Fitch: Cities outperform suburbs

Housing in cities centers have increased in value by 50 percent more than surrounding metro areas in the last two decades, according to the financial rating agency Fitch.

Housing in cities centers have increased in value by 50 percent more than surrounding metro areas in the last two decades, according to the financial rating agency Fitch. :

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. 

Joe Cortright of City Observatory said the Fitch report was, for urbanists, maybe the most under-reported story of the year. He as a "Dow Jones Index" for cities. 

Cortright described the Fitch method:

"Fitch’s analysts looked at 25 years worth of zip code level home price data in 50 of the nation’s largest metropolitan areas to track how well city centers performed compared to surrounding neighborhoods and suburbs.  They divided zip codes within metropolitan areas into four groups based on their proximity to the city center."

Also notable, according to Cortright, is Fitch's mention of "walkable centers" as a significant factor in demand for housing. "A key factor in the attractiveness of city living is walkability, and various studies have shown that increases in the walk score are associated with higher home values."

Robert Steuteville is editor and executive director of Better Cities & Towns.