money Home buyers seek affordability ‘beyond the suburbs,’ expert says
The pandemic-fueled home buying frenzy is long gone, but despite the market slowdown, some buyers aren’t ready to call it quits on their home search.
As competition thins out, inflation-strained buyers still in the market are taking advantage of their remote-friendly work arrangements and newfound bargaining power to purchase in more affordable areas.
“In an environment where prices are going up, mortgage rates are going up, buyers are facing higher costs, they're really looking for affordability,” Danielle Hale, chief economist at Realtor.com, told Yahoo Live (video above). “And the fact that they've got more flexibility than they've had in the past means they can go beyond the suburbs all the way out into these smaller towns.”
According to a new Realtor.com analysis, Brighton, New York, was at the forefront of the 10 most popular ZIP codes as home buyers swapped high-cost metros and suburbs for smaller markets. The average home listing price in Brighton stood at $275,000, nearly 40% below the national average of $449,000 in July.
The town is at a comfortable commuting distance from Rochester, which recently saw 6.9% of home-purchase agreements fall through in July, according to Redfin. Buyers are now more likely to back out of a deal if prices are too high or if the seller doesn’t agree to concessions, Redfin agents said.
Overall the hottest zip codes in the nation were in the Northeast, the report found, while the Midwest and South each had one make the top 10 list. New Hampshire, Massachusetts, and Maine were among the most popular for would-be buyers.
“New England is really where they're finding those smaller towns,” Hale said, “where they can get good real estate bang for the buck but not be too far away from big cities like Boston and New York and even Washington, DC, in some cases.”
Home buyers shopping in the top 10 zip codes could find larger homes with a median square footage of 1,946 — roughly 60 square feet larger than the typical home for sale nationwide in June. The price-per-square footage in these areas was also 8.7% lower than surrounding metros, the report found.
'There's a rebalancing going on'
Higher competition for homes in these pockets of the country, however, may be an exception to national trends as home builders grow less confident about market conditions.
“Thanks to this influx of home shoppers, homes are selling quickly, and they're getting a lot of views from shoppers,” Hale said. “That's keeping those housing markets relatively competitive, even though in a broad sense, we are seeing your housing pulldown nationwide.”
An index measuring builder sentiment from the National Association of Home Builders and Wells Fargo slid by six points to 49 in August as ongoing supply chain problems and higher home prices worsened affordability. That’s the eighth consecutive month of declines and the first time the index has turned negative since May 2020.
About 7 in 10 respondents cited higher interest rates as the reason for falling housing demand while about 1 in 5 (19%) home builders said they reduced prices in the past month to increase sales or limit cancellations.
“It’s clear that home builders are pulling back,” Hale said. “The fact that mortgage rates have moved significantly higher over the course of the year is being felt by homebuyers. Now, sellers, including builders are starting to feel it too.”
“There’s a rebalancing going on in the housing market,” Hale added, “and that means a pullback from heights of activity that we saw in the middle of the pandemic.”
Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.
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