Twenty-Five Percent of Homebuyers Looking to Shift to New Metro Areas Due to High Cost of Housing: Report

A 'For Sale' sign hangs in front of a home in Miami, Fla., on June 21, 2022. (Joe Raedle/Getty Images)

Roughly a quarter of Redfin homebuyers looked to move to a different metropolitan area in the fourth quarter of 2022 owing to home affordability issues, with places like Sacramento, Las Vegas, and Phoenix topping the list of destinations.

In fourth quarter 2022, 24.6 percent of Refin users wanted to shift to a new metro area, up from 22.1 percent a year back and around 18 percent prior to the COVID-19 pandemic, according to a Jan. 23rd press release by the real estate brokerage. Redfin attributes the “unprecedented rate” of relocation to high home prices, elevated mortgage rates, and economic uncertainty. These factors are especially forcing remote workers to move to more affordable places.

Sacramento, California, was the most popular destination for migration, followed by Las Vegas. Florida cities Miami and Tampa, and Phoenix, Arizona, were in the remaining top spots.

“The cost of living in Phoenix is low compared to places like the Bay Area, Seattle, Denver, and parts of the East Coast, where many out-of-towners are coming from,” said Redfin agent Heather Mahmood-Corley.

“I helped one client buy a home in Washington State in 2016, and it has doubled in value. She sold that home last year and used the proceeds to buy a much bigger, nicer house in Phoenix.”

Drop in Net Inflows

Out of the top 10 migration destinations during n the fourth quarter, eight had fewer homebuyers looking to move in when compared to a year earlier. Sacramento had 5,700 net inflows in fourth quarter 2022, compared to 6,600 in the same period in 2021. Net inflow refers to the number of home searchers looking to move into an area minus those seeking to leave.

In Las Vegas, net inflow for the recent fourth quarter was at 5,400 compared to 6,300 a year back. Phoenix saw net inflows of 4,000 people in fourth quarter 2022, which is less than half the 8,400 seen in 2021.

“Phoenix is typically a huge vacation-home market, but I’ve seen a big decline in people purchasing second homes and investment properties lately,” Corley said.

“There are still out-of-towners buying homes and moving here full time, though that has also slowed down over the last several months as mortgage rates have risen.”

According to Redfin, the factors that cause people to relocate also caused the overall pool of homebuyers to shrink. Homeowners are reluctant to move since they do not wish to give up the relatively low mortgage rate on their existing homes. Pending home sales at the end of 2022 were down 30 percent compared to a year back.

San Francisco ranked at the top in terms of net outflows, followed by Los Angeles, New York City, Washington, and Chicago.

Home Sales Plunge, Decline in Price

The sale of luxury and non-luxury homes declined by more than 30 percent in third quarter 2021. Luxury homes saw a 38.1 percent fall, while non-luxury homes saw a decrease of 31.4 percent in sales, both of which were record drops.

Price growth in both these segments eased during the period, with prices rising by only 10 percent year over year as compared to the 17 percent growth during the year-ago period.

Redfin expects the median home sales price to decline by 4 percent, to $368,000 in 2023, which would be the first such yearly fall since 2012. The firm is blaming elevated mortgage rates as a factor behind the decline.

“Two years ago: 30-year mortgage rate was 2.77 percent and median existing-home price in the U.S. was $304,000. Today: 30-year mortgage rate is 6.15 percent and median existing-home price is $367,000. Result: $13,000 increase in down payment (20 percent down) and 80 percent increase in monthly payment (from $995 to $1,788),” Charlie Bilello, chief market strategist at CPI Wealth, stated in a tweet on Jan. 20.

Redfin predicts existing home sales to only be at 4.3 million in 2023, down by around 16 percent compared to 2022. New listings are expected to fall during much of this year.