A record-high number of homebuyers are looking to relocate to more affordable areas as high home prices and mortgage rates limit their ability to buy homes in many U.S. cities, according to a new report released Monday by the online brokerage Redfin.
It found that 32.6 percent of Redfin users nationwide are looking to move from one metropolitan area to another during the second quarter of 2022, a slight increase from the 32.3 percent of users looking to relocate during the first quarter.
The increase comes as the housing market starts to slow with higher mortgage rates resulting in slowing sales and higher inventory and with more and more Americans priced out of homeownership. The report posits that those who can still afford to buy are looking to relocate to more affordable areas where their dollars goes further.
“The typical home in San Francisco or San Jose now costs more than $1.5 million. Add in today’s 5 percent-plus mortgage rates and you have a sky-high monthly payment,” Redfin Deputy Chief Economist Taylor Marr said in a statement. “Those factors, 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. 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.”
The report found outsize demand is continuing in Florida’s cities, which saw a huge increase in demand during the pandemic but remain relatively affordable compared to other parts of the country.
Miami was found to be the most popular relocation destination during the second quarter unchanged from the first quarter, with fellow Florida city Tampa coming in second and relocation hotspot Phoenix, Arizona coming in third followed by Sacramento, California, and Las Vegas, Nevada.
Migration to Florida is showing no signs of slowing, with more people moving there during 2022 than in 2021. The most common sources of these outflows are New York and Chicago, according to the report.
Meanwhile, inflow into Phoenix, Sacramento, Las Vegas, and Dallas, Texas has slowed, due in part to high prices deterring buyers. Prices in Phoenix rose 20 percent year-over-year to $485,000 in June and rose 23 percent in Las Vegas to $450,000. Those areas remain significantly more affordable than coastal cities like New York and Los Angeles, though.
“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,” Eric Auciello, a Redfin manager in Tampa said in a statement. “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. 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.”