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The great debate: City vs. suburbs

What we'll cover

  • Why should you buy property in the suburbs 

  • When you should buy within city limits

  • The impact of jumbo loans

In movies and on TV, city life is as glamorous as it gets. But many people who have made the move to a bigger city know the stars can fade from your eyes soon after seeing the price of housing. Still, the convenience, opportunities and energy offered by urban living often make up for expensive real estate. When it comes time to buying, though, the suburbs can start to look nice as you compare prices, sizes and how much space your money can buy outside the city proper.

Why settle in the suburbs?

It’s simple: You can get a lot more bang for your buck. The average price per square foot tends to be lower in suburban areas compared to their nearby cities, meaning you can get a bigger home and more space for the same as what you’d pay in the city. For current or hopeful families, folks who crave a yard and outdoor space or anyone who wants some space between them and their closest neighbor, the suburbs can provide a lot more room to grow.

The suburbs have also grown in appeal since 2020 as work-from-home has taken over. While some employees are starting to return to in-person work, many businesses are moving toward more flexible models — meaning commuting to the office isn’t as much of a necessity as it once was. With increased flexibility by employers on working from home, homebuyers can more easily relocate to the ’burbs without worrying about daily long train rides or rush-hour traffic.

The national average home sale price is $267,717, 15% below the average in 2020. Going down in chi-town. The median sale price in Chicago city proper is $312,500, while the median sale price in Chicago metro area is $242,168. NYC or not for me? The average cost per square foot is $1,376 in Manhattan and $334 in Montclair, NJ. The average home price is 2.2 million dollars in Manhattan and $609,550 in Long Island.

Why buy within city limits?

While the cost of real estate in most cities around the country exceeds that of surrounding suburbs, the perks of urban living are compensation enough for many. From neighborhood walkability and easy access to shops, restaurants, entertainment and more, to convenient public transit and quick commutes to work, certain benefits of city life are tough to beat. Cities also tend to host a variety of different cultures, offering more opportunity for new and diverse experiences and activities.

For many, having everything you could want at your fingertips is worth the price of urban real estate — and money saved on cars and other transportation costs can help reduce the overall cost of living in a city.

Space vs. city life. In the San Francisco, New York and Seattle metros, urban ZIP codes are typically 20 to 50% more expensive than suburban. In the Cleveland, Cincinnati, Indianapolis and Kansas City metros, urban ZIP codes are 20% to 60% lower than suburban. Going back to Cali. The average home value in Los Angeles is nearly $200,000 more than the state average. The number one real estate market to watch in 2021 is Raleigh/Durham, North Carolina.

What’s trending?

As the coronavirus developed, some believed a mass exodus from cities would cause suburban markets to explode in popularity. But while urban dwellers were opting for more spacious living quarters during the quarantine era, housing markets in both cities and their surrounding towns generally grew stronger. Overall, home values increased nearly everywhere around the country.

As mortgage rates reached historical lows, buyer demand soared. With more shoppers on the market than homes for sale, property values enjoyed a boost. In fact, from 2020 to early 2021, the average price of homes in urban areas increased an average of 15.9% — while houses in suburban neighborhoods increased just slightly less at 15.5%.

Jumbo loans, jumbo spaces

No matter where you decide is right for you to put roots down, you’ll likely take out a mortgage to finance the cost of your home. And depending on the cost of the property as well as the location, a jumbo loan might be necessary.

Jumbo loans are those that exceed the limit of conforming loans, which is $548,250 in most regions of the country and $822,375 in certain high-cost areas, like Washington D.C. and several counties in California.

If you’re looking for a home in the city where properties tend to be more expensive for less space, be prepared to need a jumbo loan. Because jumbo loans are larger than a typical mortgage, buyers must often meet stricter requirements to qualify, such as higher credit scores and greater down payments. When searching for your next house, it’s a good idea to know the conforming loan limits in the area in case you need to take out a jumbo loan. For example, the average price of a single-family home in certain downtown Chicago neighborhoods far exceeds the conforming loan limits — meaning buying there will almost certainly require a jumbo mortgage.

Should you opt for the suburbs, you may have an easier time avoiding the need for a jumbo loan — and you may be able to score a home with jumbo space while you’re at it.

Make your move

In the city vs. suburb debate, there’s no obvious winner. Both areas offer benefits and drawbacks worth considering — and each has die-hard fans. At the end of the day, it comes down to deciding which kind of neighborhood fits your lifestyle and works best with your wallet.

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