Tax concerns push prospective homebuyers away from pricey cities

by Francis Monfort13 Feb 2018

Migration patterns among home searchers who looked to move to another metro area in the fourth quarter followed the trend of affordability observed throughout 2017, according to the latest Migration Report from Redfin.

However, the fourth quarter also saw more searchers factoring in tax benefits when they searched for a new home.

Redfin’s analysis of home searchers who looked to move to another metro area found that the high-tax coastal markets of San Francisco, New York, and Los Angeles posted the highest net outflows. These home searchers looked for homes in Sacramento, Phoenix, Las Vegas, and Nashville, which are more affordable metros with lower taxes.

Redfin said it expects the new trend to intensify in 2018 as tax reform becomes a reality and more people relocate to find a lower cost of living.

"People leaving coastal hubs in search of affordability has been a consistent trend for the last five years," Redfin Chief Economist Nela Richardson said. "Late last year, there was a twist. Many of the popular migration paths that we saw users exploring yielded tax benefits along with increased affordability."

In Redfin’s analysis, 18.2% of searches for homes in Las Vegas in the fourth quarter came from Los Angeles. Using a tax burden report, Redfin estimated the tax benefit from a move from one metro to another. A Los Angeles family earning $150,000 who would move to Las Vegas could save $7,785 in taxes. The family would also likely pay less for a Las Vegas home given typical homes cost about $333,000 less than in Los Angeles.

"Lower taxes and more affordable housing have historically drawn Californians away from the coast to places like Nevada and Arizona," Redfin agent Heidi Ludwig said. "The recent changes in tax law have been coming up in my conversations with prospective home sellers.”

Related stories:
Top migration destinations include metros with active residential construction
LendingTree homebuyer migration study reveals Southern tilt


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