about lockdowns causing big city residents to flee for the space and security of the suburbs. While it’s true that rural markets heated up, the complete data tell a complicated story.

There appears to be some correlation in big cities between home prices going up and square footage decreasing.

Of the 50 largest MSAs per the U.S. Census Bureau, 37 saw the median square footage of a house listing decrease this year over 2019. Perhaps space demand wasn’t as big of a motivator as advertised. Or, perhaps, it reflects more first-time homebuyers upgraded from small rental apartments.

Another factor is population growth. Cities with faster annual average population growth tend to correlate with higher prices and smaller listing square footage. Meanwhile, large MSAs with slower than average annual population growth saw smaller price increases and and slightly larger than average increases in square footage.

Top 10 cities with the highest increases for home prices

Here are the 10 U.S. cities that experienced the highest increases in median sale price.

Top 10 cities with the biggest decreases in home price

While most cities in the U.S. saw post-pandemic home price jumps in 2020, some experienced significant price decreases.

Top 10 cities with highest increases for home square footage

Although our data on square footage of listings was surprising, we know that many homebuyers also want more outdoor space.

Perhaps this is one of the reasons why lot sizes for homes experienced increases after COVID-19.

Our data for lot size showed 29 of the top 50 cities experienced an increase in median lot size.

What’s the takeaway?

The pandemic caused a shift in demand for homes that pushed up prices around the country. It also exacerbated an already acute supply shortage, and motivated buyer behaviors in a number of interesting ways. Most notably, it has people rethinking space and whether to own a home rather than rent one.

—

Methodology

Sales numbers used in this assessment come from First American Data. Population statistics come from the U.S. Census Bureau’s 2019 estimates.