COVID-19’s Effect on City/Suburb Migration

By: Francesca Micallef & Jamie Hickey

The COVID-19 pandemic affected the housing market worldwide but specifically had an effect on migration from the city to the suburbs in Connecticut. According to the Hartford Business Journal, more than 27,000 people moved from New York City to Connecticut in 2020. Many people who lived and worked in New York City started working remotely due to COVID-19. Being able to work remotely gave civilians the opportunity to move to the suburbs, specifically, in Connecticut. With the demand for Connecticut homes increasing over time during the pandemic, a question arises: Are there enough homes for sale to meet buyer demand? An increase in demand causes prices to increase. Buying a house in Connecticut during the pandemic is more expensive than doing so pre-pandemic, but this is great for the sellers. According to Redfin, home prices statewide were up 3.4 percent year over year in October. At the same time, the number of homes sold fell 19.2 percent, and the number of homes for sale fell 32.7 percent. The general trend of the median sale price for Connecticut homes, as seen in Figure 4, has been increasing over the past three years. This corresponds with the percent of homes sold above list price also increasing over time (see Figure 5). The demand for houses has increased the sale prices, which in turn has caused homes to sell above list price. The issue that arises is the supply of homes for sale. As seen in Figure 6, generally, the number of homes for sale in Connecticut has decreased. Because there are fewer houses available for sale, the prices of the houses on the market have increased because demand is greater. As seen in Figure 4, the median sale price for Connecticut homes has increased over the past three years. The median sale price is significantly higher now compared to before the pandemic hit. The highest median sale price was $340,000 in June of 2021. Figure 4 shows that the pandemic had a significant impact on Connecticut homes’ median sale price. The direction and pace at which home prices are changing are indicators of the strength of the housing market and of whether homes are becoming more or less affordable. The median price of a U.S. home is currently $305,000.

Figure 1 Figure 1

Figure 4: Median Sale Price for CT Homes Year-Over-Year Change

Figure 5: Home Sold Above List Price in CT Year-Over-Year Change

Figure 6: Number of Homes for Sale in CT Year-Over-Year Change

Figure 2 Figure 2

Figure 3

As seen in Figure 5, from January 2021 to June 2021, there was a large spike in the percentage of homes sold above the list price. June 2021 accounted for the highest percentage of homes sold above list price, at 62 percent. The highest median sales price also occurred in June of 2021. Homes that sold above list price likely received multiple offers. A high or growing percentage of homes selling above list price indicates that the housing market is competitive and bidding wars are becoming more common. A low or shrinking percentage of homes selling above list price suggests that the market is becoming less competitive. The number of homes for sale, according to Figure 6, has become less and less over time. June 2021 was a peak for the number of homes for sale at 12,000 homes. The supply of homes for sale has decreased because the demand was high; people were buying more homes than were available. The direction and pace at which housing supply changes indicate whether the options for buyers are increasing or decreasing and can indicate whether homes are lingering on the market or being sold faster than sellers list them. There are currently 10,806 residential homes for sale in the United States. Income is the main factor for why many people moved out of the city and into the suburbs. The average rent for a one-bedroom apartment in New York City is $3,805, which is very expensive for most buyers — especially those who have lost their jobs. Unemployment increased sharply during the pandemic, which contributed to people moving out of the city. Another factor is that people wanted more space because they were working remotely. Working in a one-bedroom apartment with one’s spouse can be difficult when trying to find a quiet space. Also, being quarantined in a tiny space is far from ideal. Needing private space caused many people to move into houses. During the past three years, the median sales prices of homes in Connecticut have increased, along with the percentage of homes sold above list price. The number of homes for sale has decreased in the past three years because more people are moving into Connecticut than are moving out. In the future, we can expect to see these trends continuing. Connecticut houses are becoming more expensive because more people want to live in the state.

Jamie Hickey ’22

Major: Behavioral Economics with a Finance Minor Hometown: Port Jefferson, NY

Francesca Micallef ’22

Major: Business Analytics with a Marketing Analytics Minor Hometown: Warwick, NY

REFERENCES

Redfin. (2020, January). Connecticut Housing Market: House Prices & Trends. https://www.redfin.com/state/Connecticut/housing-market#overview Vasile, Z. (2021, May 5). Study: 27,200 people moved from NYC to CT in 2020. Hartford Business Journal. https://www.hartfordbusiness.com/article/study-27200-peoplemoved-from-nyc-to-ct-in-2020#:%7E:text=Over%2027%2C000%20 people%20left%20New,of%20the%20COVID%2D19%20pandemic