Will people leave cities post COVID 19?

[Phil Wells]

An article recently published by Redfin highlights the current working from home trend. In a survey it's revealed that up to 1 in 4 newly remote workers expect to continue working from home after COVID 19 passes.

Imagine if you were paying $4000 a month in rent for an apartment in a major city with a strict pet policy and nowhere to park. Suddenly COVID 19 hits and you realize that all you need to earn money is an internet connection.

Almost overnight you begin to think it might be nice to have a house with a garage, some land, somewhere for a couple of dogs to run around and maybe even somewhere to start a family ... and also it might be nice to do all this for half the price of your current rent.

I think this is a real possibility but what impact will it have on the nations major cities? I'd love to hear peoples arguments for cities because I haven't seen much in the press of late.

Original article - https://www.redfin.com/blog/wf...

[Justin Thorpe]

@Michael John

$6000 for 500 sq ft is a wild exaggeration!

Let’s be more specific. A studio in Manhattan in a very good building like 95 Wall Street goes for $2200. It’s about 500 sq ft in size.

It’s has door man/ front desk concierge, 24x7 security, access to amazing gym, pool, a parking spot and a nice club house and roof top. It’s located on Wall Street and ideal for anyone who works in the area. It’s 2 blocks away from the nearest subway station and can take you midtown in 6 - 10 mins.

[Michael John]

Yes, You're probably right about that but I think people will flee NYC. Not all, but a lot. Just my thoughts with defunding police, civil disorder, and COVID-19 all at once. NYC suburbs will flourish.

[Dennis Cosgrave]

Originally posted by @Mark Franklin:

Originally posted by @Dennis Cosgrave:

It is not just the WFH phenomenon that is driving this trend. The BLM protests just added fuel to the fire. To make matters worse, the demands to defund police departments are actually being implemented in some cities. In NYC, de Balsio cut the police budget by $1 billion and within a week crime increased 380%. Who wants to live in that kind of environment? WFH just made the decision to leave a lot easier. 

Looking a little further down the road, municipalities have lost serious revenue from the COVID lock down and they will be raising taxes to compensate for the losses. Smaller communities suffered less.

I forgot to mention the pension problems that some major blue cities have. More tax revenue is being diverted to cover pension payouts that will result in other services being cut or taxes raised again. 

When you add this all up, the future for big cities, especially those that are leftist and financially unstable, does not look promising.

Reducing police budgets is a long term strategy to reduce crime. The immediate impact is expected to be negative, but those funds are being diverted to fund public health, education, and community improvement, which is at the root of crime problems. 

If that were true, why did the crime rate in NYC spike a week after the budget was cut? Spending money on education is not going to solve anything. The US currently spends more per student than any country in the world and yet has mediocre outcomes at best. Why is that? I am curious to know how you restore pride in a community by throwing money at it. A residential community in the vicinity of the White House has been renovated a number of times at taxpayer's expense, only to be destroyed again and again. That obviously did not work either. 

[Justin Thorpe]

@Michael John

I am curious if your “flee” theories would also apply to cities like Las Vegas, Houston, Minneapolis, the hundreds of college towns, tourist towns in America. Because between Covid and BLM, these places will likely face a lot of devastation.

What about the great states of Texas, Florida and Arizona which are facing huge spikes in Covid-19. Where would those people flee to?

The answer lies not speculate at individual opportunities to profit from a trend which is inherently destructive but hope that this trend never emerges fully because in a world with sustained presence of Covid or BLM related rioting won’t be a very prosperous world, I can assure you that.

[Tomas Saenz]

@Phil Wells personally I think all of this talk about leaving the city is a bit misguided. Sure, there are people who move to surrounding burbs to "settle down" or people move to "Hot" job markets. But cities will always be desirable locations.

Cities are historically centers of culture, jobs, entertainment ,etc. People who own properties in large cities have nothing to worry about. May appreciation stagnate? possibly but I am willing to bet on the long term outlook

[Jon Schwartz]

Can we stop referring to cities as though they're homogenous? I live in Los Angeles, and I know at least two people who are so fed up with New York City that they're moving here, to this city. I'm sure plenty of folks in New York and Chicago and DC are feeling antsy. I'm sure lots of people in Los Angeles and Austin and Phoenix don't feel the squeeze.

[Nick M.]

My 2 cents:  While some people will make the flight out of large cities, people will continue to live in near major work hubs (which are the cities).  Major corporations, hospitals, colleges etc aren't going to be moving.

[Kenny Hsu]

Late to the party here.  I work full-time at a tech company where we are all working remotely and invest in RE on the side.  I didn't go through the entire thread, so hopefully, these points haven't been made yet:

1) I think what COVID has done is shown both employers and employees work from home is practical for a good portion of the workforce (e.g., white-collar jobs).  CFOs will love not having to pay for real estate for every employee, and employees will love the flexibility and no commute time.  As someone said, I think COVID may have accelerated things by a good number of years.

2) Consequently, I do think some people that would've moved to big cities like NY and SF may stay put, or people currently living those cities will think about moving.  

3) Having said all that, big cities will be big cities... they will all evolve and adapt in ways none of us can know yet... So long term I'm still bullish on NY/SF and other iconic cities.

4) More importantly, ss RE investors we have to think about how it will impact our particular tenant segment.  Young professionals with jobs where they could work from home will need bigger spaces.  People who live in 2 bedrooms may start looking for 3 bedrooms for a home office.

For what it's worth, I own two condo units in NYC, and both sets of tenants left to go back to their home country after COVID hit...  it's taken a bit more incentives, but there are still people looking for a place to live out there :) 

Good luck everyone!

Kenny

[Matthew Paul]

Riots , statues being torn down , Covid 19 , defund police , yes people will leave cities . I grew up in Balto Md till 1972 , The riots of 1968 were the reason my parents bought in the Suburbs .  Back then it was called "The white flight" .  The last 3 houses in my neighborhood sold in less than 2 weeks . All the buyers were from the city .

[Curtis Bidgood]

NPR Saturday July 6.  Montclair NJ, exploding housing sales, because of work at home and other covid reasons.

https://www.npr.org/2020/07/04/887239302/covid-19-pandemic-pushes-many-in-new-york-city-to-suburbs

[Michelle Backer]

@Phil Wells

@Matthew Paul

I was born and raised in nyc

I live in Brooklyn now.

I predict what will happen is exactly that: urban flight

It’s happening now.. the real test will be in the fall. Will people come back ?

It feels more like the 90’s right now which is cooler anyway! We just don’t want the 80s again!

Most of my neighbors are families and they are running for Hudson Valley and other New York suburbs . People, especially families, are very scared

Native New Yorkers like myself will stay. This is my home. As long as you live in a nice neighborhood you’re pretty much ok though ..

It’s a cycle that NYC goes through. It will continue to go through the same cycle long after we are gone. This is New York City!

[Megan Shay]

So far, in Seattle anyway, there was a period in May where more folks headed out of town in favor of Kitsap County (west of Puget Sound). But for the most part, it does not appear we're looking at any sort of mass exodus from the more populated areas. 

[Michael John]

Justin,

I am only speaking about NYC. The rental requests in certain areas Rockland County, NY for single family home is through the roof right now. As for other cities, I don't know. 

Originally posted by @Justin Thorpe:

@Michael John

I am curious if your “flee” theories would also apply to cities like Las Vegas, Houston, Minneapolis, the hundreds of college towns, tourist towns in America. Because between Covid and BLM, these places will likely face a lot of devastation.

What about the great states of Texas, Florida and Arizona which are facing huge spikes in Covid-19. Where would those people flee to?

The answer lies not speculate at individual opportunities to profit from a trend which is inherently destructive but hope that this trend never emerges fully because in a world with sustained presence of Covid or BLM related rioting won’t be a very prosperous world, I can assure you that.

[Paul DeSilva]

I was born and raised in Brooklyn NY. I work in Manhattan and invest in the Hudson Valley. I'm right in the middle possibly the most impacted (by COVID-19, police defunding and riots) city in the country.  I am seeing the exodus on both ends.... The traffic and number of people in Manhattan is way down, scary almost (picture attached is from 7th Ave south and Varick St. taken 2 weeks ago at 6:30 Am on a weekday, it would normally be packed with cars and people, not one car or person in this photo it was eerie)  Meanwhile the Hudson Valley surrounding NYC market is possibly the hottest that it has ever been, even more so than after 9/11, I've been beat out of several highest and best situations ever since we hit Phase 2 and have been making offers again. That being said nothing is permanent, NYC will not fall, commercial space is being  hit the hardest but will make a comeback even if people continue to work from home, secondly class A rentals will also suffer and rents are falling attracting people that may have not been able to previously afford them and apartments will be in high demand again. One of the biggest factors that I see will be when tourism starts again, then we will see a big influx of money back into the commercial space again. Just my thoughts on a topic I'm very interested in. Thanks for starting this post!

[Justin Thorpe]

@Paul DeSilva

We live in interesting times indeed. Here in SF the downtown areas look isolated with more homeless encampments than before. With offices closed, restaurants closed etc it’s quite deserted. That said as you head into other parts of the city that are residential, life is normalizing fast and people are out and about. Traffic in general is rising and Freeway traffic is rising everyday. To your point NYC will never go away and neither will SF. What needs to go the heck away is Covid. It’s been frustratingly stuck now for a while and might end up triggering a few changes to human life and the normalization cycle may take longer.

[Karen Margrave]

Covid definitely is impacting the markets already. I'm a Realtor in Redding, CA which is a 4 hr drive north of the bay area in CA. People call the bay area northern CA, but the "real" northern CA is up here! We are already seeing our market tighten further due to people relocating. We are a small city with big redevelopment going on in our old downtown area. There's the Sacramento River that runs through our city, the Sundial Bridge, Turtle Bay Museum and a huge expanse of walking/biking trails. We have two lakes Whiskeytown and Lake Shasta and within an hour of Shasta Caverns, Mt. Lassen, Mt. Shasta, Burney Falls, and Castle Crags. 

I cannot say prices are low, but in relation to the bay area they're a steal. I'm working with 2 sets of clients right now relocating from the bay area. 

We just sold a house in Sunriver, OR, to a couple from Portland, but before selling, we leased it up for a year to a couple from San Diego county. 

Covid was the final straw for all of these. 

[Justin Thorpe]

@Karen Margrave

What is interesting is even as markets like Redding, Sonoma, Outer Marin and other places in the outer areas are showing strength, SF based realtors have been very busy over the past 3 months. SF Homes are selling and pricing is holding ok except in some few corners like newly built condo units. I think it’s a function of the stock market run up combined with lower interest rates that pretty much the entire Bay Area continues to strength in the housing market despite all the larger macro economic issues we all know about.

[A.B. Argee]

Anyone who thinks the economy won't crash and take the housing market with it is, "optimistic" to say the least.  Either we stop all the money printing and everyone is bankrupt, and we don't, hyperinflation results, and everyone is bankrupt.  Reality just hasn't set in yet.

[Trudy Pachon]

Cities are very different in character from one another. San Diego is really spread out. I am from SD, and I can't imagine living anywhere else.

We live in the central area of east San Diego. Yes there is traffic and a bit of crime and homelessness. It's a big city, but we have our tiny yard sanctuary and garden. We love it here. It's diverse, great people, lots of attractions, etc. House prices in our neighborhood have actually gone up, and they are being sold quickly. We can't believe people are buying so much during the pandemic! 

I don't think many people are going to leave. We just have such a great quality of life. No one I know is moving away because it's cheaper, or because of the pandemic. This city will be fine, I think. We pay a premium to live here with wonderful weather, beaches, mountains and deserts. For us, it's worth it!