- A record number of home buyers look to new metros in search of affordability in the latest Redfin report, with 24.6% of Redfin.com users looking to relocate in the fourth quarter of 2022.
- Migrating home buyers are motivated by economic uncertainty, high housing costs, the flexibility of remote work and the allure of more affordable housing options.
Economic uncertainty and 6%-plus mortgage rates had many would-be buyers on the sidelines in the final quarter of 2022. About a quarter of those still buying looked outside their own metro for their new homes.
The allure of more affordable options, combined with the flexibility of remote work, made it easier for some. The significantly lower cost of housing outside their usual haunting grounds justified the hassle and cost of moving.
Here are the highlights from the latest Redfin report.
A record number of Redfin.com users looking to relocate in Q4 2022
That record share of Redfin.com users looking to relocate in Q4 2022 is up from 22.1% in Q4 2021 and about 18% before the COVID pandemic.
Remote work has freed more Redfin.com users to seek out more affordable housing options outside their current metro, drawn by the prospect of saving hundreds or even thousands of dollars a month in housing costs.
Elevated mortgage rates, persistently high home prices, and economic uncertainty are a potent mix. It was just a matter of time before home buyers with the flexibility to do so would look outside their relatively pricey metros for more affordable ones.
Those same factors naturally caused a shrinkage in the overall pool of buyers. Pending home sales in the fourth quarter of 2022 were down over 30% compared to a year earlier.
Many homeowners are still reluctant to move because of the lock-in effect, not wanting to trade their relatively low mortgage rates (around 3%) for rates above 6%.
In eight of the top 10 migration destinations, fewer home buyers were looking to move in the fourth quarter of 2022 compared to a year earlier.
Net inflows for the most popular destinations on the list—Sacramento and Las Vegas—were around 5,500 in Q4, down from about 6,500 in Q4 2021. For Phoenix, which had a net inflow of over 8,000, the number shrank to about 4,000 in the fourth quarter.
Net inflow is the number of people looking to move into a metro minus the number of those looking to leave it.
Phoenix, while still a huge vacation-home market, has seen a significant decline in purchases of second homes and investment properties. Out-of-towners are still buying homes and moving there full-time, but agents in the area are seeing a slowdown in migration over the past several months.
Still, the cost of living in Phoenix, while higher than it was before it became a pandemic boomtown, is still low compared to pricey coastal markets like the Bay Area, Seattle, Denver, and parts of the East Coast, where many of those migrating to Phoenix are coming from.
Sun Belt metros are the most popular migration destinations
Based on net inflow, relatively affordable metros in the Sun Belt are still the most popular migration destinations by far. After Sacramento and Las Vegas, the most popular metro on the list was Miami, followed by Tampa and Phoenix.
Home prices in these areas have soared since the start of the COVID pandemic, with remote workers flooding into them. They remain more affordable than places like the Bay Area and New York City.
The median home price in eight of the top 10 migration destinations is less expensive than the median home in the metro’s top origin.
To give an example, Sacramento’s median sale price of $540,000 is well below the $1.4 million median sale price in San Francisco, the top origin metro for out-of-town migrants moving to the area.
The exceptions to this rule are Cape Coral, FL, and North Port-Sarasota, FL, which have Chicago as their top origin metro.
Weather is also a factor for migrating home buyers. All 10 of the top metros on the list below, half of which are in Florida, are known for their warm, sunny climates.
Redfin’s top 10 relocation destinations by net inflow:
- Sacramento, CA
- Las Vegas, NV
- Miami, FL
- Tampa, FL
- Phoenix, AZ
- Dallas, TX
- Cape Coral, FL
- North Port-Sarasota, FL
- Houston, TX
- Orlando, FL
Homebuyers are leaving pricey coastal metros
Of all the metros seeing an exodus of financially squeezed home buyers, San Francisco tops the list, followed by Los Angeles and New York.
Rounding out the top five are Washington, D.C., and Chicago, followed by five other large northern job centers, which tend to be expensive places to live.
Home buyers who can work remotely are no longer bound to these metros and are free to seek out locations that better suit their budgets (among other things).
Net outflow is the measure behind these rankings, based on the number of people moving out of the area, minus the number of those moving into it.
With the slow housing market, the net outflow in Q4 2022 is lower for seven of the 10 metros on the list than a year earlier.
Top 10 metros home buyers are leaving in search of affordability–by net outflow:
- San Francisco, CA
- Los Angeles, CA
- New York City, NY
- Washington, D.C.
- Chicago, IL
- Boston, MA
- Denver, CO
- Detroit, MI
- Seattle, WA
- Hartford, CT
Top takeaways for real estate agents
If you serve one of the top migration destinations, you’re probably familiar with the influx of buyers searching for more affordable housing in your area.
For your sellers, this means a better chance at a sale price that will make it easier for them to buy their next home. For your buyer clients, make it a priority to know better than most how to help them find and purchase the best homes for them.
If you serve one of the top origin metros, you can still help buyers and sellers get the best possible deals on their homes.
Be open to whatever helps you get the best outcome for your clients and prospects.