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Americans migrate away from big cities amid COVID-19

Yahoo Finance’s Alexis Christoforous and Brian Sozzi discuss Housing Starts and the Realtor.com Hottest Zip Codes report with Danielle Hale, Realtor.com Chief Economist.

Video Transcript

ALEXIS CHRISTOFOROUS: Looks like homebuilders have been pretty busy this summer. Housing starts surged 22.6% last month while building permits, a sign of future building, soared 18.8%.

And there's more evidence today that Americans are migrating away from cities and looking for more space as we all work from home during this pandemic. Realtor.com is out with its latest list of hottest zip codes, and it's a lot of smaller cities or suburban interviews.

Here to talk about it in an interview you'll see first on Yahoo Finance is Danielle Hale, Chief Economist at Realtor.com. Daniel, good morning to you. As I look through this list, the thing that stuck out to me is a lot of these hot zip codes are in the Northeast. The West Coast used to be king. What happened here?

DANIELLE HALE: Yeah, absolutely right, Alexis. The East Coast really did well this year. There are a couple of reasons for that. One, it's done a better job of keeping up with building and helping-- that helps homes stay affordable. So on the West Coast and California in particular, we've seen prices rise very fast. We see price increases in the Northeast but not nearly as much.

And the second reason is that this list is taken from a post-COVID period. So as I'm sure you remember, the Northeast, especially New York, was hit particularly hard by the coronavirus early on. But since that time, it's really recovered. And as the economy has recovered, so too has the housing market, and that's why we're seeing a lot of Northeast metros on this list this year.

BRIAN SOZZI: Is city living just a thing of the past in this post-COVID world?

DANIELLE HALE: You know, Brian, everyone's worrying about that, but I don't think that's the case. Certainly we have seen a migration away from the cities. Some of that may, in fact, be permanent. Already there was a trend towards younger buyers as they're coming of age, settling down, maybe having a family, looking for more space, and that tends to lead people to look in the suburbs. So that was already happening.

Now with this extra time at home trying to live, work, play, do schooling all in the same space, people are even more interested in extra space. And so that's accentuated this ongoing trend toward the suburbs.

That said, young people, empty nesters, there's a lot of people who will still prefer the city. It's got culture. It's got nightlife. It's got close proximity to everything-- young people starting out in their careers who want to be really close to the office so they can make a good impression. There are lots of reasons to stay in the city depending on what stage of life you're at.

ALEXIS CHRISTOFOROUS: Let's tick through some of these. Number-one-hottest zip code, Colorado Springs, Colorado, followed by-- get this-- Reynoldsburg, Ohio, and Rochester, New York. Why do you think?

DANIELLE HALE: So you've got broad representation of the US there-- a Western zip, a Midwest zip, and a Northeast zip. Each of these areas have affordable home prices, and that's really helping to draw buyers in. And because buyers are interested in that affordability, homes in these zip codes are selling fast. So that's propelling them to the top of our hottest-zips list this year.

ALEXIS CHRISTOFOROUS: Any big surprises for you here? I mean, other than that-- I was surprised to see Rochester. I love Rochester but surprised to see it in the top-three hottest zip codes.

DANIELLE HALE: Yeah, Rochester has done a lot to revitalize its downtown area, so that is appealing to folks who are looking for an area that has big-city-like amenities without a lot of the big-city problems. You don't have as much traffic, and you've also got more affordability. So you can sort of have the best of the suburbs with, you know, some features that are a lot like living in a big city too.

Rochester's got a major university. It's got, you know, major corporate headquarters there. So there's a lot going on in Rochester.

BRIAN SOZZI: Danielle, why are some of these houses so darned cheap? You know, I look at the zip code. Maybe a lake nearby. Drop a fishing pole in there. Catch some fish for dinner. I mean, it looks like somewhat relaxing places to go, but some of the prices here, wow, downright cheap.

DANIELLE HALE: Yeah, I mean, location has a big factor in how much homes cost, right? So if you're in a city where land is in super high demand like New York City, for example, that's going to necessarily make the homes more expensive in that area. You know, as you go to these secondary markets, suburban areas, the land is less expensive. That enables builders to, you know, get that land for a good price and put up a home, and it's much more affordable, and it helps keep the existing properties more affordable too because there's a steady supply of new construction.

In New York, land's expensive. You've also got, you know, limited availability of land, so that helps push prices up. So that's what enables these suburbs and secondary metros to stay affordable even as bigger-city major metros get more expensive.

ALEXIS CHRISTOFOROUS: All right, fascinating stuff. Hottest zip codes in the country right now. Danielle Hale, chief economist at Realtor.com, thanks for being with us.

DANIELLE HALE: My pleasure.