OPPORTUNITY ZONE REDEVELOPMENT AREA HOME PRICE TRENDS OUTPACE SHAKY U.S. HOUSING MARKET IN THIRD QUARTER
ATTOM, a leading curator of real estate data nationwide for land and property data, released its third-quarter 2022 report analyzing qualified low-income Opportunity Zones targeted by Congress for economic redevelopment in the Tax Cuts and Jobs Act of 2017. In this report, ATTOM looked at 4,732 zones around the United States with sufficient data to analyze, meaning they had at least five home sales in the third quarter of 2022.
The report found that median single-family home and condo prices rose from the second quarter of 2022 to the third quarter of 2022 in 51 percent of Opportunity Zones around the country and went up at least 3 percent in almost half. Those gains fell below those recorded in earlier time periods over the past year, but they still stood out amid a broader national market that saw a 3 percent decrease in the median single-family home price in the third quarter, after a decade of almost uninterrupted gains.
The latest price improvements extended similar scenarios from the past year as home price changes in distressed neighborhoods around the nation continued to keep up with, or surpass, the performance of the nationwide housing market.
“The combination of higher home prices and mortgage rates that have doubled over the past few months has made affordability a real challenge for both traditional homebuyers and investors,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “For many prospective buyers, the solution to worsening affordability is to look for less expensive homes, and it seems like homes in Opportunity Zones might represent a relative bargain for buyers who’ve been priced out of other markets.”
Typical home values in Opportunity Zones did still remain lower than those in most other neighborhoods around the nation in the third quarter of 2022. Median third-quarter prices fell below the nationwide median of $339,815 in 79 percent of Opportunity Zones. That was about the same portion as in earlier periods over the past year. In addition, median prices remained below $200,000 in 50 percent of the zones during the third quarter of 2022. But that percentage was down from 56 percent in the third quarter of 2021.
Amid those trends, considerable price volatility continued in Opportunity Zones, as median values either dropped or increased quarterly by at least 5 percent in about two-thirds of them, probably reflecting the small number of sales in many areas.
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.
The relative strength of Opportunity Zone markets continued in the third quarter even amid a series of forces that threatened to stall or derail an 11-year boom that nearly has tripled home prices nationwide and has trickled down to the nation’s lowest-price neighborhoods. Over the summer of 2022, the national median sales price declined 3 percent as 30-year mortgage rates approached 7 percent, consumer-price inflation remained at a 40-year high and the stock market fell. Those headwinds all cut into what home buyers could afford.
More drops in home values could have an especially harsh effect on Opportunity Zones if those drops make other areas more affordable to buyers.
High-level findings from the report:
- Median prices of single-family houses and condominiums rose from the second quarter of 2022 to the third quarter of 2022 in 2,283 (51 percent) of the Opportunity Zones around the U.S. with sufficient data to analyze, while declining or staying the same in 49 percent. They increased from the third quarter of 2021 to same period this year in 3,162 (71 percent) of those zones.
- But of those opportunity zones, trends were weaker than in earlier quarters over the past year. Yet they roughly matched or slightly bested broader national trends. By comparison, median prices rose from the second to the third quarter of 2022 in 48 percent of census tracts outside of Opportunity Zones and annually in 75 percent. (Among the 4,732 Opportunity Zones included in the report, 4,441 had enough data to generate usable median-price comparisons from the second quarter to the third quarter of 2022; 4,432 had enough data to make comparisons between the third quarter of 2021 and the third quarter of 2022).
- Measured year over year, median home prices remained up at least 15 percent in the third quarter of 2022 in 1,981 (45 percent) of Opportunity Zones with sufficient data. Prices rose that much during that time period in just 40 percent of other census tracts throughout the country.
- Typical single-family home values in 58 percent of Opportunity Zones either increased, or declined by less, than the nationwide drop-off in the median home price from the second quarter of 2022 to the third quarter of 2022. Nationally, the median dipped 2.7 percent quarterly. In addition, 55 percent of median values inside Opportunity Zones rose from the third quarter of 2021 to the third quarter of 2022 by more than the national annual increase of 9.7 percent.
- Of the 4,732 zones in the report, 1,581 (33 percent) still had median prices in the third quarter of 2022 that were less than $150,000. That was down from 38 percent of those zones a year earlier. Another 768 zones (16 percent) had medians in the third quarter of this year ranging from $150,000 to $199,999.
- Median values in the third quarter of 2022 ranged from $200,000 to $299,999 in 1,057 Opportunity Zones (22 percent), while they topped the nationwide third-quarter median of $339,815 in 1,013 (21 percent).
- The Midwest continued in the third quarter of 2022 to have the largest portion of the lowest-priced Opportunity Zone tracts. Median home prices were less than $175,000 in 66 percent of zones in the Midwest, followed by the South (45 percent), the Northeast (44 percent) and the West (6 percent).
- Median household incomes in 87 percent 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 56 percent of zones and less than half in 16 percent.
Media Contact:
Christine Stricker
949.748.8428
christine.stricker@attomdata.com
