Home Prices In Opportunity Zone Redevelopment Areas Fall During Q4
Drop-off Matches Broader Nationwide Downturn
By ATTOM Staff
ATTOM, a leading curator of land, property, and real estate data, released its fourth-quarter 2022 report analyzing qualified low-income Opportunity Zones targeted by Congress for economic redevelopment in the Tax Cuts and Jobs Act of 2017 (see full methodology below). In this report, ATTOM looked at 4,119 zones around the United States with sufficient data to analyze, meaning they had at least five home sales in the fourth quarter of 2022.
The report found that median single-family home and condo prices decreased from the third quarter of 2022 to the fourth quarter of 2022 in 56% of Opportunity Zones around the country and went down at least 5% in almost half. Those declines closely paralleled drops in neighborhoods outside the zones as prices fell across the broader U.S. housing market during the second half of 2022 following a decade of almost continuous growth.
However, some signs emerged during the fourth quarter revealing that Opportunity Zone markets were withstanding the national market retreat better than other neighborhoods, just as they outperformed nationwide increases by some measures during the boom period. For example, larger portions of Opportunity Zones saw typical values rise by at least 10% both quarterly and annually compared to the rest of the nation during the last few months of 2022.
In yet another ongoing sign of strength, median values were still up year over year in almost the same portion of Opportunity Zones as elsewhere around the country.
“Home values inside Opportunity Zones are falling. But, on balance, they aren’t dropping any faster than in more well-off neighborhoods around the country,” said Rob Barber, CEO for ATTOM. “By a couple of metrics, they are even doing a little better. That speaks to the continued strength of Opportunity Zone housing markets and their potential allure for investors who still want to take advantage of the program’s tax breaks even in the current uncertain economic environment.”
Opportunity Zones are defined in the Tax Act legislation as census tracts in or alongside low-income neighborhoods that meet various criteria for redevelopment in all 50 states, the District of Columbia and U.S. territories. Census tracts, as defined by the U.S. Census Bureau, cover areas that have 1,200 to 8,000 residents, with an average of about 4,000 people.
Without a doubt, typical home values in Opportunity Zones remained well below those in most other neighborhoods around the nation in the fourth quarter of 2022. Median fourth-quarter prices fell beneath the nationwide median of $321,500 in 79% of Opportunity Zones. That was about the same portion as in earlier periods over the past year. In addition, median prices were less than $200,000 in 53% of the zones during the fourth quarter of 2022, also about the same as in earlier periods.
Considerable price volatility also continued in Opportunity Zones, as median values either dropped or increased from the third to the fourth quarter of 2022 by at least 5% in more than three-quarters of zones. That likely reflected the small number of sales in many zones.
Still, the fourth-quarter price trends, while down, continued a pattern of Opportunity Zones
largely keeping pace with the national market despite their location in some of the country’s most distressed communities. Over the past few years, price trends inside the zones matched or even bested nationwide patterns. That happened as a combination of rock-bottom home-mortgage interest rates and a historically small supply of homes for sale pushed up demand and prices throughout the U.S. As buyers with more-limited resources were priced out of many areas, they likely turned to lower-priced locations, including Opportunity Zones.
Home prices have dipped in most of the country since the middle of 2022 as higher mortgage rates and consumer price inflation, combined with a faltering stock market and other forces, have cut into what buyers can afford. But the ongoing tight supply for homes for sale could help Opportunity Zones withstand steeper drop-offs.
“These areas targeted for redevelopment tax breaks may be less vulnerable to taking a big hit if the market keeps dropping because they are still some of the most affordable markets,” Barber added. “The Spring buying season should say a lot about whether they can maintain their strength.”
High-level findings from the report
Median prices of single-family houses and condominiums declined from the third quarter of 2022 to the fourth quarter of 2022 in 2,116 (56%) of the Opportunity Zones around the U.S. with sufficient data to analyze, while increasing or staying the same in 44%. Medians were still up from the fourth quarter of 2021 to the same period last year in 2,414 (63%) of those zones.
Both of those trends roughly followed national patterns. By comparison, median prices decreased from the third to the fourth quarter of 2022 in 58% of census tracts outside of Opportunity Zones, while remaining up annually in 65%. (Among the 4,119 Opportunity Zones included in the report, 3,801 had enough data to generate usable median-price comparisons from the third quarter to the fourth quarter of 2022; 3,862 had enough data to make comparisons between the fourth quarter of 2021 and the fourth quarter of 2022).
In addition, measured year over year, median home prices remained up at least 10% in the fourth quarter of 2022 in 1,738 (45%) of Opportunity Zones with sufficient data. Prices rose that much during that time period in 41% of other census tracts throughout the country.
Of the 4,119 zones in the report, 1,481 (36%) had median prices in the fourth quarter of 2022 that were less than $150,000. That was down from 39% of those zones a year earlier. Another 697 zones (17%) had medians in the fourth quarter of last year ranging from $150,000 to $199,999.
Median values in the fourth quarter of 2022 ranged from $200,000 to $299,999 in 934 Opportunity Zones (23%) while they topped the nationwide fourth-quarter median of $321,500 in 856 (21%).
The Midwest continued in the fourth quarter of 2022 to have the largest portion of the lowest-priced Opportunity Zone tracts. Median home prices were less than $150,000 in 59% of zones in the Midwest, followed by the Northeast (41%), the South (36%) and the West (4%).
Median household incomes in 87% of the Opportunity Zones analyzed were less than the medians in the counties where they were located. Median incomes were less than three-quarters of county level figures in 55% of zones and less than half in 15%.
Report Methodology
The ATTOM Opportunity Zones analysis is based on home sales price data derived from recorded sales deeds. Statistics for previous quarters are revised when each new report is issued as more deed data becomes available. ATTOM’s analysis compared median home prices in census tracts designated as Opportunity Zones by the Internal Revenue Service. Except where noted, tracts were used for the analysis if they had at least five sales in the fourth quarter of of 2022.
