NEW YORK -- Amid stabilizing U.S. home price growth lies a demographic shift that is underway across much of the country, according to Fitch Ratings in its latest quarterly sustainable home price report.
Significant demand is returning to city centers following decades of suburban and exurban growth. Since 2000, home prices have grown 50% faster in urban centers than in the broader MSA areas, with population growth trends beginning to favor city centers as well. 'This demand shift implies that city centers will continue to see growth even where regional prices have been stagnant, such as Atlanta or Chicago," said Director Stefan Hilts.
This trend is clear in nearly every city analyzed, but seems to be particularly strong amongst growing mid-sized markets, including Nashville, Denver, Portland, and Cincinnati. With increased preference for urban living, one implication going forward is 'the likelihood for home ownership rates to remain persistently low and declining as more potential buyers opt to live in cities where rentals dominate,' said Hilts.
This shift in demand comes amid a high level of sustainability nationally, with the median city now 2% undervalued, and only 46 markets more than 10% overvalued. There is also evidence of price moderation in the Texas MSAs, including Houston, Austin, and Midland, which have been amongst the most overvalued in Fitch's recent reports. That said, booming cities like San Francisco continue to see prices skyrocket.