High Rates and Prices are Pushing Home Buyers Out of These 10 Cities
We’ve all heard stories of couples who, despite earning over $150,000 each, moved to Austin or Santa Fe after not being able to find a home anywhere in the San Francisco Bay Area.
This trend reached a head after the COVID-19 pandemic allowed many who otherwise wouldn’t have that opportunity to work from home and therefore anywhere. As a result, the big-city lifestyle, the sky-high rents and lack of apartment space became more and more difficult to justify.
So Which Cities Are Homebuyers Leaving?
Last month, real estate listings platform Redfin reported that 32.6% of its users were looking to move from one city to another in the second quarter of 2022. And the cities that buyers were looking to leave in the greatest numbers were San Francisco and Los Angeles.
California’s sky-high prices have long been the stuff of lore, so it’s hardly surprising that the the state’s two biggest cities topped Redfin’s list. New York came third while Seattle and Washington, D.C. also made the top five.
Particularly for the top five cities, the phenomenon most often reflects being priced out — not just from the lack of affordable houses on the market but also due to the high cost of living in popular metropolises.
“The typical home in San Francisco or San Jose now costs more than $1.5 million,” Redfin Deputy Chief Economist Taylor Marr said in a statement. “Add in today’s 5%-plus mortgage rates and you have a sky-high monthly payment.”
Boston, Detroit, Denver, Chicago and Minneapolis were the other cities to make the July survey.
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While these are all big and expensive cities, the migration flow is also not as simple as the age-old story of “people moving to the suburbs.”
Big cities like Miami, Tampa, Phoenix, Sacramento and Las Vegas were the ones that saw the largest inflow of residents.
Does That Mean I Shouldn’t Buy In These Places?
The conclusion that most often gets drawn from these reports is to run where the people are going — particularly for smaller towns and cities, many want to invest before a place is ready to “explode.”
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But unless one knows the real estate market well (and is willing to either move or hire a company to do manage business in another city), chasing cities that are popular now often turns into a fruitless errand — overly confident developers often build as though a current uptick in a given area’s residents will continue indefinitely (it rarely does as new small cities become “trendy.”)
This situation is already being observed in Las Vegas, where the median home price fell for the second month in a row this July.
When it comes to cities like New York and San Francisco, a spacious and centrally-located apartment is unlikely to be a bad long-term investment but requires the very high entry point that prices many out of the market entirely and keeps the real estate circle spinning.
“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,” says Tampa Redfin manager Eric Auciello. “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.”
