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40 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION For Many Home Shoppers, Relocation is Everything People are realizing that if they move from LA to the Midwest or Florida, their mortgage is cut in half and tax bills are lower, agents say. I t appears that the beach is losing its allure for many homeowners. According to Redfin.com, the percentage of people relocating from one metro to another has gone up, and most of them are former coastal dwellers looking for less expensive places to live. In 2019, 25.5% of buyers left one metro area for another one. In 2020, that number went up to 27.8%, a 9% increase year over year. This is contributing to the overall housing shortage, espe- cially in the Phoenix, Austin, and Las Vegas areas. In fact, in the 10 most popular migration destina- tions, the supply of homes is down by double digits compared to last year. The only areas where supply has increased are the San Francisco Bay area, New York, and Los Angeles—some of the most expensive places to live in the country. "For the past two years I've felt like everyone is leaving Los Angeles, and that has intensi- fied during the pandemic," said Lindsay Katz, Los Angeles Redfin agent. "More than half of my sell- ers are moving to a different area." These homebuyers from more expensive areas bring about another side trend—rising home prices. "But even though Phoenix is af- fordable compared to other places, prices have risen significantly over the last year," said Van Welborn, Redfin agent. "Locals are having a hard time getting their offers accepted because there are so few homes on the market, and often someone from California will put in a competing offer at a higher price and waive the appraisal." For example, the average budget for a Phoenix resident looking to relocate within the same metro is $509,000. The average out-of-tower relocating to Phoenix, however, has $627,000, which is 23% more money than the typical local. These patterns aren't show- ing any signs of slowing down anytime soon. With remote work continuing to be an option for many white-collar workers in large metros, there's no reason to continue paying high mortgages when they have the means to relocate to somewhere more af- fordable. "A lot of young families are moving back to their hometowns to be near their parents, moves they can now make because they're working remotely," Katz said. "People are realizing that if they leave Los Angeles and move to a place like the Midwest or Florida, they can afford to live on just one income because their mortgage is cut in half and tax bills are lower." Interest Rates—and Affordability—Remain Low While rates dropped, the financial strain on the average household income and the rise in home prices have erased positive effects. I nterest rates on 30-year mortgages are at historic lows, but that hasn't helped make homes any more af- fordable for the average Ameri- can, according to the Federal Reserve Bank of Atlanta's Home Ownership Affordability Moni- tor (HOAM) index. Household incomes have dipped, and home prices have risen all over the country. In fact, the median household income at the end of November was down 5.4% from the same time the year before. And in contrast, the national median home price went up 14.1% in the same amount of time. Yes, rates on fixed 30-year mortgages may have dropped to 2.8% by November's end, but the financial strain on the average household income and the rise in home prices have erased any positive effects from lower rates, according to the index. In other words, the median- priced home is simply unaf- fordable to the median-income buyer. However, these are national averages. There are pockets of the country where homes are still affordable, even in populous metro areas. Rochester, New York; Washington's Spokane-Spokane Valley; and St. Louis all have populations over 500,000 and saw improvements in affordability (7.08%, 7.02%, and 6.63%, respectively). This is due to the lower interest rate and declining home prices. Washington, D.C., and San Francisco also saw small increases in affordability, because home prices remained stable. To counter those cities, Milwaukee, Wisconsin; the New York metro area; and Cape Coral, Florida, all experienced the biggest drop in affordability (4.15%, 2.03%, and 1.85%, respectively). Home price growth in these areas out- paced any financial perks of lower interest rates. In fact, the median home price in Milwaukee climbed 19.9% over a year's time, New York's median price increased 11.9%, and Cape Coral's price went up 15.9%. So, why have homes priced themselves out of affordability across the country? Supply and demand. There simply aren't enough homes available for eager buyers, and bidding wars ensued. Those with deeper pockets won, and that drove up the cost of homes around them. December of 2020 saw a 23% drop in inventory, for example, and the supply shortage won't be fixed in the near future, which means affordability will continue to be a problem for some time.