How home prices have changed by neighborhood type - and what these changes mean for the future

Looking today at home value changes by neighborhood type.

Even within a region, prices and price changes can vary widely by neighborhood type. A lower-cost rural neighborhood won’t necessarily have the same price growth pressures - or price growth prospects - as high-priced downtown neighborhoods. As such, Homeworthi categorizes every neighborhood by its price and development intensity. The price and development categories are listed below.

Price tiers are based on comparative median, typical, and upper quartile home values, but as of 2022 they generally equate to $450,000 and above for premium neighborhoods, $200,000 - $450,000 for moderate priced neighborhoods, and under $200,000 for affordable neighborhoods.
Development categories are based on comparative densities of residential and non-residential uses.

Over the past year, price changes have differed among neighborhood types. Moderately priced neighborhoods have on the whole outperformed affordable and premium markets, though the differences are fairly slight. However, development intensity continues to be a major differentiator in price growth, with rural and suburban neighborhoods outperforming denser, more development-intense neighborhoods. In fact, price growth in rural and suburban neighborhoods was nearly 50% higher than intown and downtown neighborhoods (though both neighborhood types still had double-digit price growth in 2021).

Moderately priced neighborhoods and lower-density neighborhoods outperformed other neighborhood types in 2021

Interestingly, if we combine price and development intensity as Homeworthi does in its evaluations, some interesting patterns emerged:

Premium Priced Rural neighborhoods had the highest return last year while other premium neighborhoods were at or below market-rate returns.

And not all dense neighborhoods did poorly.

- Notably premium-priced rural neighborhoods had the highest price increase of any neighborhood type, with the average neighborhood home value increasing 21%. It's pretty clear that wealthier households continued to prefer open space over dense access. Premium rural and suburban neighborhoods, strongly outperformed premium neighborhoods in and around downtowns: in fact, premium downtown and in-town neighborhoods were by far the worst performers.

- Despite density being a drag on prices overall, affordable downtowns and moderately-priced intowns returned average to above-average rates. Importantly, this may be an early signal of a return to cities, at least for those not in the highest income brackets.