Migration trends are shifting again. For the second month in a row, a record number of homebuyers are looking to move out of their state, according to the latest data from Redfin.
In the third quarter of 2023, roughly 26% of homebuyers are looking to move to another part of the country, compared to 24% a year ago and 19% from pre-pandemic years. A lot of that is driven by affordability, says Redfin.
But while people are moving to more affordable areas, they are also moving to areas that are prime for natural disasters, which could ultimately increase insurance costs.
Where Homebuyers Are Moving
To determine where homebuyers are moving, Redfin looked at net inflow, measuring how many more Redfin.com users looked to move into an area than leave.
So, where are homebuyers moving to? Sacramento, California; Las Vegas; and Orlando, Florida, were among the most popular destinations for those relocating. Florida was by far the most popular state overall, with half of the most popular destinations. Eight of the 10 most popular areas were located on the East Coast.
In general, the cities that homebuyers are moving to tend to be more affordable than the areas that they are moving from, which is a trend we’ve seen for several years now.
|Rank||Metro||Net Inflow, Q3 2023||Net Inflow, Q3 2022||Top Origin||Top Out-of-State Origin|
|1||Sacramento, CA||4,800||8,700||San Francisco, CA||Chicago, IL|
|2||Las Vegas, NV||4,500||7,000||Los Angeles, CA||Los Angeles, CA|
|3||Orlando, FL||4,000||3,000||New York, NY||New York, NY|
|4||Myrtle Beach, SC||3,800||3,200||Washington, D.C.||Washington, D.C.|
|5||North Port-Sarasota, FL||3,700||5,200||New York, NY||New York, NY|
|6||Portland, ME||3,500||3,300||Boston, MA||Boston, MA|
|7||Tampa, FL||3,400||6,700||New York, NY||New York, NY|
|8||Cape Coral, FL||3,300||5,200||Chicago, IL||Chicago, IL|
|9||Miami, FL||3,200||8,000||New York, NY||New York, NY|
|10||Salisbury, MD||3,100||2,500||Washington, D.C.||Washington, D.C.|
Where Are Homebuyers Leaving
For the first time in Redfin’s records, more homebuyers looked to leave Austin, Texas, than move in, with net outflows doubling from last year.
Austin has long been a magnet for out-of-towners, fueling high growth and high prices. By their peak in mid-2022, home prices had skyrocketed 75% more than pre-pandemic levels. Part of the surge in outflows has been caused by remote workers leaving as more companies are call employees back to the office.
Other places where buyers are leaving include major cities like San Francisco, New York, and Los Angeles.
|Rank||Metro||Net Outflow, Q3 2023||Net Outflow, Q3 2022||Portion of Local Users Searching Elsewhere||Top Destination||Top Out-of-State Destination|
|1||San Francisco, CA||25,800||37,700||24%||Sacramento, CA||Seattle, WA|
|2||New York, NY||25,300||23,500||30%||Miami, FL||Miami, FL|
|3||Los Angeles, CA||20,200||33,500||19%||Las Vegas, NV||Las Vegas, NV|
|4||Washington, D.C.||13,900||18,800||19%||Salisbury, MD||Salisbury, MD|
|5||Chicago, IL||4,800||5,600||16%||Milwaukee, WI||Milwaukee, WI|
|6||Boston, MA||4,300||9,300||21%||Portland, ME||Portland, ME|
|7||Hartford, CT||3,300||900||79%||Boston, MA||Boston, MA|
|8||Denver, CO||2,200||3,700||35%||Chicago, IL||Chicago, IL|
|9||Detroit, MI||2,000||4,500||26%||Grand Rapids, MI||Cape Coral, FL|
|10||San Diego, CA||1,800||inflow of 6,900||29%||Las Vegas, NV||Las Vegas, NV|
Why Homebuyers Are Changing States
While average home prices have dipped from their peak in 2022, they remain elevated. The average home price in the third quarter was $513,400, compared to $547,800 the same time a year ago, according to the latest Federal Reserve data.
Prices in large metropolitan areas are still higher, and many homebuyers are buying in places that are cheaper, Redfin says. It’s a trend that’s been going on for a while. According to real estate data provider ATTOM, 99% of real estate areas are unaffordable for Americans who earn the average annual national wage of $71,214 a year.
Meanwhile, mortgage rates are still at levels not seen since the early 2000s, pushing borrowing costs up even further. While the Fed has paused rate hikes for now, it indicated in its official statement that it was unsure how the market would respond to its policies or when the effects would be felt.
However, not all homebuyers are moving because of affordability. Some simply want more space. Alison Williams, a Redfin agent in Sacramento, said in the Redfin press release that most of the buyers she is working with are from the Bay Area and “want a bigger home and better quality of life.” Some are even buying houses to rent out before moving in later on, she added.
The Bottom Line
A shift in buying dynamics could be good news for real estate investors looking to get into certain areas. For example, the median home price in Austin has fallen about 5% year over year due to people leaving. And with the Fed not likely to raise rates again until 2024, mortgage rates should (fingers crossed) remain steady, if not decline slightly.
For those looking to buy a place to rent out, it might make sense to look outside large metro areas to places with a cheaper cost of living.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.