Americans are fed up with the high cost of living in big cities, and they’re planning on moving to sunny, more affordable locations.
On Wednesday, the U.S. Federal Reserve added another 75-basis-point increase to a key interest rate as it attempts to cool 40-year high inflation. It’s the fourth consecutive 75-basis-point rate hike to the federal funds rate this year, taking it to the 3.75% -4% range. It was near zero last year’s holiday season. It will likely push interest rates on mortgages even higher. The 30-year fixed rate is now over 7%, according to Freddie Mac FMCC, -3.00%.
People are looking for cheaper climes. A recent report by real-estate brokerage Redfin RDFN, -6.29% looked at the share of users on its platform looking for for-sale homes outside of their home city. It found that nearly a quarter of homebuyers are looking to move to a more affordable metro area, rather than the big city where they currently live.
Just over 24% of Redfin users were looking for a deal in a cheaper metro area in the third quarter — a record high. To put that in context: Even during the pandemic, only 18% of users were looking to relocate.
Warm cities topped the list of most desired locations: The top destination was Sacramento, followed by Miami, Las Vegas, San Diego, and Tampa.
With home prices still elevated and mortgage rates above 7%, mortgage demand has sunk to the lowest level in 25 years, the Mortgage Bankers Association said on Wednesday. People are finding it hard to buy a home when their mortgage is now hundreds of dollars more expensive per month.
Most of the people looking to move to Sacramento were from San Francisco. The median sales price in Sacramento was $560,000, Redfin said, which is higher than the national average, but is still a “fraction” of the $1.5 million median-priced home in San Francisco.
“‘More than half of my buyers in Sacramento are from outside the area.’”
“More than half of my buyers in Sacramento are from outside the area,” Samantha Rahman, a local Redfin agent, said in the report.
“They’re mostly remote workers coming from the Bay Area who may need to commute to the office a few times a month but are saving significantly on housing costs,” she explained.
New York refugees continue to find deals in Florida. In New York, the median sales price of a home was $680,000, but in Miami, the median sales price of a home was only $475,000.
The most common city that people are leaving? San Francisco. That’s followed by Los Angeles, New York, D.C., and Boston, said the report.
Most Angelenos are looking to move to San Diego, while most D.C. residents are hoping to move to Salisbury, Md., according to Redfin. And many are considering moving from Boston to Portland, Maine.
But “migration will likely slow in the coming months because the softening labor market and job losses will push more people to stay put or move in with family, though some may need to relocate for new employment opportunities,” Chen Zhao, economics research lead at Redfin, said in a statement.
“Plus, many remote workers who wanted to relocate already have,” she added.
Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at aarthi@marketwatch.com