Demand for housing has risen sharply in 2021, and that has affected prices. According to the carefully followed S&P CoreLogic Case-Shiller Indices, home prices nationwide rose 19.1% in October, compared to the same month last year. In several markets, the figure was over 25%.
No single factor has caused these increases in demand for housing. Certainly, low mortgage rates have contributed, although these have begun to rise. Tens of thousands of people have departed expensive coastal cities such as New York and San Francisco, where home prices exceed twice the national median, for cities inland where prices have been lower. The ability to work from home, brought on by the COVID-19 pandemic, has allowed many Americans to become mobile.
Ironically, the move inland has pushed home prices higher in cities people have found attractive for their new lives. With limited supply, bidding wars (when more than one buyer puts an offer for the same home) also have contributed to price increases. Homes in some cities now stay on the market for just a few days.
As people migrate to these popular inland cities, among the things that have happened is that they can often pay more for homes than the residents of these same cities. In some places where the rich have bought large volumes of homes, the “locals” can barely afford to stay. One well-known example of this is Nantucket, an island playground for the rich that is off the coast of Massachusetts.
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In its just released Out-of-Town Buyers Have Nearly 30% More to Spend on Homes Than Locals in Migration Hotspots Like Nashville, Atlanta and Miami report, brokerage Redfin found that the market where the difference is the greatest is Nashville. Hope Geyer, a Redfin agent in Nashville, commented about this trend in the Tennessee city: “We’re seeing a lot of out-of-state transplants, mostly from states like California that have an income tax.”
The budget premium outside residents have to buy a home in Nashville compared to local residents is 28.5%. The budget of outsiders is $736,868. It is what Redfin calls the “average maximum budget for migrants.” The “average maximum budget” for locals is $573,382.
These are the 10 cities where out of towners have a budget to pay the biggest premium compared to locals for a home:
| City | Outsider Budget | Premium |
|---|---|---|
| Nashville | $736,868 | 28.5% |
| Philadelphia | $559,215 | 28.t% |
| New York | $1,211,195 | 26.5% |
| Atlanta | $717,243 | 26.1% |
| Miami | $972,470 | 25.1% |
| Columbus | $456,037 | 21.4% |
| Phoenix | $708,911 | 20.8% |
| Las Vegas | $652,942 | 19.9% |
| Indianapolis | $402,620 | 19.1% |
| Orlando | $555,216 | 17.8% |
Click here to see the cities where it is most expensive to buy a home.
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