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Mortgage Rates, Affordability Prompt Rapid Relocations

Sarah Wolak
Jul 18, 2022
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Redfin found that a record share of homebuyers are relocating as high prices and mortgage rates make affordable areas more attractive.

KEY TAKEAWAYS
  • Buyers that remain in the market are continuing to relocate at unprecedented levels, largely because surging housing costs are putting expensive metros further out of reach.
  • Popular migration destinations lie within the state of Florida, including Miami, Tampa, Cape Coral, and North Port.

A record 32.6% of Redfin.com users looked to move from one metro to another in the second quarter, up from 32.3% in the first quarter and roughly 26% before the pandemic, according to a new report from Redfin

The housing market has slowed following a pandemic-driven buying storm, with home sales falling and supply starting to rise due to rising mortgage rates, high home prices, inflation, and a faltering economy. 

However, people who can still afford to buy are continuing to relocate at unprecedented levels, largely because surging housing costs are putting expensive metros further out of reach, leading to affordable places like Tampa and San Antonio appearing more attractive.

“The typical home in San Francisco or San Jose now costs more than $1.5 million. Add in today’s 5%-plus mortgage rates and you have a sky-high monthly payment,” said Redfin Deputy Chief Economist Taylor Marr. “Those factors, along with more companies giving employees the permanent flexibility to work remotely, are driving a larger portion of buyers to consider homes in other parts of the country. Someone who would have to stretch beyond their budget in Los Angeles may be able to comfortably afford a home in Phoenix or San Antonio.”

The report showed that Florida is seeing more homebuyers move in than a year ago, with Miami being the most popular migration destination in the second quarter, unchanged from the first quarter. Other areas with high net inflow include Tampa, Cape Coral, and North Port, which are higher than a year earlier. 

Movement into San Diego and San Antonio is also rising in popularity, with higher net inflow in the second quarter than a year earlier. 

Meanwhile, net inflow into Phoenix, Sacramento, Las Vegas, and Dallas has started to slow from last year. That’s partly because home prices have risen so much in those areas, making them unaffordable. For example, Phoenix prices rose 20% year over year to $485,000 in June, and in Las Vegas they rose 23% to $450,000.

“Tampa is still attracting a lot of out-of-state homebuyers, coming from places like New York, who can get more for their money in Florida,” said Eric Auciello, a Redfin manager in Tampa. “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. 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.”

San Francisco had the highest net outflow of any major U.S. metro in the second quarter, unchanged from the first quarter. Buyers continue to buy outside of expensive job locations — such as Los Angeles, New York, Washington, D.C., and Seattle — as permanent remote work becomes the norm for many workers. 

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Jul 18, 2022
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