ATTOM: Mixed Results on 3Q Opportunity Zone Growth

(Aerial view of an Opportunity Zone in Newark, N.J. Photo courtesy of HUD.)

ATTOM, Irvine, Calif., said its analysis of low-income Opportunity Zone redevelopment found median single-family and condo prices slowed in the third quarter but continued to outpace the overall national housing market—although home values continued to lag.

The company’s third quarter analysis found median single-family home and condo prices rose from the second quarter to the third quarter in 51 percent of Opportunity Zones around the country and rose by at least 3 percent in nearly half. Those gains fell below those recorded in earlier periods over the past year, but they still stood out amid a broader national market that saw a 3 percent decrease in the median single-family home price in the third quarter, after a decade of almost uninterrupted gains.

The report conceded typical home values in Opportunity Zones remained lower than those in most other neighborhoods around the nation in the third quarter. Median third-quarter prices fell below the nationwide median of $339,815 in 79 percent of Opportunity Zones. That was about the same portion as in earlier periods over the past year. In addition, median prices remained below $200,000 in 50 percent of the zones during the third quarter. But that percentage was down from 56 percent a year ago.

The Opportunity Zone initiative, created under the 2017 Tax Cuts and Jobs Act, comprise 8,764 census tracts certified by the U.S. Department of the Treasury. The Opportunity Zones tax incentive is designed to spur economic development and job creation in these communities through preferential tax treatment for those investing certain eligible capital gains into Opportunity Zones through Qualified Opportunity Funds.

Opportunity Zones are defined in the Tax Act legislation as census tracts in or alongside low-income neighborhoods that meet various criteria for redevelopment in all 50 states, the District of Columbia and U.S. territories. Census tracts, as defined by the U.S. Census Bureau, cover areas that have 1,200 to 8,000 residents, with an average of about 4,000 people.

“The combination of higher home prices and mortgage rates that have doubled over the past few months has made affordability a real challenge for both traditional homebuyers and investors,” said Rick Sharga, executive vice president of market intelligence with ATTOM. “For many prospective buyers, the solution to worsening affordability is to look for less expensive homes, and it seems like homes in Opportunity Zones might represent a relative bargain for buyers who’ve been priced out of other markets.”

The report said of the 4,732 zones in the report, 1,581 (33 percent) still had median prices in the third quarter that were less than $150,000. That was down from 38 percent of those zones a year earlier. Another 768 zones (16 percent) had medians in the third quarter year ranging from $150,000 to $199,999. Median values ranged from $200,000 to $299,999 in 1,057 Opportunity Zones (22 percent), while they topped the nationwide third-quarter median of $339,815 in 1,013 (21 percent).

The Midwest had the largest portion of the lowest-priced Opportunity Zone tracts. Median home prices were less than $175,000 in 66 percent of zones in the Midwest, followed by the South (45 percent), the Northeast (44 percent) and the West (6 percent).