Rich Out-of-Town Buyers Are Making It Hard for Locals to Afford Homes in Their Own Cities
Buyers from out of town keep descending on popular real estate markets, and they’re prepared to bid over asking price and spend a lot more than locals to get the homes they want.
In some red-hot cities like Nashville and Philadelphia, a new report from Redfin finds that the budget disparity between out-of-town homebuyers and locals is approaching 30%.
In Nashville, the typical out-of-town buyer had a budget of $736,000, compared to an average budget of $573,000 for locals. That’s a difference of 28.5%, the biggest gap of all the cities Redfin analyzed. In Philadelphia, out-of-towners were prepared to spend an average of $559,200 on their new homes while locals were budgeting $435,609 — a difference of 28.4%.
Redfin said that out-of-towners had more money to spend than locals in 42 of the 49 cities it looked at, meaning that locals had the edge in just seven of the hottest markets (five of which were located in California, which has a large share of high earners). To assemble its ranking, Redfin looked at the maximum price parameters used by home searchers. Only cities with at least 3,000 searchers from both inside and outside the metro area in 2021 were considered.
“People moving from the West Coast will pay way over asking price without batting an eye,” Hope Geyer, a Redfin agent in Nashville, said in a statement. “It’s really hard for locals to compete right now, and it can be devastating for first-time buyers who aren’t able to offset high prices by selling a home before they buy a new one.”
A previous Redfin study, from last summer, showed that out-of-towners were more likely to pay higher over asking price than locals in hot markets such as Austin, Dallas and Sacramento.
Local buyers likely won’t see relief any time soon. A recent report from Realtor.com found that the typical home in Nashville spent just 29 days on the market in January before it was purchased. Homes across the country sold in about 61 days that month as buyer activity continues to surge even in the winter, which tends to be slower period for real estate. Rising mortgage rates will only exacerbate the problem as buyers rush to lock in mortgages.
Home prices: 10 cities where out-of-towners outspend locals
Here are the top 10 cities where out-of-towners have the highest budgets compared to locals, according to Redfin’s analysis, plus the difference between the average budget of an out-of-towner compared to a local buyer.
- Nashville, Tennessee: 28.5%
- Philadelphia, Pennsylvania: 28.4%
- New York, New York: 26.5%
- Atlanta, Georgia: 26.1%
- Miami, Florida: 25.1%
- Columbus, Ohio: 21.4%
- Phoenix, Arizona: 20.8%
- Las Vegas, Nevada: 19.9%
- Indianapolis, Indiana: 19.1%
- Orlando, Florida: 17.8%
The report credits the rise of remote work as a prime reason the gap is widening between local buyers and transplant buyers.
Transplants with higher salaries from places with higher costs of living, like California, have been able to expand their home searches to lower-cost areas if their employers allow them to work remotely from any location. Even if they pay over asking price in their new city, Geyer says, “in their eyes, they’re getting a deal.”
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