An influx of out-of-towners with big budgets is contributing to the rise in home prices in popular migration destinations, pricing out many local buyers, according to a new report from real estate brokerage Redfin.
The average out-of-towner moving to Nashville in 2021 had $736,900 to spend on a home, 28.5% higher than the $573,400 average budget for local buyers. The report cited Nashville as having the biggest budget gap among the cities included in its analysis.
Next comes Philadelphia, with an average out-of-town budget of $559,200—28.4% higher than the average local budget. It’s followed by New York City, where the average out-of-towner had a 26.5% higher budget than the average local resident, and Atlanta, where migrants had a 26.1% bigger budget. Miami rounds out the top five, with an average out-of-town budget 25.1% higher than that of locals. Out-of-towners have higher budgets than locals in 42 of the 49 cities included in Redfin’s report.
The upswing in people moving from one area to another since the start of the pandemic is due partly to remote workers moving to relatively affordable areas in search of larger homes with more outdoor space. Out-of-towners frequently have bigger budgets than local residents because they may come from a place with higher salaries, and/or they may have sold a home in a more expensive city.
That’s good news for people moving from a place with sky-high home prices like coastal California to an area that’s still comparatively affordable, like Nashville or Atlanta. For instance, the typical home in Los Angeles—the most common origin of people moving to Nashville—sold for $950,000 in December, versus $411,000 in Nashville. The typical home in New York City —the most common origin of people moving to Atlanta and Miami—sold for $785,000, versus $385,000 in Atlanta and $459,000 in Miami.
The influx of out-of-towners with big budgets is contributing to the rise in home prices in popular migration destinations, pricing out many locals. Nashville home prices remain lower than many expensive coastal cities, but were up 22.6% in December from the year before. So while Nashville may be a good deal for someone coming from Los Angeles, many local residents are stuck renting.
“We’re seeing a lot of out-of-state transplants, mostly from states like California that have an income tax,” said Hope Geyer, a Redfin agent in Nashville, where there’s no state income tax. “People moving from the West Coast will pay way over asking price without batting an eye. In their eyes, they’re getting a deal. 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.”
Locals have bigger budgets in several Bay Area cities
Locals had higher budgets than out-of-towners in seven of the 50 cities in the analysis, most of which are in California: Four Bay Area cities (Fremont, Pleasanton, San Jose and San Francisco) and Riverside, plus Baltimore and Frisco, Texas.
The average budget for Fremont locals was $1,560,600, about 6% higher than the average budget for out-of-towners. That’s a bigger premium than any other city in this analysis. It’s followed by Pleasanton, where locals had an average budget of $1,752,400, roughly 5% higher than the average migrant budget.
Bay Area locals tend to have bigger budgets than people moving in from out of town because they have some of the highest incomes in the country.