Demand for Housing Shifting Toward City Centers in US

Published Date : Aug 12, 2015

With home prices reaching a sustainable pace, there has been a demographic shift in terms of housing demand toward city centers, states the US Residential Mortgage Back Securities Sustainable Home Price Report by Fitch Ratings for the second quarter of this year.

Fitch reports that after decades of exurban and suburban growth, a large section of housing demand has been making its way back to city centers. 

Home prices since 2000 have risen 50 per cent faster in the urban centers of the city than in the bigger metro statistical areas, according to Fitch. The central parts of the cities are projected to continue to witness growth owing to the change in demand and are presently being considered to be rather overvalued. Regions that are lacking major fundamental support are also witnessing a shift in housing demand.

Fitch Ratings director Stefan Hilts said that the shifting housing demand signifies that the central parts of the cities will continue to experience growth even in areas that have witnessed stagnant regional prices such as Chicago or Atlanta. 

Fitch reports that after many years of major growth, home prices have finally begun settling into a steady and sustainable phase.

Prices of real estate have only risen by 2.8 per cent year on year, compared to the prior year’s 8 per cent. At the same time, price values of sustainable homes have risen in the developing economy, rising by 2.5 per cent over 2014. This segment posted the highest gains since the latter half of the 1990s.

This shift in demand is noticeable in almost every city that was evaluated. However, it is significantly stronger in developing mid-sized markets such as Denver, Nashville, Cincinnati, and Portland. Home ownership in these regions is likely to remain low since potential buyers choose to live in cities where rentals are more prominent.