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As the remote work trend has grown during the coronavirus (COVID-19) pandemic, the residents of some expensive metros are considering a move.

Nationally, San Francisco has the second-highest portion of home searchers looking for homes outside their current metro, after New York. As of July 2020, 24% of San Francisco home searchers were exploring homes outside their expensive metro, according to Redfin.

The next-highest portion of searchers looking outside their city is in Los Angeles, where 16% of searchers are looking to move outside of their metro area.

On the flip side, Sacramento is currently the number one migration destination for homebuyers looking to move outside their current metros. In fact, just over 50% of Redfin users searching for homes in Sacramento originated from outside the metro in July 2020. The biggest portion of these searches comes from the nearby San Francisco metro area, where the cost of living is significantly higher.

Expensive cities buck the trend

Nationally, home sales volume has struggled at roughly the same pace in both urban and suburban markets. This is also true when comparing attached and detached homes, which offer more space. Further, inventory is down dramatically everywhere, regardless of neighborhood density.

However, San Francisco is a big exception to this trend, with soaring inventory in its urban core. The reason for this sudden lack of demand stems from the growing ability for San Francisco residents to work remotely. When given the opportunity to move, it’s no wonder many of the residents of one of the U.S.’s most expensive cities are taking the chance to look elsewhere.

Nearby Sacramento is poised to benefit from the exodus.

Here, the median home price of $366,600 is a whopping $1.05 million below San Francisco’s median home price, according to Zillow. Further, home prices in Sacramento have increased 7.7% over the previous year as of August 2020, compared to the 0.6% annual rise in San Francisco, reflecting different levels of demand.

But there is a big caveat: local job losses in Sacramento, as with the rest of the state, will continue to hold back growth in the housing market. While a minor influx of residents from pricier metros may provide a brief boost to home sales volume and prices in 2020-2021, the foundation for home sales is jobs, and that foundation currently needs repairs.

Employment figures are 9% below a year earlier in Sacramento as of July 2020, reflecting a loss of over 90,000 jobs compared to the year prior. This is slightly less than the annual statewide job losses of 9.5% as of July 2020.

Looking forward, expect the recession to hit different segments of the economy in waves. This W-shaped recession may see a momentary upswing heading into 2021, but the housing market will be just starting to slide. When the eviction and foreclosure moratoriums expire in 2021, the millions of homeowners who are currently 90 or more days delinquent will enter the foreclosure process.

The result of the sudden influx of foreclosures will be a dramatic cut to home prices, not to recover until jobs return in sufficient numbers to support homebuyers and renters alike. first tuesday forecasts this housing recovery will begin in 2023.

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Recession 2020