Here Is Another Trend Driving Housing Prices

As if affordable housing weren’t scarce enough, a recent blog post by Corelogic Chief Economist Archana Pradhan

noted that in some U.S. metropolitan areas out-of-town homebuyers earn higher incomes than local residents, with the average difference in income at least 60%. This trend makes it particularly challenging for local residents to find affordable house-purchasing options without moving outside areas in which they currently reside. 

It is a significant finding because in 2023, almost one-quarter of homebuyers in the U.S. purchased property outside their current local metros. This migration started as an attempt to secure more affordable housing. It continued with pandemic migration patterns. Namely, individuals started moving out of the big cities to smaller towns with more space. An increase in remote work also plays a significant role in this shift in housing. While this trend is reversing and people are returning to the cities, housing prices in many smaller towns have already experienced significant increases.

In Corpus Christi, TX, for example, the average monthly income for homebuyers is almost $7,000, while the average monthly income for out-of-metro applicants is close to $11,000 – a 60% difference in earnings. The trend is similar in other metropolitan areas such as Miami-Fort Lauderdale-Pompano Beach, FL, New Orleans, LA, and Nashville, TN, to name a few.

This study is based on all home purchase mortgage applications, accepted or not, from January 2023 through October 2023. Since investors, second-home buyers, and cash buyers are excluded, most indications point to primary homebuyers being most affected by this trend.

The average U.S. income was 25% higher in 2023 than in 2019. However, the income gap between out-of-town buyers and locals went from 20% to 15% in 2023. It would appear that unless the market sees a correction in home prices, these areas are left with home prices unaffordable for many local residents.