By Anayat Durrani

A new third-quarter 2021 special report by ATTOM analyzing qualified low-income Opportunity Zones shows those areas are maintaining momentum with the U.S. housing market as a whole.

“This latest data provides compelling evidence that the enacted Opportunity Zone legislation is achieving its desired outcomes. The data also counters several recent national stories questioning the effectiveness of OZ's,” says Vince Brady, principal, Buttonwood Due Diligence, a leading national firm providing third-party due diligence and analysis of alternative investment programs.

In the report, ATTOM looked at 5,402 zones nationwide with at least five home sales in the third quarter of 2021. The report found that median single-family home and condo prices rose from the second quarter of 2021 to the third quarter of 2021 in 62% of Opportunity Zones nationwide by about 20% annually in 47% of them.

“Seeing 62% of Opportunity Zones register increases in home values is a positive sign indicating that prospects are improving in many Opportunity Zone communities,” says Chris Knoppe, president of Cbus OZ Funds.

Home values in Opportunity Zones follow national trend 

The study said the patterns mirrored the broader U.S. housing market as it powered through a tenth straight year of gains. Values in Opportunity Zones did better by some measures, extending patterns from over the past year, the report said.

“These increases in OZ home values are also reflective of the historic levels of housing demand we're currently seeing in markets throughout the country,” says Brady. “This bodes well for future OZ investment opportunities even though a feature of the legislation, notably the 10% step up in the tax basis of deferred capital gains, will expire at the end of 2021.”

The report noted that home values in most Opportunity Zones did lag behind values in most other neighborhoods in the U.S. in the third quarter of 2021. Some three-quarters of zones with enough data to analyze had third-quarter prices under the national median of $310,500, the same as in earlier periods over the past year.

“The fact that 38% of the zones did not register price gains during this very strong real estate market is evidence that these communities continue to need help, that there is more investment needed, and more work ahead,” says Knoppe.

Median values also stayed below $200,000 in 53% of Opportunity Zones in the third quarter of this year. That was down from 57% in the second quarter of 2021 and 63% a year earlier as values inside some of the nation's poorest communities kept pace with broader national housing market gains amid the pandemic.

Home prices increased in Opportunity Zones

Prices spiked by at least 25% in the third quarter, measured year over year, in four of every 10 Opportunity Zones, compared to three of every 10 communities in the US., the report said. The increases occurred despite the pandemic's financial impact.

"The third quarter of 2021 was just like the second, which was pretty much like the first when it came to home prices in some of the more distressed neighborhoods around the United States,” Todd Teta, chief product officer with ATTOM, said in a statement. “Values in markets scattered through so-called Opportunity Zones kept rising at around the same pace seen in more upscale areas, as the housing-market boom kept lifting fortunes just about everywhere.”

Among states that had at least 20 Opportunity Zones with sufficient data, those with the largest percentage of zones where median prices rose, year over year, during the third quarter of 2021 were Idaho (97%), Arizona (94%), Massachusetts (91%), Delaware (90%) and Utah (89%).

The Midwest continued in the third quarter of 2021 to have the highest portion of Opportunity Zone tracts with a median home price of less than $150,000 (60%), followed by the South (42%), the Northeast (35%) and the West (5%).

Teta said that while home values in Opportunity Zones are still quite low compared to other areas “the ongoing gains showed that lots of households are buying in those areas - something that should lure the attention of investors looking to take advantage of Opportunity Zone tax breaks."


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