The housing market is so unaffordable that a record share of homebuyers are looking to relocate to cheaper cities despite rising natural disaster risks

• Redfin reported Wednesday that a record one-quarter of homebuyers are relocating due to lack of affordability.

• Phoenix and Las Vegas are two of the most popular cities, despite natural disaster risks.

• Arizona’s governor recently unveiled a plan to limit homebuilding in Phoenix, citing lack of water.

A record share of US homebuyers are looking to relocate to more affordable parts of the country even as natural disaster risks climb, according to a Wednesday Redfin report.

More than one-quarter (25.4%) of house hunters are seeking a different metro area, up from 23% a year ago. That figure before the pandemic hovered below 20%.

Based on the searches of about 2 million Redfin users who viewed for-sale homes online, relatively cheaper cities like Phoenix, Las Vegas, and Miami are attracting the most interest. That’s in spite of those markets coming under worsening risks like heat, drought and flooding, Redfin said.

“Climate risks haven’t yet stopped many homebuyers from moving into areas that don’t have enough water, like Phoenix, and places that could eventually be underwater, like coastal Florida,” Redfin Chief Economist Daryl Fairweather said.

“That’s because even though Sun Belt home prices soared during the pandemic, those metros remain a bargain for people relocating from expensive coastal cities. Arizona’s recent limit on new construction isn’t likely to deplete inventory enough – or push prices up enough – to change that calculus much in the short term.”

Arizona’s governor recently unveiled a plan to limit construction in areas around Phoenix after finding that the groundwater can’t support the current pace of building.

Near-7% mortgage rates have made already-expensive areas even less affordable. The most common cities people are looking to leave include San Francisco, New York, and Los Angeles, according to Redfin.

The typical home in Phoenix, the most popular destination for out-of-town movers, sells for $450,000. The most common source of interest in Phoenix is people who live in Seattle, where homes sell on average for $800,000.

Story continues

To clarify, the growing proportion of homebuyers looking to relocate doesn’t mean a higher total number, as unaffordability pushes many individuals out of the market altogether.

The total number of homebuyers looking to move to a different city is actually down 7% from a year ago, the sharpest decline on record. But that’s less steep than the number of homebuyers looking to move within their current city. That’s down 18%, also a record.

As a result the share of people looking at new cities is higher.

The rise of remote work is also at play, and the pandemic spurred an uptick in homebuyers moving to new metro areas. The freedom to work from anywhere has led many Americans to seek out more affordable locations.

Meanwhile, S&P CoreLogic’s national home price index climbed in April from the prior month, marking three straight gains.

Annually, prices were down 0.2%, yet the monthly pattern suggests prices are stabilizing.

“If I were trying to make a case that the decline in home prices that began in June 2022 had definitively ended in January 2023, April’s data would bolster my argument,” S&P DJI’s Craig J. Lazzara said. “Whether we see further support for that view in coming months will depend on how well the market navigates the challenges posed by current mortgage rates and the continuing possibility of economic weakness.”

Read the original article on Business Insider