The U.S. housing market has been affected by high mortgage rates, inflation and an unstable economy this year, deterring the number of potential homebuyers and sellers.
A new Redfin report says in the months of August, September and October, 24.1% of homebuyers buying homes in the U.S. wanted to move to new metros and relatively affordable places to live. This is on par with a similar 24.2% in Q3 of 2022, up from around 18% in 2019 before the COVID-19 pandemic brought in the wave of work-from-home employment, which allowed Americans to relocate.
Homebuyers want to move to the Sun Belt, especially Florida despite the recent damage done by Hurricane Ian in September. Sacramento, Las Vegas and Miami are the most popular destinations, with San Diego, Tampa, Phoenix, Cape Coral, North Port-Sarasota, Dallas and Orlando close behind. The report attributes this to the relative affordability of these areas.
Although another recent Redfin report noted more than 60% of American homebuyers and sellers are reluctant to move to a natural disaster-prone area experiencing extreme temperatures or rising sea levels, when it comes to Florida, homebuyers flock to the region due to home affordability and the warm weather.
In October, Redfin released another report which said high mortgage rates and high home prices encouraged people to move from expensive coastal job locations like San Francisco, Los Angeles, New York, Washington, D.C., Boston, Chicago, Detroit, Denver, Seattle and Philadelphia to affordable locations like Sacramento, Miami, Las Vegas, San Diego, Tampa, Phoenix, Cape Coral, North Port-Sarasota, Dallas and Portland, Maine. This is because homes in Las Vegas cost $410,000 in October, which is almost half of that in Los Angeles, which saw an average of $823,000.
Affordability is a major concern with mortgage rates that have seen a rapid increase since May. According to Freddie Mac, the volatility in the housing market is making potential buyers hesitate before making a decision, thereby slowing down the existing home sales across all price points.
In October, the average 30-year-fixed mortgage rate was 6.9%, an increase of 3.83 percentage points from 3.07% in 2021 and the largest year-over-year increase during any month since 1981, Redfin says in the report. This doubled monthly mortgage payments for homebuyers this year.