Some of the hottest migration destinations – Phoenix, Tampa and Atlanta – have the highest inflation rates in the US.
Rising Home Prices a Contributor to Outsized Inflation
In March, inflation hit 8.5% y/y, the highest nationwide inflation rate in 40 years. The recently announced inflation rate in April was slightly better at 8.3%. (By the way, policymakers at the Federal Reserve and elsewhere consider an inflation rate of 2% acceptable.)
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“Not everyone in the country (however) is experiencing inflation the same way,” said Redfin Deputy Chief Economist Taylor Marr. “It’s having an especially big impact in places like Tampa and Phoenix, which are attracting the most new residents and seeing double-digit increases in prices overall and even bigger increases in housing costs…In Atlanta…wages are up about 7% from a year ago but inflation is up 10% and asking rents are up 22%. That means it’s becoming more difficult to save for a down payment and break into homeownership even before you factor in sky-high home prices and rising mortgage rates.”
Prices Skyrocketing in Most Popular Destinations
In Phoenix, the prices of goods and services increased +10.9% y/y during Q1 2022, the highest inflation rate of metros included in an analysis by Redfin. Phoenix was also the second-most popular destination for relocating homebuyers during Q1 2022, according to Redfin’s migration data. Home prices in Phoenix soared +27% y/y in March 2022 to $470,000.
Atlanta, the tenth most popular migration destination, had the second-highest inflation rate in the country at +10.6. Home prices in Atlanta climbed +22% to $368,000 compared with an average home price increase of +17% nationwide.
Tampa saw an increase of +9.9% in prices of good and services while home prices jumped +29% y/y to $364,000. Tampa ranks number three in the country for both inflation and migration jumps.
Eventually, Financial Benefit of Moving to Relatively Affordable Areas to Diminish
Some housing markets around the country are beginning to show signs of cooling BUT not in the Sun Belt markets. Sun Belt markets are expected to remain appealing to out-of-town homebuyers as remote working becomes more and more entrenched and as more people seek warm climates and relative affordability.
The problem? Homes in Sun Belt markets such as Phoenix are becoming less affordable more quickly than are homes in coastal markets. For example, a homebuyer in Phoenix now needs to earn +46% more than they needed to earn just one year ago in order to afford Phoenix’s monthly mortgage payment.
Marr said, “A homebuyer would still save a lot of money by moving from San Francisco to Phoenix if (that homebuyer) kept the same job and the same salary – but the discount is less than it was two years ago…There may come a point where it won’t make financial sense to move from coastal California to Phoenix or Atlanta (but) that point is likely still many years in the future, as popular migration destinations are building more new homes than other places in the country.”
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Thanks to Redfin.