'Zoom towns' not booming anymore
With rising mortgage rates and housing prices that surged during the pandemic, cities that attracted out-of-town buyers are now seeing sharp slowdowns.
Key points:
- Cities like Las Vegas, Phoenix and Boise are experiencing price drops and sluggish sales as demand cools.
- This trend is playing out in many "unsustainably hot" areas across the country, with Florida seeing slowdowns in several markets.
- Buyers wishing to relocate may be more likely to consider lesser-known areas with houses at or below the U.S. median sale price.
Cities dubbed "Zoom towns" early in the pandemic are among those cooling most quickly as interest rates remain elevated.
A September Redfin report looked at which markets have cooled down the most between February and August 2022, basing their analysis on a variety of factors including changes in overall price, inventory and price per square foot.
Among those areas cooling the fastest are cities that were popular relocation destinations for remote workers, including Las Vegas, Phoenix and Sacramento. Buyers flocked to those cities from more expensive metros, like Seattle and the Bay Area, during the first two years of the pandemic, driving up prices. Las Vegas saw a 35% increase in home prices between August 2020 and 2022.
Seattle, while not a "Zoom town," topped the list of cooling markets, likely due to the area's high housing prices that have become even more expensive with the spike in interest rates.
"These are all places where homebuyers are feeling the sting of rising home prices, higher mortgage rates and inflation very sharply. They're slowing down partly because so many people have been priced out and partly because last year's record-low rates made them unsustainably hot," said Redfin Chief Economist Daryl Fairweather in the report.
Five of the top 20 cooling markets are located in Florida, which has been a popular landing spot for those who could relocate or retire early. Florida experienced more inbound migration than any other state in 2021.
In a study from SmartAsset that used a different set of metrics to assess cooling, Boise, Idaho, took the top spot among markets that had cooled the most. Boise saw an influx of buyers during the pandemic, but SmartAsset found that nearly twice as many houses are now being listed relative to those being sold. Austin, Phoenix, San Jose and Las Vegas rounded out the top five in their report.
The slowdown in Boise was noticeable to agents in the area by mid-2022. "It was like somebody just turned the lights off," Shauna Pendleton told the Wall Street Journal in July. Pendleton, a Boise real estate agent for Redfin, said "the buyers just disappeared off the face of the earth."
Boise, Las Vegas and other cities in the report quickly went from relatively affordable to less affordable, pricing out many local buyers and reducing demand from relocating buyers.
Relocation remains an attractive option for those with the flexibility to move, but affordability is key. Realtor.com Senior Economist George Ratiu said in an email that buyers may turn to smaller or mid-size cities that didn't experience the rapid Zoom boom and are still relatively affordable, like Manchester, New Hampshire; LaCrosse, Wisconsin; Rochester, New York; and Springfield, Ohio — markets that are below the national median home price.