Out-of-town homebuyers are outspending locals, driving up home prices and increasing the … [+]
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Tired of getting outbid on homes? You might have out-of-towners to blame.
According to a new analysis from real estate brokerage Redfin, out-of-town buyers are bringing significantly larger budgets to the table than their local counterparts. It’s driving up home prices and creating stiff competition for the very limited supply of homes on the market.
What’s driving these more cash-flush buyers to new markets? According to Daryl Fairweather, Redfin’s chief economist, the pandemic — as well as the sweeping remote work arrangements it has ushered in — has a lot to do with it.
“Many homebuyers are now able to widen their searches to parts of the country that weren’t options when they were tied to offices in expensive cities, and the consequences for popular destinations will be numerous,” said Redfin chief economist Daryl Fairweather. “That’s great news for remote workers because their San Francisco salary can buy a lot more in Nashville or Austin than the Bay Area.”
Speaking of Nashville and Austin, the two cities claim the some of the biggest budget discrepancies between local and out-of-town homebuyers. In Nashville, for example, local buyers have an average budget of about $485,500. Out-of-town buyers, on the other hand? Theirs is $719,500 — a whopping 48% more.
Austin isn’t much better. There, locals can afford about 32% less than what out-of-town buyers can.
Other cities where locals are getting outspent include Atlanta (33% difference), Houston (31%), New York (27%), Denver (26%), San Antonio (24%), Philadelphia (23%) and Phoenix (23%).
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Unfortunately, the discrepancies don’t just mean more competition. They’re also driving up local home prices. Austin’s prices jumped 15.2% between December 2019 and December 2020. In Atlanta? It was 13.7%.
“My nickname for Austin is ‘Texa-fornia’ because so many people are moving in from California,” said Sabrina Archolecas, a senior asset manager at Redfin’s iBuying brand RedfinNow. “Buyers’ agents are taking lawn chairs to showings because lines to get into properties are so long. People moving in from other parts of the country are making the market incredibly competitive and driving up prices like agents have never seen.”
According to Fairweather, the trend does have a silver lining: It means existing homeowners will see their property values increase. And ultimately, that equals more in sales profits down the line.