Inflation drives homebuyers to target these more affordable cities

Decades-high inflation is driving many prospective homebuyers to consider a move to cities deemed to be more affordable, according to data released by real estate firm Redfin on Monday.

Surging mortgage rates have crimped buying demand in the US housing market. But among homebuyers still looking to make a move during the third quarter, a record 24.2% were eyeing homes in a different metro area,

The top destination for potential movers was Sacramento, Calif., according to Redfin’s data. Miami, ranked second on the list, followed by Las Vegas. Of the top 10 most popular metro markets, nine had a more affordable median home price than the homebuyers’ city of origin.

“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 Redfin Economics Research Lead Chen Zhao.

Inflation hit 8.2% in September, much higher than the Federal Reserve’s 2% target. The Fed has implemented a series of sharp interest rate hikes in an effort to bring prices lower – and prompted an ongoing correction in the housing market in the process.

Redfin noted that Sacramento’s median home sale price is $560,000 median – roughly one-third the $1.5 million price tag of homes in San Francisco, the top origin city of its homebuyers.

Similarly, Miami’s median sale price of $475,000 was much lower than that of its top origin city, New York, where homes cost $680,000.

Redfin’s data also showed an ongoing trend of homeowners looking to leave major cities, where inflation has driven the steep cost of living even higher and added to the financial pain for residents.

During the third quarter, homeowners were looking to leave San Francisco, Los Angeles and New York more than any other cities, the firm said.

Redfin conducted its analysis based on approximately two million online users who viewed home listings across more than 100 metro areas during the three-month period. Viewers were considered potential movers if they viewed at least 10 home listings, with at least one based outside their current home city.

Home values are already falling in many markets as sellers adjust their asking prices to account for higher mortgage rates. The average 30-year fixed-rate mortgage surpassed 7% last week – a trend that has pushed many buyers to the sidelines until conditions improve.

Redfin noted the pace of relocations, even to more affordable destinations, is likely to decline as the housing market cools.

“Migration will likely slow in the coming months because the softening labor market and job losses will push more people to stay put or move in with family, though some may need to relocate for new employment opportunities. Plus, many remote workers who wanted to relocate already have,” Zhao added.