Waving goodbye to your hard-won real estate clients is never easy. But when clients are increasingly moving out of town, the process is becoming ever more familiar.
The share of homebuyers searching outside of their current metro continued to increase in the third quarter (Q3) of 2022, rising to 24% nationwide. This share is up from 22% a year earlier, according to Redfin.
Before the Pandemic Economy emboldened many workers to seize the remote work trend and move further away from the office, the share of homebuyers who looked beyond their present metro was an even smaller 18%.
This presents an additional roadblock for real estate agents, who are used to assisting a seller client with both listing their current home and buying their next home. When the seller client buys in another metro or another state, the traditional agent is only able to access one side of the transaction — the local part.
Here in California, the share of local homebuyers who searched for homes in another metro in Q3 2022 included:
- 24% of San Francisco homebuyers, with most of these searchers looking to move to Sacramento; and
- 20% of Los Angeles homebuyers, with most of these searchers looking to move to San Diego.
During the pandemic, households energized by stimulus checks and freedom from the office caused a veritable migration boom. Unchained by a commute, homebuyers increasingly looked further afield to find larger — less expensive — pastures, fueling long-distance moves.
Still, with the pandemic response receding across the nation, the continued (and still rising) trend away from homebuyers’ present metros was less easily anticipated.
It turns out, short-lived stimulus checks and remote work aren’t the only forces pushing homebuyers to head for the hills.
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Nearly three times as many Californians are moving out-of-state than moving in
Falling prices are still too high
While economic forces come and go, there is one thing that continues to stick: California’s high housing costs, especially in the state’s coastal job centers.
Nationally, the average mortgage payment for a purchase-assist mortgage originated in August 2022 has jumped a colossal 40% since the start of the year. Driven by a jump in mortgage interest rates and the corresponding drop in buyer purchasing power, mortgaged homebuyers are increasingly limited in how much they can spend on a home.
With such a significant jump in mortgage payments — on top of the rapid home price rise which occurred during the pandemic — homebuyers determined to buy are increasingly forced to lower their expectations on home size, amenities — and location.
However, some good news for future homebuyers: after over a decade of price increases exceeding the pace of incomes, placing homeownership further and further out of reach, home prices have finally reversed course.
After peaking in May 2022, as of September 2022, home prices are down from their peak by:
- 5%-7% in Los Angeles;
- 6%-8% in San Diego; and
- 9%-13% in San Francisco.
While this steep drop is easing the burden somewhat, home prices are still too high for homebuyers unwilling to sacrifice. Thus, today’s would-be homebuyers continue to choose between buying further from job centers, where they can get more value for their money — or, much better, waiting for prices to fall to meet their budgets.
Now is not the time to buy — anywhere
firsttuesday forecasts California home prices will continue their descent in 2023-2024, likely bottoming in 2025. To return to a pace on par with incomes, prices will fall on average 40% from their peak.
After the delight of a decade of climbing home values, most real estate agents will imagine this level of decline to be absurd. But for a recent example, recall the aftermath of the Millennium Boom, when average California home values contracted 45% from their 2006 peak to their bottom in 2009.
Homebuyers and brokers have come to see housing as a get-rich-quick scheme. It’s time to adjust your view and see housing as primarily shelter or long-term investment. Flippers — and recent homebuyers — will find themselves deeply underwater in the coming years.
Referral agent
However, even when seller clients are moving out of the agent’s area of service, agents can still earn income from the seller’s next purchase by joining a referral network to assist clients both leaving and entering the metro or state. When you refer a seller client who is buying out-of-state, you receive income paid as a percentage of the other agent’s fee, and vice-versa.
Another way to make the most of long-distance moves is to become a relocation agent. Many companies, including the larger franchises, offer relocation services throughout the country. Or, you can reach out to businesses on your own and offer your services to help employees relocate into and out of your area.
As another way to help relocating clients, agents can also become versed in property exchanges, also called a two-party exchange. In this situation, two owners exchange equity-for-equ
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