High taxes are pushing residents out of some metros, according to a report from Redfin that indicated, homeowners in high-tax areas such as San Francisco, New York, Los Angeles and Washington, D.C. were searching for homes in metros like Phoenix, Las Vegas and Miami, where taxes are lower. The report notes that 24 percent of Redfin.com home searchers looked for homes in a different metro in Q2 2018, compared to 21 percent in Q2 2017.
“With home prices reaching new heights in many metro areas, it’s no surprise people are continuing to move away from expensive metros in search of homeownership,” said Taylor Marr, Redfin Senior Economist. “Last year’s tax reform poured fuel on the fire. By capping mortgage interest and state and local tax deductions, there is an even greater incentive for homebuyers to consider moving to a lower-tax state.”
According to Redfin, homeowners have been leaving high-tax states for low-tax ones since at least 2010, but that rate has accelerated. The report cites Census Bureau data, which found that housing-related reasons, notably affordability, are the primary motive behind relocating to different counties.
Tennessee, which has some of the lowest tax rates, added about 70 new residents per day since 2010. However, high tax rate New Jersey 155 residents leave the state per day in that same time frame.
Marr notes that the 2017 tax reform may be the driving factor behind the migration. According to a Redfin survey, nine percent of the 1,300 homeowners who responded said that they shifted their search to nearby cities with lower taxes, while eight percent of people said they shifted their search to a state with lower taxes due to the new tax law.
“Now that homeowners and prospective buyers have had some time to understand how the new tax laws are affecting their finances, we are starting to see an impact on migration trends,” said Marr.
Find the Redfin report here.