Some of the biggest pandemic migration destinations also have the highest inflation
Soaring home prices and inflation are two of 2022’s biggest personal finance stories, and arguably the ones most likely to affect your wallet.
But in some cities, where home prices are rising fast and inflation is particularly high, residents risk having to face both problems at once.
Warm and comparatively affordable Sunbelt cities saw a massive influx of new arrivals during the pandemic, as remote work enabled more people to move. The influx kickstarted bidding wars and drove up housing prices, but now these cities are dealing with some of the highest inflation rates in the country, and risk losing their affordability.
Nationwide, home prices are up 20.9% from March 2021, and the biggest factor behind that rise is the high demand for homes outstripping supply, especially in Sunbelt cities, where competition for housing has caused home prices to rise faster than the national average. In Phoenix, Tampa, and Atlanta, three of the most popular migration destinations in the country, average home sale prices have increased more than 23% relative to last year.
And now, in addition to high housing prices, these same cities are experiencing inflation well above the national average of 8.5%. In Phoenix, Tampa, and Atlanta, among the most popular migration destinations, prices for goods and services have increased on average around 10%, according to online real estate firm Redfin.
Comparatively, cities with an exodus of residents during the pandemic have inflation rates that are lower than the national average. San Francisco and New York City—the No. 1 and No. 3 cities people who have moved away from this year, according to a Redfin migration report from April—have some of the lowest inflation rates in the country, at a little over 5%.
Inflation and housing prices have long been related. For homeowners, inflation can often be a good thing, as property values tend to rise, and sellers have more pricing power. But for buyers, high inflation is often a burden, especially now when housing inventory is so low. Prospective homeowners are more likely to be forced into bidding wars and have to pay above home asking prices.
If high inflation and high competition in Sunbelt cities persist, the region might lose its claim as an affordable refuge. But it will likely be several years, if ever, for cities like Phoenix and Tampa to become more expensive than San Francisco or Los Angeles.
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