Homebuyers looking for less expensive cities are relocating in record numbers, a recent report said.
A record 33.9% of Redfin users considered moving to another metro in July and August, according to the company's migration report. That's an increase from 32.6% in the second quarter of this year and the highest level since it began tracking migration in 2017.
Most of that relocation activity was driven by homebuyers who lived in coastal areas with expensive job centers and wanted to move to a more affordable location.
"Six percent mortgage rates are exacerbating already-high home prices and motivating homebuyers–especially remote workers–to leave expensive areas for more affordable ones," Redfin Deputy Chief Economist Taylor Marr said. "Persistent inflation and slumping stocks are also cutting into buyers' budgets, making relatively affordable areas even more attractive."
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Homebuyers drawn to cheaper Sun Belt locations
Homebuyers are swapping expensive coastal areas for more affordable warm-weather locations in the Sun Belt, the report said. The median sales price in 8 out of the top 10 most popular destinations to move to is below $500,000, and 6 of these locations have no state income tax, lowering the overall cost of living.
San Francisco saw the biggest outflow of residents in July and August, with 40,432 Redfin users having left the city.
Miami was the most popular destination, with more than 8,000 Redfin users moving into the city, "continuing a year-plus streak of the South Florida metro taking the number-one spot," the Redfin report said.
The remaining top 5 most popular cities to move to were Sacramento, Calif., San Diego, Calif., Las Vegas, Nev., and Tampa, Fla.
"Although home prices in many of the popular destinations have increased significantly throughout the pandemic, they're still more affordable than the places homebuyers are coming from," the Redfin report said. "The typical home in Las Vegas, for instance, sold for $416,000 in August, half of the $845,000 median in Los Angeles, the number-one origin for people moving in."
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Cancellations up in the Sun Belt region
Affordability concerns were also why a growing number of homebuyers backed out of deals, Redfin said. Home sale cancellation rates registered 15% in August, up from 12.1% a year earlier. That's roughly 64,000 home-purchase agreements that fell through, the report said.
These four Sun Belt locations — Las Vegas, Nev, Phoenix, Ariz., Tampa, Fla., and San Antonio, Texas — ranked on Redfin's top 10 migration destinations. But they were also among the cities experiencing the highest rates of contract cancellations.
"These areas initially attracted house hunters because they were relatively affordable, but an influx of demand caused prices to skyrocket, rendering them less attractive to many homebuyers," Redfin said.
And that reduced homebuyer appetite meant that those still shopping for homes had more room to back out of deals, according to the report.
"Financing and appraisal contingencies in a contract means a buyer can cancel their purchase if there's an issue with the home, they can't get a mortgage, or the appraisal is different from the agreed-upon amount," the Redfin report stated. "Some buyers may also be backing out of deals because they're waiting to see if home prices fall."
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