Spacious affordable homes in less populated metropolitan areas are hot, while small expensive apartments in densely populated areas are not. Warmer weather also appeals to homebuyers.
The COVID-19 pandemic shifted homebuyers’ preferences in a major way, making these three cities the hottest cities in the U.S. last year. Riverside-San Bernardino-Ontario, Calif.; Lakeland-Winter Haven, Fla.; and Myrtle Beach-Conway-North Myrtle Beach, SC-NC were the the top metros for the most inbound residents, according to CoreLogic’s "2020's Hottest Cities for Homebuyers" report, the property data analytics firm's first annual list of the nation’s top 15 metros for residential in-migration and out-migration.
Not so surprising, New York-Newark-Jersey City, NY-NJ-PA; Los Angeles-Long Beach-Anaheim, Calif.; and San Francisco-Oakland-Berkeley, Calif., were the top three metros with the most outbound residents.
“We are seeing a reshuffling,” said Frank Nothaft, chief economist at CoreLogic. “People are moving to areas of lower population and lower cost of living.”
In 2020, the average home price in Riverside, Calif. (the top in-migration metro) was $436,288, almost half the average price of a home ($989,157) in Los Angeles (the No. 2 out-migration metro), the report said. Meanwhile on the East Coast, the average home price in New York City (the top out-migration city) was $656,214, far higher than Tampa (No. 5 on the in-migration list), where the average home price was $348,849.
“The pandemic severed the need for employees to be near or co-located with their employer,” Nothaft said, adding that the shift toward cheaper locales started several years before COVID-19 hit the country.
Still, the pandemic accelerated that shift, he noted. “It increased the desire for more living space, inside and outside,” he said.
While people were making big moves, they weren’t physically going very far. New York lost a good share of its potential homebuyers to affordable neighboring metros, such as Philadelphia and Allentown in Pennsylvania; Bridgeport in Connecticut; and Poughkeepsie in New York state, according to the report. Similarly, those who moved out of the LA metro moved to Riverside and San Bernardino, the next metros over where housing cost is lower and for first-time homebuyers it’s more accessible, said Nothaft.
Last month, John Burns Real Estate Consulting noted buyers save about $236,000 on a resale and $438,000 on a new home in Philadelphia, when comparing median home values to its bigger sister city of New York in a research note titled “The Rise of the Sister Cities as an Affordability Solution.” John Burns defines sister cities as locales that sit within a two hour drive from their counterparts.
“Sister cities are seeing a lot of regional migration from residents who are leaving big sister complements,” John Burns Real Estate Consulting analysts wrote in the note.
“The pandemic created a perfect recipe for consistently employed Americans,” said Archana Pradhan, CoreLogic’s principal economist, in the report. “If it had been any other mix of events, for example, if low housing inventory was coupled with job inflexibility, we wouldn’t have had such a large group of homebuying consumers feeling empowered to make bold moves in their living situations.”
For those taking the plunge, affordability was top of mind. Ten out of the top 15 in-migration metro areas were in states that do not have income taxes — Florida, Nevada, and Texas. Meanwhile, the coastal cities located in high-tax pricey states were on the out-migration list. Seattle, Boston, Chicago, San Diego and Portland, Oregon — all known for high home prices and population density — were also on the out-migration list.
Nothaft thought we were approaching the end of migration. But he noted that he's not so sure now as some major cities (many of which are on CoreLogic’s top out-migration list) reimpose mask mandates and other vaccination requirements for indoor dining and gyms to battle the rise of Delta variant cases across the country.
The new measures “may put legs under this reshuffling,” Nothaft said. But he remains optimistic that the pandemic is behind us. Now, he said, the bigger question is this: “How much will remote work stick in the labor market?”
According to consulting firm McKinsey & Co., “considering only remote work that can be done without a loss of productivity, we find that about 20% to 25% of the workforces in advanced economies could work from home between three and five days a week.” Based on that analysis, Nothaft thinks the great migration in the U.S. could linger. John Burns analysts agree, noting: “We expect this trend to continue as work-from-home permissions become clearer for many.”
There’s now this insatiable “desire to have more space because you need a school room and office from home, a desire for more living space inside and outside," Nothaft said.
Amanda Fung is an editor at Yahoo Finance.