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Increased Migration Leads to Shrinking Supply and More Competition

It appears that the beach is losing its allure for many homeowners. According to Redfin.com [1], the percentage of people relocating from one metro to another has gone up, and most of them are former coastal dwellers looking for less expensive places to live.

In 2019, 25.5% of buyers left one metro area for another one. In 2020, that number went up to 27.8%, a 9% increase year over year.

This is contributing to the overall housing shortage, especially in the Phoenix, Austin, and Las Vegas areas. In fact, in the 10 most popular migration destinations, the supply of homes is down by double digits compared to last year. The only areas where supply has increased are the San Francisco Bay area, New York, and Los Angeles—some of the most expensive places to live in the country.

“For the past two years I’ve felt like everyone is leaving Los Angeles, and that has intensified during the pandemic,” said Lindsay Katz, Los Angeles Redfin agent. “More than half of my sellers are moving to a different area.”

These homebuyers from more expensive areas bring about another side trend—rising home prices.

“But even though Phoenix is affordable compared to other places, prices have risen significantly over the last year,” said Van Welborn, Redfin agent. “Locals are having a hard time getting their offers accepted because there are so few homes on the market, and often someone from California will put in a competing offer at a higher price and waive the appraisal.”

For example, the average budget for a Phoenix resident looking to relocate within the same metro is $509,000. The average out-of-tower relocating to Phoenix, however, has $627,000, which is 23% more money than the typical local.

These patterns aren’t showing any signs of slowing down anytime soon. With remote work continuing to be an option for many white-collar workers in large metros, there’s no reason to continue paying high mortgages when they have the means to relocate to somewhere more affordable.

“A lot of young families are moving back to their hometowns to be near their parents, moves they can now make because they’re working remotely,” Katz said. “People are realizing that if they leave Los Angeles and move to a place like the Midwest or Florida, they can afford to live on just one income because their mortgage is cut in half and tax bills are lower.”