Wealthy out-of-town buyers make it hard for locals to afford homes in their own towns | Smart Change: Personal Finances
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Out-of-town buyers continue to descend on popular real estate markets, and they’re willing to outbid the asking price and outspend locals to get the homes they want.
In some hot cities like Nashville and Philadelphia, a new report from Redfin finds the budget disparity between out-of-town homebuyers and locals is approaching 30%.
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In Nashville, the typical out-of-town buyer had a budget of $736,000, compared to an average budget of $573,000 for locals. That’s a difference of 28.5%, the largest gap of any city analyzed by Redfin. In Philadelphia, out-of-towners were willing to spend an average of $559,200 on their new home, while residents expected to budget $435,609, a difference of 28.4%.
Redfin said out-of-towners had more money to spend than residents of 42 of the 49 cities surveyed, meaning locals had the edge in just seven of the hottest markets (five of which were located in California, which has a large share of high incomes). To put together its ranking, Redfin looked at the maximum price metrics used by home searchers. Only cities with at least 3,000 researchers from inside and outside the metropolitan area in 2021 were considered.
“People moving from the West Coast will pay way more than asking price without batting an eyelid,” Hope Geyer, a Redfin agent in Nashville, said in a statement. “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 buying a new one.”
A previous study by Redfin, from last summer, showed that foreigners were more likely to pay more than residents of hot markets such as Austin, Dallas and Sacramento.
Local shoppers likely won’t see relief any time soon. A recent report by Realtor.com revealed that a typical home in Nashville spent only 29 days on the market in January before being purchased. Homes across the country sold in about 61 days that month, as buyer activity continues to increase even in winter, which tends to be a slower time for real estate. Rising mortgage rates will only exacerbate the problem as buyers rush to lock in mortgages.
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Property Prices: 10 Cities Where Foreigners Spend More Than Locals
Here are the top 10 cities where foreigners have the highest budgets compared to locals, according to Redfin’s analysis, plus the difference between the average budget of an out-of-towner compared to a local shopper.
- Nashville, TN: 28.5%
- Philadelphia, Pennsylvania: 28.4%
- New York, New York: 26.5%
- Atlanta, Georgia: 26.1%
- Miami, Florida: 25.1%
- Columbus, Ohio: 21.4%
- Phoenix, Arizona: 20.8%
- Las Vegas, Nevada: 19.9%
- Indianapolis, Indiana: 19.1%
- Orlando, Florida: 17.8%
The report credits the rise of remote work as one of the main reasons the gap is widening between local buyers and transplant buyers.
Transplants with higher salaries from places with higher costs of living, such as California, have been able to expand their house searches to lower-cost areas if their employers allow them to work remotely since then. any place. Even if they pay more than the asking price in their new town, Geyer says, “in their eyes, they get a deal.”
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