ATTOM [1] recently released its Q1 2022 report analyzing qualified low-income Opportunity Zones targeted by Congress for economic redevelopment in the Tax Cuts and Jobs Act of 2017. In the newest report, ATTOM looked at 5,092 zones around the United States with sufficient data to analyze, meaning they had at least five home sales in Q1 of 2022.
The report found that median single-family home and condo prices rose from Q4 of 2021 to Q1 of 2022 in 55% of Opportunity Zones around the country, and climbed approximately 20% annually in half.
ATTOM analyzed areas where there was sufficient data for all quarters. Those gains followed similar patterns over the past year, as home prices in distressed neighborhoods around the nation continue to keep up with gains in the broader national housing market.
While the pace of increases slowed in Q1 of 2022 compared to peak periods last year, median values still went up in about half the Opportunity Zones by more than the 16.6% year-over-year gain seen nationwide.
"Home price trends in Opportunity Zones mirror what we're seeing elsewhere in the housing market," said Rick Sharga, Executive VP of Market Intelligence at ATTOM. "Strong price growth has helped homeowners in these economically-challenged areas benefit from higher equity, and should contribute to the ongoing redevelopment of these areas."
Typical home values in Opportunity Zones do remain lower than those in most other neighborhoods around the nation in Q1 of 2022. Median Q1 prices were less than the national median of $320,500 in 76% of Opportunity Zones, about the same portion as in earlier periods last year.
Typical values also were under $200,000 in 51% of the zones during Q1 of 2022. That figure marked the same percentage as in Q4 of 2021, but was down from 61% a year earlier, as markets inside some of the nation's poorest communities kept improving amid a time of historically low mortgage rates, high buyer demand and tight supplies of homes for sale.
In another ongoing sign of strong growth, prices spiked at least 25% from Q1 of 2021 to the same period in 2022 in a larger portion of Opportunity Zones than in other neighborhoods around the country.
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.
Prices inside Opportunity Zones remained on an upward track during Q1 of 2022 as a decade-long price boom in the United States kept boosting markets throughout the U.S. Those included lower-income communities that have become more appealing as many buyers have gotten priced out of more-expensive neighborhoods.
"With so little entry level inventory on the market, homes in Opportunity Zones represent some of the few remaining affordable options for prospective homebuyers," Sharga added. "This is especially important for first-time buyers, who typically have to stretch their finances in order to be able to afford a home."
Both the overall housing market and Opportunity Zones are facing headwinds today that didn't exist a few months ago, as mortgage rates have risen to 5%, the stock market has fallen, and consumer price inflation is at a 40-year high.
Key Findings
- Median prices of single-family houses and condominiums rose from Q4 of 2021 to Q1 of 2022 in 2,617 (55%) of the Opportunity Zones around the U.S. with sufficient data to analyze, and increased from Q1 of 2021 to same period this year in 3,529 (78%) of those zones. By comparison, median prices rose quarterly in 58% of census tracts outside of Opportunity Zones and annually in 80%.
- Measured year-over-year, median home prices rose at least 20% in Q1 of 2022 in 2,231 (49%) of Opportunity Zones with sufficient data. Prices rose that much during that time period in 44% of other census tracts throughout the country.
- Typical single-family home values in 55% of Opportunity Zones increased from Q1 of 2021 to the first quarter of 2022 by more than the jump in the overall national median home price. Nationally, the figure rose 16.6%, year-over-year. Measured quarterly, prices in Opportunity Zones increased at a slower rate than in most of 2021. However, 52% of zones still saw larger quarterly improvements from late 2021 to early 2022 than the national uptick of 1.7%.
- Among states that had at least 25 Opportunity Zones with enough data to analyze during Q1 of 2022, those with the largest portion of zones where median prices rose year-over-year were in the West. They were led by Utah (median prices up, year-over-year, in 97% of zones), Arizona (97%), Nevada (93%), Oregon (88%) and Florida (87%).
- Of all 5,092 zones in the report, 1,807 (35 percent) still had median prices in Q1 of 2022 that were less than $150,000 and another 779 (15%) had medians ranging from $150,000 to $199,999.
- Median values in Q1 of 2022 ranged from $200,000 to $299,999 in 1,092 Opportunity Zones (21%) while they topped the national median of $320,500 in 1,238 (24%).
- The Midwest continued in Q1 of 2022 to have the highest portion of Opportunity Zone tracts with a median home price of less than $150,000 (61%), followed by the South (39%), the Northeast (39%), and the West (3%).
- Median household incomes in 87% of the Opportunity Zones analyzed were less than the medians in the counties where they were located. Typical incomes were less than three-quarters of county-level figures in 56%of zones, and less than half in 13%.
To read the full report for more details and methodology, click here [2].