Throughout the Pandemic Recession we’ve tracked a massive home upgrade cycle as Americans spruced up their houses amid more time spent there. Today, we want to shift our focus from the cyclical side of this discussion to a structural theme that will extend beyond the public health crisis: the suburbanization of America. A combination of low mortgage rates plus wanting additional space and a more controllable home environment contributed to many Americans moving out of urban and into suburban residences over the last year.
A slew of Google Trends search volumes shows the magnitude of this shift, since moving from an apartment in a city to a larger house in the suburbs requires many new purchases. Therefore, let’s first start with Google queries for “buy house” over the last 5 years to baseline this discussion:
- Searches for “buy house” first broke out to new highs in April 2020, with an elevated level of interest extending through early August ahead of back-to-school. Queries have picked up again this year and are currently at a 5-year peak.
- Importantly, states with the highest relative “buy house” searches are those with large urban centers from which to move. For example, Massachusetts, California, New York, New Jersey and Virginia all fall within the top 10.
Takeaway: more Americans are searching for a house now than at any point in the last 5 years even after a significant rise in Google queries last Spring and Summer. This interest is coming from states with large urban areas, and are explicitly searches for a “house”, not “apartment” or “condo” (where query volumes are not rising). Lastly, search volumes now are 70 – 100 percent higher than pre-pandemic levels. This tells us that incremental house buying interest is secular and not simply tied to either demographic trends (millennial first time home buying) or one-off pandemic effects.
Next, a car is a necessary purchase to move from the city to the suburbs in order to get to work and run errands. Here is a chart of Google queries for “buy car” over the last 5 years:
- Searches for “buy car” collapsed after lockdowns in March 2020 but rebounded to a 5-year high in May 2020, also when interest in buying a house picked up materially.
- Queries made a new 5-year high last month as searches to buy a house started gaining more steam again this year. Interest in buying a car is still at the upper band of pre-pandemic levels.
Takeaway: it is hard to explain the last year’s resilient US new/used car demand without the “suburbanization” theme we’re outlining today. A piece of last year’s demand was certainly due to commuters’ reluctance to use mass transit. This year’s Google Trends data, light vehicle sales, and sky-high used car prices say something else is going on now.
Now, let’s turn to other home-related purchases required for a house, but not necessarily an apartment.
First, a durable goods purchase, such as a “washer and dryer” over the last 5 years:
- Queries for “washer and dryer” dropped after shutdowns in March of last year but have recovered to levels even higher than pre-pandemic.
- After hitting a 5-year high this past March, searches are set to break out again to a new peak this month.
Takeaway: even the lows in searches for “washer and dryer” over the last year were at the upper range of pre-pandemic levels. It’s more common to need these machines for a house than an apartment in the city which often includes communal equipment, so this data fits with the trend of suburbanization over the last year.
Second, queries for “patio furniture” (unnecessary in an apartment, virtually required in the suburbs) over the last 5 years:
- Searches for “patio furniture” typically peak in May of each year but exploded during that month in 2020. Queries were up 88 percent versus the prior 5-year high in 2016.
- Current interest bests this time last year and is also on track to make a new 5-year high.
Takeaway: Former urbanites moving to the suburbs clearly wanted to enjoy sitting outside last Summer amid stay-at-home orders, but this year’s search interest fits with our idea that suburbanization is a secular, not one-off pandemic-inspired, theme.
Lastly, searches for “curtains” over the last 5 years:
- Queries for “curtains” spiked to a 5-year high after lockdowns in May 2020 and have mostly remained above pre-pandemic levels since.
- Current interest matches the highs before the public health crisis over the last few years, and searches are on track to break out again.
Takeaway: while apartment dwellers certainly need curtains for privacy in a dense urban area, they need many more to cover the windows of an entire house. This chart is therefore emblematic of Americans moving into larger spaces since, as with all the other charts we’re showing you, post-pandemic interest is 50-100 percent above pre-2020 levels.
Bottom line: permanent moves from cities to suburbs are a lasting structural shift in American life, perhaps the single most important investment theme to come out of the pandemic. This transition is a positive for US consumption as buying all the necessary durable goods, consumables and furniture for a new home takes time. The long-term trends of deurbanization help explain why Home Depot and Lowes continue to trade around record highs. While incremental house buying is typically an early cycle phenomenon, the unique nature of the pandemic super charged this trend as families reimagine how they want to live. The shift we’ve outlined today is certainly not as large as post-World War II suburbanization of America, but in our view it is significant enough to be a major investment theme over the coming years.