By Anayat Durrani
Median single-family home and condo prices increased from the first quarter of 2022 to the second quarter of 2022 in 63 percent of Opportunity Zones nationwide and rose at least 5 percent in about half of the zones analyzed, according to a second quarter 2022 report by ATTOM, a curator of real estate data for land and property. Typical values also rose at least 20 percent annually in about half of Opportunity Zones.
“Rising home prices in Opportunity Zones—particularly prices rising at a similar rate to home prices outside of the zones—is an indication that the program is successfully doing what it set out to do: improve the economic conditions of underserved and struggling communities,” says Rick Sharga, EVP Market Intelligence at ATTOM.
For the study ATTOM analyzed 5,198 zones nationwide that had at least five home sales in the second quarter of 2022.
“That improvement suggests that investors who invest inside these Opportunity Zones should find conditions more conducive to business success,” says Sharga. “Rising home values should contribute to higher values of surrounding properties as well—both residential and commercial— and an improved economic infrastructure that supports the kinds of businesses that Opportunity Zones were designed to attract and help to succeed.”
Median home prices rise in Opportunity Zones
The report said median values rose in about half the Opportunity Zones by more than the 8.8 percent quarterly and a 15.3 percent year-over-year gain seen for all markets across the country in the Spring of 2022. The gains echoed similar patterns from last year as home prices in distressed neighborhoods kept up with gains in the national housing market as a whole.
Typical home values in Opportunity Zones stayed lower than most other neighborhoods nationwide in the second quarter of 2022. Median second-quarter prices dropped below the national median of $346,000 in 77 percent of Opportunity Zones, similar to earlier periods over the past year. The report said price volatility continued in those markets, as median values dropped quarterly in 37 percent of them, which the report said likely reflected the small number of sales in many areas.
The report also found that median prices were under $200,000 in 49 percent of the zones during the second quarter of 2022, but was down from 58 percent in the second quarter of 2021 and 52 percent in the first quarter of 2022.
In a sign of market strength, the report noted that prices spiked at least 25 percent from the second quarter of last year to the same period this year in a larger portion of Opportunity Zones than in other neighborhoods nationwide.
“It's important to remember that Opportunity Zone investments are overwhelmingly not single family residential properties,” says Sharga. “But, as the area's economy begins to grow, supporting and supported by these rising home prices, it makes investing in commercial properties—retail, multifamily, hotel, office and even industrial units—much safer and more attractive. That bodes well for ongoing investments in these zones, and increases the possibility of the program being extended or renewed.”
Opportunity Zones with highest growth
States in the West with the largest portion of zones had median prices that rose year over year. They were led by Utah (median prices up, year over year, in 97 percent of zones), Arizona (93 percent), Nevada (93 percent), Oregon (89 percent) and Idaho (88 percent).
The Midwest continued in the second quarter of 2022 to have the highest portion of the least-expensive Opportunity Zone tracts, with median home prices of less than $175,000 (69 percent), followed by the Northeast (45 percent), the South (45 percent) and the West (6 percent), the report said.
Sharga says as affordability has become more difficult for prospective homebuyers due to rising mortgage rates, he says there's a chance more buyers may look at areas like Opportunity Zones for future home purchases, particularly if it appears the quality of life in these areas is already improving.
“If that happens, we might even see Opportunity Zone property values increase more rapidly than other parts of the country, where limited affordability should begin to slow down home price appreciation,” says Sharga.
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