money Housing: Pandemic boomtowns show the highest inflation rates
As homebuyers flocked to more affordable cities during the pandemic, their arrival helped to drive up prices for goods and services in their new hometowns.
Some of the hottest pandemic boomtowns — Phoenix, Atlanta, Tampa, Fla., and Miami — also had the highest inflation rates in the third quarter, according to Redfin data of 21 metros. All four registered double-digit rates versus the 8.3% national average for the period.
The spike in prices adds yet another hurdle for locals who have been priced out of the housing market by many out-of-state newcomers.
“People who are leaving an expensive area like the Bay Area and are going to a more affordable area like Las Vegas, they're coming in with a lot of money and high salaries,” Daryl Fairweather, chief economist at Redfin, told Yahoo Money. “This makes them pretty able to compete against the locals who don't have those same resources.”
“The housing market being softer is probably giving them even more of an advantage,” she added, “but they already had the upper hand over locals.”
Phoenix took the lead in the third quarter, with an average 13% year-over-year inflation rate, the highest reading of the metros in the analysis and up from 11.3% in the previous quarter. Redfin’s latest migration data showed that Phoenix ranked as the sixth most popular destination for Redfin users looking to relocate from one metro to another.
Atlanta, the 15th most popular destination for out-of-state homebuyers, had the second-highest inflation rate at 11.7%, up from 10.9% in the second quarter. Tampa – the fifth most popular metro area among relocaters – had the third-highest inflation reading at 10.9%. Miami, which ranked as the second-hottest relocation area, had the fourth-highest inflation rate at 10.7%.
“Americans left pricey coastal job centers and moved to more affordable places in the Sun Belt, but now those more affordable places are seeing affordability erode faster than anywhere else in the country,” said Redfin Deputy Chief Economist Taylor Marr in a news statement. “Some of these areas may lose their titles as top migration destinations in 2023 as a result.”
Prices didn’t jump as much in metros experiencing an exodus of homebuyers, according to Redfin.
San Francisco, which ranked as the top metro area homebuyers were leaving, had the lowest inflation rate across all metros at 5.7%. New York, which was the metro area with the second-highest out-migration, also had the second-lowest inflation rate at 6.4%.
A record 24.2% of homebuyers were interested in relocating from one metro to another in the third quarter, according to Redfin, up from 23.3% in the second quarter, 21.6% a year ago and 18% before the pandemic.
Sacramento took the lead as the most popular migration destination in the third quarter, followed by Miami, Las Vegas, San Diego, and Tampa. Phoenix, Ariz.; Cape Coral, Fla.; North Port-Sarasota, Fla.; Dallas; and Portland, Maine, rounded out the top 10.
“Remote work is enabling people to move to places that are more affordable where they have more disposable income,” Fairweather said. “The labor market is still quite strong, with new jobs being added to the economy. So people feel pretty good about leaving behind a job center like New York and moving to a new location.”
But the migration pattern has caused a sharp increase in housing prices in addition to the increase in goods and services.
For instance, Redfin data showed that home prices in Miami rose 24.5% year over year as of September, for an average of $530,000. Still, those prices were significantly lower than those listed in New York – where out-of-staters were most likely to hail from. As of September, the median sales price in New York was $803,880.
The phenomenon has strained housing affordability across the U.S., said Fairweather.
“Housing affordability was only a problem for coastal cities and now it's spreading all across the country,” Fairweather said. “For example, Austin went up in price a lot and then locals got priced out and started moving to San Antonio. San Antonio became one of the most competitive areas, so it just keeps rippling out to the more affordable places.”
Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.
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