In about half of the nation’s designated Opportunity Zones, home prices are rising at a faster pace than the national average, according to an analysis of Opportunity Zones released Thursday by ATTOM Data Solutions.
Median home prices in 47% of Opportunity Zones studied rose at a faster pace than the 9.4% price gain for the nation overall between Q4 2018 and Q4 2019.
At the same time, 66% of zones analyzed charted a price gain of any amount, both slower and faster than the national pace.
An Opportunity Zone is an “economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment,” according to the IRS.
While home price growth in these areas is a positive sign, there’s no guarantee they will last, said Todd Teta, Chief Product Officer at ATTOM Data Solutions.
“These areas are among the most vulnerable to economic downturns,” he said. “As a result, the recent upswing could change on a dime if the broader housing market flattens out or sags.”
He added, “But for now, the price gains are a crucial measure that neighborhoods designated as Opportunity Zone tax breaks hold significant allure for potential residents.”
Despite many Opportunity Zones reporting faster home price appreciation than the nation overall, many still report home prices are well below the national average. In fact, 78% of Opportunity Zones have median home prices below the national average.
While the national median home price for Q4 2019 stood at $257,000, the median home price in nearly half of Opportunity Zones was less than $150,000. About 22% recorded median home prices above the national median.
The region with the highest percentage of Opportunity Zones having median home prices below $150,000 was the Midwest. Nearly three-quarters—about 73%—of Opportunity Zones reported median prices below this threshold in the Midwest. The Midwest was followed by the South with 58% of zones reporting such prices, the Northeast with 51%, and the West with just 12%.
Eighty-four percent of Opportunity Zones had lower median home prices than their surrounding Metropolitan Statistical Areas.
The report released Thursday is the third special report on Opportunity Zone home prices released by ATTOM Data Solutions. ATTOM analyzed home prices based on sales deeds in census tracts that qualify as Opportunity Zones under the Tax Cuts and Jobs act of 2017. Opportunity Zones were included in the report analysis if they had at least five home sales between 2005 and Q4 2019.
The states with the highest numbers of Opportunity Zones that provided sufficient data for the report—at least five home sales from 2005 through 2019—are California (465), Florida (332), Texas (234), Pennsylvania (166), and North Carolina (165).