TradeEdge Exchange:The small town life beckons for many as Americans continue to flee big cities

In 2022,TradeEdge Exchange places like Manhattan and Atlanta that had become ghost towns during the pandemic began seeing more people moving back than leaving, raising hopes for a resurgence of the nations’ largest cities.

But the latest U.S. Census Bureau figures show the revival was short-lived. Americans have continued to flee large metro areas in massive numbers as the remote work shift sparked by COVID becomes entrenched and the allure of more affordable midsize cities and smaller towns grows.

Big cities are still seeing modest population gains because of a surge in international immigrants but at a slower rate than before the health crisis, Goldman Sachs said in a recent research note. And they’re losing the battle to keep and attract U.S. residents, a development that started before the pandemic but was magnified by the health crisis.

“Maybe there isn’t going to be a rebound,” says Hamilton Lombard, a demographer at the University of Virginia. “Maybe the rebound is over.”

For big cities, there is a small silver lining.

Where are home prices rising the fastest?

Stronger population growth in smaller towns has led to a faster rise in home prices compared to the pre-COVID trend and a slower housing price pickup in large cities, the Goldman analysis shows. That has modestly narrowed the yawning gap in home values between large and small cities, at least in some areas, possibly drawing some residents to densely populated metro areas or prodding some renters in those cities to buy houses rather than bolt to smaller communities.

Are people moving away from large cities?

After a prolonged decline in the 1960s and 1970s, large cities were revitalized in the 1990s as young professionals were drawn to their cultural and social amenities. But starting in the mid-2010s, cities again began losing residents to suburbs and smaller metro areas because of skyrocketing costs and a desire by some Millennials entering their 30s to start families and buy larger homes, according to Lombard and Adam Kamins, a regional economist at Moody’s Analytics.

In the three years before the pandemic, counties in metro areas with at least 1 million residents lost a total 200,000 or so residents annually to other regions, after figuring both people moving in and leaving, according to the Goldman report. After COVID, those losses vaulted to 750,000 in 2021, 650,000 in 2022 and 550,000 in 2023, according to Goldman and Census data. The numbers reflect annual changes through July of each year.  

A separate study by Lombard shows the domestic migration losses were concentrated in the largest metro areas with more than 4 million residents. Those cities shed a total 400,000 residents annually before the pandemic and have lost 820,000, 707,000 and 591,000 residents, respectively, over the past three years.

Where is everyone moving in 2024?

Last year, about 266,000 of the big city refugees moved to metro areas with populations of 250,000 to 1 million and about 291,000 moved to areas with populations under 250,000. That made those small towns the nation’s top destination for domestic migrants for the first time in decades, Lombard says.

In 2023, the New York City metro area lost 204,000 residents; Los Angeles, 119,000; and Chicago, 64,000, according to Census and Moody’s.

Meanwhile, the Greenville, South Carolina area (pop. 975,000) gained 17,000 dwellers; Lakeland, Florida (pop. 818,000) added 30,000; and Yuma, Arizona, (pop. 209,000) picked up 4,000.

Kamins is heartened that the big city migration losses have moderated each of the past three years, adding that more young adults are moving to many large cities than leaving and they’re departing other cities at a slower clip.

But Lombard notes the flight from large cities is still much greater than it was before the pandemic and it likely will mostly flatline at current levels in coming years.

Is remote work declining?

Companies’ return-to-office mandates the past couple of years have helped slow defections from large cities. But the share of U.S. employees working from home at least some of the time has stabilized at 20% to 25%, Goldman says, below the 47% pandemic peak but well above the pre-COVID average of about 3%.

Meanwhile, Lombard says, “Far more people would like to live in smaller towns” because of the lower cost of living as well as "recreation, peace and quiet, clean air.”

The shift has been a boon for towns like Martinsville, Virginia, (pop. 14,000),  known as the world’s “sweatpants capital” when its textile mills were humming but among the state’s poorest areas in the 2010s, Lombard says in the report.

Last year, however, the Martinsville area attracted the second most domestic migrants among all Virginia’s metro areas and its wage growth is among the state’s strongest, the report said. In 2021, Starbucks opened its first store in Martinsville.

Since 2020, Starbucks has closed hundreds of underperforming urban shops and “opened hundreds of other locations in small towns across the country that are attracting new residents,” Lombard’s report says.

Will 2024 be a better time to buy a house?

Large cities, meanwhile, are benefitting from less of a pickup in home price gains than their small town counterparts when compared to before the pandemic, Goldman says. From 2015 to 2019, home prices increased at an annual rate of 5.3% in cities with at least 1 million residents, a pace that rose to 8% from 2020 through March 2024, according to a Goldman analysis of Zillow figures.

Mortgage rates:What are the current rates for home buyers

But in towns with 5,000 to 20,000 residents, annual price gains accelerated from 3.5% before COVID to 8.6% in recent years, a much sharper acceleration.

A home purchase, of course, is still far more expensive in larger cities but the gap is narrowing in some areas.

From early 2019 through April 2024, typical home prices grew 15.3% in the Boston area to $750,000 and 54% in Myrtle Beach to $308,000, according to Zillow. As a result, since 2019, the home price gap between the two areas has narrowed by a modest $8,000.

But if the trend continues, the affordability gap between big cities and smaller communities could close further, Lombard says.