Rising Housing Costs Pushing Homebuyers Towards More Affordable Metros

Mortgage News May 10, 2023

According to Redfin’s records, in Q1, there was a decline of 4.2% in the number of people using Redfin.com to search for a new metro to relocate to, compared to the previous year. In contrast, there was a larger drop of 15.6% for those searching to move within their current metro, which is the largest decline in Redfin’s records.

Amid the slowdown in the housing market after the pandemic-induced home-buying frenzy, home searches in distant locations have fared better than those within the same metropolitan area. This is primarily due to high mortgage rates, elevated home prices, and inflation, which have prompted many buyers, especially remote workers with flexibility, to consider more affordable areas. Cities like Phoenix, Las Vegas, and some regions of Florida, which offer relatively lower costs of living, have emerged as some of the most sought-after locations in the country.

Shay Stein, a Redfin agent in Las Vegas, explained that the city is drawing many homebuyers from expensive western states such as California, Hawaii, and Washington. The primary attraction for these buyers is affordability, as Las Vegas has no state income tax, low property taxes, and a reasonable cost of living. Furthermore, some buyers relocating from out of town have significant cash reserves, enabling them to pay for the property upfront, making the current elevated interest rates insignificant for them.

In late 2020 and early 2021, homebuyers’ searches for properties located outside of their current metro area increased significantly, as remote workers took advantage of low mortgage rates and the flexibility to work from anywhere. Although searches for properties close to home also increased, the rise was not nearly as significant.

The proportion of homebuyers looking to relocate to a new area has increased significantly and now constitutes a larger share of the overall homebuying market. In the first quarter, a record 25.1% of Redfin.com home searchers were seeking properties in a new metropolitan area, compared to 22.8% the previous year and approximately 18% before the pandemic.

The following are the top 10 metros that homebuyers are leaving:

  1. San Francisco
  2. New York
  3. Los Angeles
  4. Washington, D.C.
  5. Boston
  6. Seattle
  7. Chicago
  8. Denver
  9. Hartford, CT
  10. Minneapolis, MN

The following are the top 10 metros that homebuyers are moving into:

  1. Miami
  2. Phoenix
  3. Las Vegas
  4. Tampa, FL
  5. Orlando, FL
  6. Sacramento, CA
  7. Cape Coral, FL
  8. North Port-Sarasota, FL
  9. Dallas
  10. Houston

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