The relocation trend has come to a head

The share of homebuyers seeking to move out of their metro area has finally passed its peak. The percentage of homebuyers searching in other metros had been gradually building from the beginning of 2020 to 2021, but those numbers have dipped in the third quarter (Q3) of 2021.

This relocation boom was produced primarily by the recession and pandemic – inducing families to pick up and relocate to areas which offer more space for social distancing and take advantage of remote work to find a lower cost living.

But as the world continues to open up and people return to the office, domestic migration is finally starting to return to normal following its temporary boost.

In Q3 2021, 30.1% of potential homebuyers using Redfin’s search tool viewed homes outside of their originating metros, nationwide. This marks the second quarter of decline following the peak of 31.5% in Q1 2021, according to Redfin.

For reference, prior to the pandemic, 25%-26% of Redfin users regularly searched outside of their home metros, so the Q3 2021 level is still elevated.

The slight dip in relocating can be attributed to a cautious return to a more normal work and office space. Remote working allowed workers the ability to move on to more low-cost cities – everything is gradually settling now. In that dust, relocation will return to its seasonal pattern of decline in the latter half of the year, to continue to return to normal levels in 2022-2023.

California’s moving metros

Sacramento was one of the most popular destinations across all major U.S. metros during Q3 2021. Sacramento experienced the greatest net inflow of home searches — with more homebuyers looking to move into a metro than move away.

While remaining a popular destination for homebuyers from costly areas of the state, Sacramento is not immune to the decline in migratory demand. In Q3 2021, Sacramento experienced:

• an 8,400 net inflow of searchers, down from 10,700 a year earlier; and
• 42% of home searches originating outside the metro area, down from 50% a year earlier.

The top origin area for those searching in Sacramento came from San Francisco. In terms of low-cost living, space, and weather, destinations like Sacramento are becoming more popular for nearby coastal residents — especially during our ongoing recession hangover.

Accordingly, San Francisco continued to see a significant percentage of residents looking at housing outside of this expensive metro. In Q3 2021, San Francisco experienced:

• a 52,800 net outflow of searchers, up from 36,500 a year earlier; and
• 25% of total searches originating outside the metro area (well below the national average), up slightly from 24% a year earlier.

Los Angeles also experiences a significant net outflow of home searchers, seeing great numbers of residents searching outside of their current metro. In Q3 2021, Los Angeles experienced:

• a 30,800 net outflow of searchers, up from 19,000 a year earlier; and
• just 18% of total searches originating outside the metro area, up from 17% a year earlier.

The dense cities of the coast with little room for construction are seeing more and more of their residents depart, which occurred a lot more often during the height of the recession – especially with the flexibility of working from home.

Many saw the highlights of more lower-cost metros that also offer more space, but as things continue to return to a pre-pandemic normal, interest in relocating will dwindle to a more usual state.

The relocation boom peak coincided with the remote work peak. As both peaks have now passed, expect to see less of a shakeup in your local housing market, and a gradual return to what is considered a normal level of in-town moves for your community.

For costly coastal cities, the outward-bound trend will continue, as is now considered “normal.” Until local residential construction picks up to meet the high level of demand in job centers like San Francisco, Los Angeles and San Diego, residents will have no choice but to look elsewhere for a cost of living in keeping with incomes. The addition of new housing will depend on legislative intervention in the form of:

• looser zoning restrictions so builders can meet demand;
• fewer parking requirements in downtown areas;
• builder incentives for low- and moderate-income housing;
• faster permitting times; and
• accessory dwelling unit (ADU)

Perhaps most importantly, to encourage more homeownership opportunities in these expensive coastal cities, we need more yes in my backyard (YIMBY) advocates. Real estate professionals can advocate for more housing at city council meetings in their local communities. When the cost of housing is reasonably in line with incomes, fewer outbound moves will occur and the local homeownership rate will rise, creating job security for real estate professionals.