Analysis: Hot RE Markets Have Highest Inflation
Inflation affects home prices – and home prices affect inflation. Metros with more departing residents – San Francisco, New York, etc. – have the lowest inflation rates.
SEATTLE – Four U.S. metros experienced double-digit inflation in the second quarter–Phoenix, Atlanta, Tampa and Miami – and all four were among the most popular migration destinations for Americans, according to a new report from Redfin.com.
With inflation, home prices are a chicken-or-egg event: They’re both a result of inflation and a cause of it.
At No. 1 in the study, Phoenix saw the average prices of goods and services rise 11.3% year-over-year in the second quarter, the highest inflation rate of the metros in the analysis. Phoenix was also the third-most popular destination for those Redfin.com users looking to move from one metro to another.
Atlanta, the 12th-most popular move-to destination, had the second highest inflation rate at 10.9%, and Tampa (10.6%) clocked in at number three for inflation and number two for migration. Miami, the most popular destination, had the fourth-highest inflation rate (10%).
Lower inflation in moving-out metros
The places homebuyers are leaving tend to have lower inflation rates. San Francisco tops the list of metros Redfin.com users looked to leave in the second quarter, and prices there rose a more modest 5.6% – the lowest inflation rate of the metros in the analysis and half that of Phoenix.
New York had the second-lowest inflation rate (5.9%), and it’s number three on the list of places homebuyers are leaving. Los Angeles (8%), Washington, D.C. (7.1%) and Seattle (8.9%), which round out the top five metros homebuyers are leaving, have inflation rates near the middle of the pack.
“A place’s popularity has a big impact on how much its local prices go up,” says Redfin Deputy Chief Economist Taylor Marr. “An influx of people moving into a place like Phoenix or Tampa pushes up demand for everything from housing to food to fuel, which pushes up prices in all those areas and ultimately contributes to overall inflation.”
As a result, inflation may have a harsher impact on long-term residents of hot real estate metros. They may not only be priced out of the housing market once you factor in wages that can’t keep up, but also forced to pay for daily-expense items.
While it’s too early to predict the future, rising home prices and inflation in hot real estate markets could, one day, even out the financial benefit of living in a city such as Phoenix compared to San Francisco, the study’s authors suggest.
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