Homebuyers Fleeing Big Cities Due to High Inflation and Rates

Homebuyers Fleeing Big Cities Due to High Inflation and Rates
A 'For Sale' sign hangs in front of a home in Miami, Fla., on June 21, 2022. Joe Raedle/Getty Images
Naveen Athrappully
Updated:
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Homebuyers are increasingly moving to affordable places within the country as U.S. mortgage rates crossed the 7 percent mark last month and decades-high inflationary pressures cut into real incomes.

According to Seattle-based real estate brokerage Redfin, homebuyers are looking to move into Sacramento, Las Vegas, and Tampa, with the biggest outflows seen in San Francisco, Los Angeles, and New York City. A record-high 25 percent of American homebuyers were planning on shifting residences to cheaper metropolitan areas during the third quarter of 2022, said the company. That’s an increase of 23.3 percent from the second quarter, 21.6 percent from 2021, and about 18 percent from pre-pandemic.

“More than half of my buyers in Sacramento are from outside the area,” said local Redfin agent Samantha Rahman. “They’re mostly remote workers coming from the Bay Area who may need to commute to the office a few times a month, but are saving significantly on housing costs.
While houses in San Francisco are going for $1.5 million, homes in Sacramento sport a median sale price of $560,000—for quite a substantial difference. Based on Redfin numbers, Sacramento remains the most popular option for people moving out of San Francisco. Likewise, most people in New York, where the typical home costs $680,000, are planning on moving to Miami, where the $475,000 median sale price is $475,000.

Top American Cities for Buying Homes

The top five cities preferred by homebuyers in the United States looking to relocate are Sacramento, Miami, Las Vegas, San Diego, and Tampa.

The top five cities with net outflows are San Francisco, Los Angeles, New York, Washington, D.C., and Boston. The top destinations preferred by the people leaving are Sacramento and San Diego, California; Miami, Florida; Salisbury, Maryland; and Portland, Maine.

Homebuyers prefer to move away from expensive, coastal cities to places with warmer weather and affordable properties.

“With a recession looming and household expenses high, many people can’t afford to buy a home in an expensive area and/or want to save money in case of an emergency, which makes relocating somewhere more affordable an attractive option,” said Chen Zhao, research lead at Redfin Economics.

Spiking Interest Rates

Some experts expect mortgage rates to climb even higher, which would put more pressure on the housing market. Rick Sharga, executive vice president of Market Intelligence for ATTOM, expects the 30-year rate to potentially touch 8 percent this month.
“Given the Federal Reserve’s lack of success so far, more increases to the fed funds rate are almost a certainty, which means there’s definitely an upside risk for mortgage rates,” he said, according to a Nov. 1 article at Bankrate.
American real estate agent-turned-YouTube personality and influencer Graham Stephan wrote in a tweet Tuesday, “30-year mortgage rates have just crossed 7 percent! For some context on how bad this is, for a $500,000 mortgage, you end up paying nearly $439,000 more over 30 years as the interest rate increases from 3 percent to 7 percent. That’s around 90 percent of the total mortgage value!” adding that “now is one of the worst possible time to buy a home.”

Data from the U.S. Bureau of Labor Statistics show that the annual Consumer Price Index has remained above 7.5 percent for every single month this year. It peaked at 9.1 percent in June, and was at 8.2 percent in September. This is the highest inflation seen in the country since 1982.

Naveen Athrappully
Naveen Athrappully
Author
Naveen Athrappully is a news reporter covering business and world events at The Epoch Times.
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