In Hot Cities, Out-of-Town Buyers Are Pushing Home Prices up for Everyone
It's always tempting to fantasize about packing your bags, picking a spot on the map and starting over in a new city.
But in 2021, that daydream requires deep pockets: A recent Redfin report shows that people who move from out of town into hot cities tend to pay more for their houses than locals do.
Redfin crunched the numbers on 10 popular migration destinations, or locations that had the highest net inflow of people moving in during the second quarter, plus trendy Boise, Idaho. Of them, outsiders relocating to Austin, Texas, paid the highest premium over asking price. Typical out-of-towners there forked over 7.8% above asking price, while their local counterparts paid just 3.7% over.
In Sacramento, California, migrants paid a 3% premium, with a median down payment of $145,221 — nearly $34,000 more than the typical local down payment. In Dallas, out-of-town buyers paid a 2.5% premium on the asking price, compared to 0.8% for locals. They also deposited $97,500 as a down payment — roughly $28,000 more than locals did.
Unless you've been living under a rock (or, y'know, rent), you probably know the housing market is on fire right now. Media outlets, Money included, regularly publish stories about the ridiculous lengths homebuyers are having to go to, from scouring newspaper obituaries for available properties to buying houses without seeing them first. Though there are some signs that buyers may be burning out, competition remains fierce.
That's especially true for locals, some of whom are increasingly getting edged out by spendy outsiders. Take Austin, for example. An April report from Redfin found that out-of-towners looking to buy there had an average budget of $855,000. That's 32% higher than the usual budget for residents.
Seeing strangers splurge can be frustrating for longtime residents. In Asheville, North Carolina, migrants simply "make better money than someone from here," according to RE/MAX agent Alexandra Schrank.
"Having more income means they can get prequalified to offer more money, or many will have cash," Schrank told the Mountain Xpress. "Out-of-towners are beating out the locals."
On the West Coast, Redfin agent Kristin Lopez said young buyers relocating from expensive areas also tend to be flush with cash. In a news release, she explained that they've got money from "several sources: high salaries, proceeds from the sale of their home in a place like San Francisco or Seattle and gifts from family members." Then they turn around and spend it on a new house.
In some spots, like Miami, locals and newcomers both pay below asking price. But even there, residents tend to go for less expensive, smaller homes.
According to Redfin, the median sale price for migrants in Miami was $497,500, whereas the median sale price for locals was $450,000. Square footage came in around 1,722 and 1,503, respectively.
So if you're set on starting your life over, you'd better shore up your savings first.
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