US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

Urban Living Transitions: Tier 2 Cities, the Suburbs, & Rural Areas

A much discussed trend of the last few years is the pandemic era exodus from cities to the suburbs and rural areas…and potentially back again.

However, something to keep in mind: the Census figures being discussed in many of these articles are for the actual city boundaries, not metro areas. So when you see cities like Chicago and New York losing population, it includes people shifting to the suburbs just outside the city limits. In that way, it is still counted as the city losing population, even though people may not have moved that far away.

What makes those who move away from urban centers more likely to stick with their choice? It depends on their homeownership status and if they have kids. Homeowners are stickier in their location than renters are as the transaction costs to sell are much higher than moving at the end of a lease (or even breaking a lease, in many cases). Additionally, the move to the suburbs for the schools and larger yard when you have kids is an old story that repeats with each generation.

Still, for every article that has Millennials loving their new exurban lifestyle, there are ones about pandemic homebuyers who are miserable with the move to homeownership. They have maintenance responsibilities they didn’t have as renters and might be house-poor now, lacking the cash for the travel and events they would like to resume as the pandemic feelings ease.

But what are the effects of this movement – no matter the direction?

There are many implications to this trend. From building construction needs to the type of things consumers will be spending their money on. For instance, if you have that house now, are you investing in lawn and garden care equipment and supplies? Are you investing in a new deck? Are you buying paint and furniture? Or are you spending on travel and events and dining out?

Furthermore, this shift has implications also for infrastructure. Can investment in public transport and urban bike lanes be justified if city populations are falling and fewer people are commuting into the city?

This move to smaller cities, suburbs, and rural areas could also cause trends to spread differently. Classically, as people move, they take their tastes and preferences with them to their new homes. A primary example is the spread of international food trends along with immigration. While urban centers of Tier 1 cities are often the source of trends – from food to recreation to style and beyond – that might change. First, those leaving the urban centers will bring those tastes with them and businesses will form in smaller cities and suburban areas to give them what they want.

So not only will moving to the suburbs change the habits and preferences of the former urban dwellers, but their movement into the suburbs and rural areas will change these locations by their arrival. This could lead to trends spreading faster into smaller cities and rural areas.

What should we watch? Remote work trends are worth watching as it is a good part of seeing whether the exodus from urban centers holds. As more people no longer needed to consider commute times in selecting where to live, they could cast their real estate nets a little wider, sometimes even out of state. This opened up options to these people, and since they bought homes, they are now more sticky in their location compared to urban renters.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, especially coverage in Construction & Building Products, Consumer Goods markets, and Automotive & Transport industries. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

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