Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a University Professor and Director of Cities at the University of Toronto’s Martin Prosperity Institute, and a Distinguished Fellow at New York University’s Schack Institute of Real Estate.
New data from Zillow shows that average urban home prices in the U.S. now surpass those of the suburbs.
Back in the late 1990s and early 2000s, urban and suburban homes in the U.S. used to be worth about the same on a per-square foot basis. But since the mid-2000s, urban homes have been worth more per square foot. Today, as a fascinating new report from Zillow on the shifting geography of American home values explores, urban homes nationwide are now valued at roughly 25 percent more than suburban ones on a per-square foot basis ($198 versus $156 per square foot).
What’s more, by the end of 2015, the average value of an urban home exceeded that of its suburban counterparts by 2 percent ($269,036 compared to $263,987). As the chart below shows, this overturns a long-held pattern of suburban homes having higher values than homes in urban areas—and this despite the fact that suburban homes tend to be considerably larger than urban ones.
This trend is clearly being driven by the extremely high price of urban homes in talent and knowledge hubs such as San Francisco, Boston, and Washington, D.C. In Boston, for example, urban and suburban homes were each valued at around $100 per square foot in 1997. By 2015, Boston’s urban homes were worth nearly $400 per square foot compared to nearly $250 per square foot for suburban ones.
In Washington, D.C., urban and suburban home values also started off at around $100 per square foot in 1997. By 2015, urban values exceeded $300 per square foot compared to around $225 per square foot for suburban homes. And in San Francisco, urban and suburban homes were each worth about $150 per square foot in 1997. But by 2015, urban homes commanded nearly $700 per square foot compared to nearly $500 per square foot in the suburbs.
In some metros, urban and suburban values have in fact grown more or less in tandem. In L.A., for example, urban and suburban home values started off at roughly the same level (around $120 per square foot in 1997) and by 2015, both were worth roughly $400 per square foot.
Detroit, unsurprisingly, bucks all these trends. Back in 1997, both suburban and exurban homes there were valued at around $85 per square foot, compared to nearly $70 per square foot for homes in urban neighborhoods. Today, exurban homes command the highest prices per square foot—roughly $115—compared to $105 per square foot for suburban homes and just $55 per square foot for homes in urban neighborhoods.
Meanwhile, home values per square foot for metros like Pittsburgh, Philadelphia, Cincinnati, and Cleveland are in fact highest in suburban areas today, followed closely by rural ones.
Still, while the pattern of rising home values in the U.S. certainly differs by location, the overall trend does appear to signal a growing preference for urban living over the past decade. Zillow’s report built upon the economist Jed Kolko’s methodology for identifying urban, suburban, rural areas based on ZIP code density, and one of its most striking findings is that between 2010 and 2015, growth in the value of urban homes nationwide far outpaced that of the suburbs. Over this period, average urban home values increased by more than 28 percent, compared to just 21 percent for suburban homes. Last year alone, urban home values nationwide grew by 7.5 percent, compared to 5.9 percent for those in suburban areas.
As the Zillow report puts it, “The suburban home—long a symbol of success, stability and the American Dream—appears to be losing some of its luster as the appeal of city living gains steam and urban homes grow in value more quickly.”