As home buyers explore ways to up their odds of success in the face of intensifying cost pressures, new research indicates that interest in relocating is on the rise. In the first quarter of 2022, 40.5% of prospective buyers on Realtor.com viewed home listings outside of their current state, compared to 36.4% in 2021 and 33.4% in 2020.
Where are they heading? The top 10 destinations in rank order were El Paso, Texas; Albuquerque, New Mexico; Washington, DC; Birmingham, Ala.; Hartford, Conn.; Omaha, Nebraska; McAllen, Texas; New York City; Augusta, Ga.; and Greensboro, North Carolina.
“After two years of pandemic remote work, offices have started to reopen, but instead of seeing a slowdown in the number of people interested in homes out of state, we’re seeing an acceleration,” said Realtor.com chief economist daniele hale.
“Taking a closer look at the top destinations, we see some very different trends driving the desire to live out of state and home shoppers’ diverse needs,” she explained. “First, affordability remains a key focus for buyers, with demand for less expensive areas emerging in recent months as climbing inflation and mortgage rates compound cost pressures faced by buyers. Next, flexibility enabled by broader adoption of remote work has fueled interest in sunny climates such as the Sun Belt. And finally, some people are simply ready to get back to normal, with some buyers’ desire to live downtown lifestyles driving two big cities into the top 10.”
With tighter budgets, buyers expand search areas in search of affordability
While Americans are expected to have a better chance to find a home in 2022, rapidly intensifying cost pressures are creating a greater sense of urgency for many buyers to find a home within their budget. With climbing inflation and mortgage rates compounding record-high for-sale home prices and rents2022 home shoppers have plenty of motivation to explore relatively affordable markets where higher incomes may yield more purchasing power.
And January through March search trends suggest many prospective buyers are doing just that. In eight of the top 10 relocation destinations, listing prices per square foot were lower than the national average ($206). Additionally, although rising demand is fueling double-digit annual growth in the per-square-foot price in the majority (nine) of these markets, half posted lower gains than the 2022 first quarter national rate (+15.7%).
For instance, the No. 7 market of McAllen, Texas offered the most affordable home price per square foot among the top 10, at a median of $125. While that represented an increase of 13.8% year-over-year, McAllen’s median listing price per square foot was still lower than in its top source of out-of-state buyer demand: Washington, DC ($277).
With more flexibility, some home shoppers migrate toward warmer climates
Cost pressures may be a contributing factor for some out-of-state home shoppers, but others could be approaching relocation as an opportunity to explore living in areas they couldn’t have before the Covid pandemic, with this flexibility enabled by trends like the rise in remote work. 2022 first-quarter Realtor.com search trends suggest rising numbers of home shoppers are potentially heading to areas offering warmer climates. In fact, Sun Belt meters accounted for six of the top 10 relocation destinations, all of which posted bigger annual gains in the out-of-state share of listings viewers than the national rate, led by El Paso (+11.6 percentage points).
Further illustrating the rise in demand for housing markets offering warmer climates, five of these six Sun Belt meters counted Northern cities as top sources for out-of-state demand. For example, Washington, DC and New York were among the top three areas where home shoppers were searching for homes in No. 9 market Augusta, Georgia and No. 10 Greensboro, North Carolina.
As some buyers pursue the downtown life, big city demand returns
Although some of the top relocation destinations reflect trends that surfaced during the pandemic, very different factors could potentially be driving demand in others. With offices reopening and everyday life getting back into full swing in many downtown areas, major meters accounted for two of the top 10 relocation destinations: Washington, DC at No. 3 and New York at No. 8. Additionally, the No. 5 spot went to Hartford, Connecticut, which some may view as a commuter city to New York.
Going further back in the Realtor.com data history, to its 2020 Q1 Cross-Market Demand Report, Washington, DC and New York were among the 10 markets where the onset of Covid was most pronounced and home shopping patterns showed the impact. However, in all of these meters, first-quarter 2022 data shows interest from home shoppers from other states has not only returned to year-over-year growth, but is at the highest level of any quarter since the first quarter of 2018.
Hale said, “In addition to the full rebound of out-of-state demand to New York, Washington, DC and Hartford, the fact that these markets made the top 10 destinations in 2022 Q1 signals the return of some pre-Covid norms. It simply comes down to stage of life, which housing decisions are often tied to, as big cities have historically seen strong inbound demand from young buyers from all over the country looking to establish themselves.”