Affordable Areas Outside Big Cities Heating Up

Relatively inexpensive areas outside major cities, such as El Dorado County, just east of Sacramento, Calif., and Camden County, N.J., across the river from Philadelphia, are gaining ground with homebuyers as New York City and San Francisco lose steam, according to a report from Redfin, Seattle.

The report said nine of the 10 markets where homebuyer competition has intensified the most in the past year have median sale prices below $500,000, despite seeing price growth of at least 10%. Housing markets that offer homebuyers more bang for their buck and are located outside of major cities are heating up, with relatively affordable places rising in popularity as house hunters take advantage of remote work and record-low interest rates.

Meanwhile, the report said iconic coastal hubs such as New York and San Francisco are losing their luster as the coronavirus pandemic accelerates an exodus out of dense, expensive job centers. Seven of the 10 markets that have cooled most in the last year are located in New York (including four of the five New York City boroughs; Manhattan was excluded from this analysis due to insufficient data) and seven have median sale prices above $500,000.

The report is based on a Redfin ranking of the U.S. housing markets that have heated up and cooled down the most over the past year. The ranking is based on year-over-year change in home prices, home sales, the share of homes that sold above their list price, the speed of home sales and Redfin.com searches.

El Dorado County, Calif., came in first place, with measures of homebuyer competition surging faster than any other U.S. county in the last year. Spanning from the eastern outskirts of Sacramento to the southern half of Lake Tahoe (but not including the city of Sacramento, which is in Sacramento County), the region has seen home sales skyrocket nearly 60% over the last year as buyers have flocked from the Bay Area, despite the fact that it’s located in a fire-prone area, with the most recent wildfire igniting in early September. It’s the most expensive county in the top 10, with a median sale price of $550,000, but that’s relatively affordable compared with what $1.45 million, the median sale price in nearby San Francisco.

“We’re seeing a huge influx of buyers coming to El Dorado County from the Bay Area,” said local Redfin agent Ellie Hitchcock. “With so many large tech companies allowing employees to work from home for the foreseeable future, homeowners in San Francisco are selling their two-bedroom, two-bathroom condo and buying a 5,000-square-foot home with five bedrooms and five bathrooms on an acre of land here for the same price. It’s simply a no-brainer.”

In second place was Camden County, N.J., in southern New Jersey just across the Delaware River from Philadelphia. Homes in the area have been selling fast, spending a median of 28 days on the market in July, compared with 47 days a year earlier. While prices have climbed 13% since last year, homes still sell for a median of $215,000—well below the national median.

“Camden’s economy has changed dramatically over the course of its history,” said Redfin chief economist Daryl Fairweather. “The city of Camden is still recovering from the devastating effects of housing discrimination and redlining. But more recently, the state of New Jersey has made a concerted effort to revitalize the area by offering corporate tax incentives. The revitalization seems to be improving Camden’s appeal to outsiders, but local first-time homebuyers could see themselves priced out of the market.”

The Bronx ranked number one on the list of U.S. housing markets that are cooling down. It is one of seven other New York markets, including Brooklyn, Queens and Staten Island, that are in the bottom 10. Home sales in the Bronx have plummeted by 43% since last year, while the number of Redfin.com users searching in the area dropped 16% in the second quarter.

“People want out of New York City,” said local Redfin agent Ken Wile. “This pandemic has changed everybody’s lives. People who had to commute to the city no longer have to, so they want more space, more value and more nature.”

Many people leaving New York City are moving north to Westchester and Putnam counties, Wile said, though he hasn’t noticed many people leaving New York state altogether.

San Francisco County ranked number two on the list of housing markets that have slowed down the most. New listings skyrocketed 110% year over year in July—a sign that homeowners are fleeing. The San Francisco metro area has seen its supply of homes increase more than any other major metro since the pandemic began, forcing sellers to lower expectations for what they can reap in a sale. The region has seen a greater increase in price drops than any other major metro, with a quarter of sellers cutting prices. Still, San Francisco’s median sale price remains sky-high at nearly $1.5 million.

“I’ve been telling sellers that if they’re not willing to compromise on price after a couple of weeks, they’ll probably be holding onto their home for two to four more years,” said San Francisco Redfin agent Gabrielle Bunker. “A lot of sellers are having a hard time coming to terms with that—they’re really, really wishing that the market was the way that it was six to nine months ago.” The report can be accessed at https://www.redfin.com/blog/hot-housing-markets-affordable-pandemic.