A map of the US shows movement from northern states to southern states.
Illustration by Lanette Behiry/Real Estate News

Buyers look to the South and Midwest, but costs can be high 

Midwest and Sunbelt markets continue to attract home shoppers, but affordability is precarious, especially in Florida as insurance rates rise.

June 5, 2023
4 minutes

Key points:

  • Home shoppers in the West are most likely to look outside their current market for a new home.
  • While the Midwest has been historically more affordable, buyers in the region face worsening conditions.
  • Florida continues to be a popular destination for homebuyers, but home insurance can be a showstopper. 

While the spring real estate market may be tepid in some regions, homes are still in high demand throughout much of the South and Southeast, according to two recent reports. 

And perhaps unsurprisingly, it's the mix of warmer weather and affordability that has people looking at homes outside of their current market, a study of web traffic and consumer patterns from Realtor.com suggests. A separate analysis of buyer behavior from Bankrate shows that buyers are looking away from the pricey West Coast and toward more affordable — and sunny — states in the Southeast. 

Why buyers are looking elsewhere

The West Coast's longstanding housing affordability crisis hasn't been helpful to first-time buyers and those looking to trade up. But the push toward remote work has allowed many high-earning tech and 9-to-5 workers to venture elsewhere and purchase a home in a more affordable market

And that trend is only increasing, according to the report. It's most notable in the West, where more than 66% of shoppers looked outside their market in the first quarter, compared with 55% three years ago. Home prices are a factor for many potential movers. In fact, just over half — or 50.3% — of home shoppers were looking at properties in more affordable markets such as those in the Midwest and Southeast, the report says.

An irony in the situation is that while Midwestern markets tended to have higher affordability thresholds and higher levels of homeownership for millennials, buyers in the Midwest who are looking to stay in the region face worsening conditions, the report says, as there are fewer affordable homes for them to move to. And transplants from California and New York with deep pockets are not likely to help the situation as they seek out affordable homes for themselves.

The South is where the heat is

The Bankrate report reveals which metros are most likely to lure buyers based on housing indicators — price appreciation, active listings and days on market — as well as economic factors like job growth and population growth. 

Among all metros across the country, Bankrate found the hottest markets right now are in the warm-weather locations of Gainesville, Georgia; Knoxville, Tennessee; Cape Coral-Fort Meyes, Florida; Sarasota-Bradenton, Florida; and Charlotte, North Carolina. 

Looking only at large metro areas, Southern cities also took the top five spots: Charlotte, Nashville, Tampa, Dallas-Fort Worth, and Orlando.

Florida had the most high-ranking metros on the list, contributing 10 of the top 20 hottest cities.

The dark side of the Sunshine State

Just as the Midwest is starting to experience its own upheaval over affordability and an influx of out-of-state buyers, Florida is no stranger to housing booms and busts. The state's sunshine and shoreline are major draws for buyers seeking a better quality of life. But there's another important consideration when it comes to the Florida housing market: natural disasters, and financial protection from them. 

It's becoming more challenging to find affordable home insurance in many parts of Florida. Major insurance companies have been scaling back or outright pulling out of the state in the last couple of years. According to recent reporting from CNN, Florida homeowners on average are paying private insurers roughly $6,000 a year — a huge difference when comparing the national average of just $1,700 to insure a home.

The CNN report indicates that State Farm currently only has about a 7% share of the home insurance market in Florida while no other major insurer has over 2%. And according to Insurance.com, ten companies have either started to wind down their exposure in Florida or left the state entirely. The situation has turned what was otherwise a slam dunk for out-of-state buyers into a potentially costly and frustrating conundrum. 

Florida lawmakers are getting involved to help stymy what could otherwise become a full-blown financial disaster for regular homeowners, providing property tax refunds to homeowners affected by Hurricane Ian and bolstering a publicly funded reinsurance pool to restore confidence among insurers.

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