ATTOM has released its second-quarter 2023 report analyzing qualified low-income Opportunity Zones targeted by Congress for economic redevelopment in the Tax Cuts and Jobs Act of 2017 (see full methodology below). In this report, ATTOM looked at 3,909 zones around the United States with sufficient data to analyze, meaning they had at least five home sales in the second quarter of 2023.
The report found that median single-family home and condo prices increased from the first quarter of 2023 to the second quarter of 2023 in 61 percent of Opportunity Zones around the country, and rose at least 5 percent in about half. The increases reversed a brief fallback in values during the prior two quarters in a majority of zones, which sit in and around low-income neighborhoods where the federal government offers tax breaks to spur economic revival.
The renewed price growth continued a long-term pattern of trends in Opportunity Zones largely matching those in other neighborhoods around the U.S. Values in those areas also dipped from late 2022 into early 2023 before recovering in the second quarter. Changes in home values inside Opportunity Zones have been tracking closely with national patterns for at least the last three years – mostly rising in a sign of economic strength inside some of the country’s most distressed communities.
By two key measures, Opportunity Zone markets even showed signs of rebounding slightly better than other neighborhoods around the country during the second quarter of this year. Median prices inside those zones rose more often at a faster pace than the nationwide gain both quarterly and annually.
“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,” said Rob Barber, CEO for ATTOM. “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. For sure, prices remain low in Opportunity Zones. But once again, home value trends present a positive note for investors considering using federal tax breaks offered to redevelop neighborhoods in need of revival.”
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.
As they have for many years, or even decades, typical home values in Opportunity Zones continued to fall well below those in most other neighborhoods around the nation in the second quarter of 2023. Median second-quarter prices were less the U.S. median of $350,000 in 80 percent of Opportunity Zones analyzed. That was about the same portion as in earlier periods over the past year. In addition, median prices remained less than $200,000 in 49 percent of the zones during the second quarter of 2023.
Considerable price volatility also continued in Opportunity Zones, with median values either dropping or increasing by at least 5 percent in two-thirds of those locations from the first quarter of 2023 to the second quarter of 2023. That likely reflected the small number of sales in many zones.
Still, second-quarter trends showed that the earlier downturn in home values nationwide failed to cause a long-term slump in Opportunity Zones, despite their economic distress. That suggests that a decade of home-price runups across the U.S. continues to leave a significant cluster of potential buyers with limited resources no choice but to take a chance and purchase homes in the lowest-priced communities. The apparently healthy demand in the second quarter continued even as home-mortgage rates climbed back up toward 7 percent for 30-year loans this Spring, cutting into what buyers could afford.
“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 added. “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.”