Share of Homebuyers Looking to Relocate Jumps to a Record
The rapid rise of home prices coupled with high mortgage rates has changed the behavior of consumers who are planning to buy a home.
Homebuyers have shifted their searches to include cities that are cheaper, allowing their monthly mortgages to fit better within their budgets.
A record number of shoppers are willing to relocate to more affordable areas such as San Antonio and Tampa as the homes in many cities have become cost prohibitive, according to data from real estate firm Redfin (RDFN).
The ability to purchase a home in many cities has been challenging as prices skyrocketed from high demand and low inventory while builders faced supply chain bottlenecks.
During the second quarter, Redfin reported that a record 32.6% of the real estate company’s users nationwide sought to move from one metro area to another. This trend was evident during the first quarter when 32.3% of Redfin’s clients looked at real estate because they wanted to move to a cheaper locale, the company said.
Before the pandemic, the number of people looking at real estate was only 26%.
Cities such as Tampa and San Antonio have become more attractive metro areas for homebuyers because of less expensive housing and cheaper cost-of-living since both cities are located in states that do not impose an income tax.
“The typical home in San Francisco or San Jose now costs more than $1.5 million,” said Taylor Marr, deputy chief economist of Redfin. "Add in today’s 5%-plus mortgage rates and you have a sky-high monthly payment."
Added to the affordability factor, more Americans are free to move to areas distant from their offices, he said.
Cheaper real estate, "along with more companies giving employees the permanent flexibility to work remotely, are driving a larger portion of buyers to consider homes in other parts of the country," he said.
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Getting More House for Less
Often, buyers can double their living space while paying the same price they would pay in a more expensive area, Marr said.
“Someone who would have to stretch beyond their budget in Los Angeles may be able to comfortably afford a home in Phoenix or San Antonio,” said Marr.
As many employers have adopted flexible work environments, allowing people to work remotely, consumers are seeking cities that are selling more affordable homes, he said.
Florida has been popular among people who have moved to other areas and the Sunshine State has seen more people move in during 2022 compared to a year ago.
Miami was the most popular destination in the second quarter, which is the same from the first quarter.
The popularity level is measured by net inflow, which is how many more Redfin.com users looked to move into a city compared to leaving.
Tampa was reported as the second most popular city, followed by Phoenix, Sacramento and Las Vegas.
The other top 10 cities include Cape Coral, Florida, San Diego, North Port, Florida, San Antonio, and Dallas. The metro areas that are warm and located in the Sun Belt are perennial favorites for relocators, Redfin said.
Migration to Florida Continues to Rise
The amount of migration into Florida continues to rise – the number of potential movers into Miami, Tampa, Cape Coral and North Port increased compared to a year ago.
The two cities that are most common origins of home shoppers looking to move into these cities are New York and Chicago.
“Tampa is still attracting a lot of out-of-state homebuyers, coming from places like New York, who can get more for their money in Florida,” said Eric Auciello, a Redfin manager in Tampa. “The spike in mortgage rates has priced some buyers out of the market, but it has also helped ease competition and curb bidding wars between locals and out of towners."
Buyers who used to lose bidding wars now have a chance, he said.
"A lot of buyers who kept getting outbid at the peak of the market are now getting their offers accepted, and in some cases they’re even able to use FHA loans, make smaller down payments and keep the appraisal contingency," Auciello said.
Cities that are popular with more upswing include San Antonio and San Diego as the net inflow in the second quarter was higher than a year ago. Los Angeles is also another common origin city for people relocating to both San Diego and San Antonio.
The net inflow into Phoenix, Sacramento, Las Vegas and Dallas have started to decline compared to 2021. The price increases in those metro areas have been exponential – Phoenix saw its prices increased by 20% year over year to $485,000 in June. Las Vegas also reported massive increases of 23% to $450,000.
Coastal hubs such as San Francisco and New York remain extremely expensive. The amount of migration out of San Francisco has risen while people moving out of New York is falling.
San Francisco was the metro area that had the highest net outflow of any major city during the second quarter, which was the same amount from the first quarter. Net outflow is a measure of how many more people who used Redfin.com looked to move out of a metro area than move in.
The five net outflow cities include Los Angeles, New York, Washington D.C. and Seattle, Redfin said.
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Ellen Chang is a Houston-based freelance journalist who writes articles for U.S. News & World Report. Chang previously covered investing, retirement and personal finance for TheStreet. She focuses her articles on stocks, personal finance, energy and cybersecurity. Her byline has appeared in national business publications, including USA Today, CBS News, Yahoo Finance MSN Money, Bankrate, Kiplinger and Fox Business. Follow her on Twitter at @ellenychang and Instagram at @ellenyinchang.