Pedal To The Metal On Home Prices In Opportunity Zones

Home prices in opportunity zones mirrored the rest of the nation, rebounding during the second quarter after two quarters of decline.

Median single-family home and condo prices rose from the first quarter to the second quarter in 61% of opportunity zones nationwide and increased at least 5% in half of them, according to a report from real estate data curator ATTOM.

Opportunity zones were created under the 2017 Tax Cuts and Jobs Act to provide an incentive for private, long-term investment in economically distressed communities.

“Another quarter and another sign of housing market strength. That was the story yet again in opportunity zones around the U.S. during the spring buying season of 2023,” ATTOM CEO Rob Barber said. “It doesn’t seem to matter whether the national market is booming or cooling off. Prices are rising or falling at about the same pace inside opportunity zones as they are elsewhere around the U.S. — and even doing a little better in some ways.”

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Price growth largely matches that in other neighborhoods across the country, where values also dropped from late 2022 into early 2023 before recovering in the second quarter. Two key measures showed opportunity zone markets rebounded slightly better than other neighborhoods during the second quarter — median prices rose more often and at a faster rate than the nationwide gain.

Although prices remain low in opportunity zones, home value trends give investors looking for tax breaks an incentive to redevelop neighborhoods that need revival, Barber said.

The second-quarter report found:

• Median prices were up year-over-year by at least 3% in a higher portion of opportunity zones than in the rest of the country.
• The Midwest continued to have larger portions of the lowest-price opportunity zone tracts. Median home prices were less than $175,000 in 66% of opportunity zones in the Midwest, followed by the Northeast at 46%, the South at 43% and the West at 6%.
• Median household incomes in 87% of the opportunity zones analyzed were less than the median incomes in the counties where they are located. Median incomes were less than three-quarters of county-level numbers in 55% of the opportunity zones and less than half in 15%.

“Opportunity zones appear to still be enjoying the trickle-down effect of value spikes in mid-level markets that have likely priced marginal buyers out,” Barber said. “With an ongoing tight supply of homes for sale pushing the trends even more throughout the country, there are no major signs that opportunity zones price patterns will fall out of step with the national scenario in the near future.”

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