Since Opportunity Zone (OZ) investing began, the question has been whether or not they will have a true impact on economically distressed regions of the United States. There are a variety of ways to measure the economic impact of OZ investing. One of them is the change in housing value in Opportunity Zones. While value rising too quickly, especially in comparison to the market as a whole, can create concerns of gentrification. Rick Sharga, Executive Vice President of Market Intelligence at ATTOM, says: “Home price trends in Opportunity Zones mirror what we’re seeing elsewhere in the housing market. Strong price growth has helped homeowners in these economically-challenged areas benefit from higher equity, and should contribute to the ongoing redevelopment of these areas.
Attom, a leading curator of real estate data, prepared a special report showing housing market data in Opportunity Zones in the fourth quarter of 2021. They considered data from 5,180 OZ designated census tracts nationwide with at least 5 recorded home sales in Q4 2021. They discovered that housing markets in Opportunity Zones kept up with nationwide housing price increases, while still remaining generally affordable for residents.
Housing Market Trends Between Q4 2020 & Q4 2021
In the wake of the first stage of the pandemic, housing values ballooned nationwide as people continued to seek housing that met their needs in a more relaxed work environment. Many were choosing to move out of more populated urban areas to where they could enjoy more space, and the housing market was on fire. With prices soaring, the affordability of Opportunity Zone properties saw large increases, with ATTOm reporting that price increases of 25% or more were seen in a larger portion of Opportunity Zones than in other census tracts. Median values of single family homes nationwide improved by 16.1% from the fourth quarter of 2020 to Q4 2021, with about half of the nation’s OZs outpacing the national average gains.
For further comparison, median home prices in Q4 2021 increased by 20% or more in 46% of Opportunity Zones considered by ATTOM to have enough homes sold to be included in their data. Median home prices grew in non-OZ designated census tracts by only 41% during the same period. When comparing Q4 2020 to Q4 2021, it's fair to say that growth in housing values in Opportunity Zones has kept up with, if not outpaced, nationwide gains.
Market Trends in the Second Half of 2021
The US housing market saw unprecedented gains in the second half of 2021. With historically low mortgage rates and millennials finally joining the housing hunt, the market hit new highs. For Opportunity Zones, trends remain strong, according to ATTOM’s data.
ATTOM found that median single family home and condo prices rose in 56% of OZ designated census tracts just from Q3 to Q4 2021. The increase in median price was at least 20% in almost half of these OZs.
Opportunity Zones Remain Affordable
Despite the quick growth in value of housing in Opportunity Zones, they continue to remain affordable. With low housing inventory and skyrocketing prices, Opportunity Zone neighborhoods become more and more attractive to prospective homeowners. While more expensive than recent years, homes in OZs continued to cost less than other areas as of Q4 2021. With the national median price at $315,648 at the end of 2021, the median price of a single family home in an OZ sat below the national median in 76% of OZs.
In fact, in 51% of Opportunity Zones, the median housing price remained under $200,000. 35% of OZs had a median price of less than $150,000.
Median Home Prices by Region
ATTOM’s data shows that the majority of Opportunity Zones with year over year rising median home values are located in the West: Idaho (YOY median prices rising in 96% of OZs), Nevada (95%), Utah (92%), Oregon (91%), and Washington (91%). On the other hand, the West has the smallest share of regions with median housing values under $150,000. Only 4% of Opportunity Zones in the west have a median housing value at or below $150,000. Meanwhile, the Midwest had 61% at this threshold, the South 40% and the Northeast 36%.
What does this mean for OZ investors?
What this data demonstrates is that in a housing market with low inventory, more affordable housing within Opportunity Zone designated census tracts have proven to provide a good value to potential homeowners and investors alike. If you’ve recently experienced a capital gain event, or are anticipating one, Opportunity Zones are a good option for long term investment to hedge inflation. Check out [OZ FundHub’s Fund Finder] tool to match with the perfect Qualified Opportunity Fund to meet your investment goals today.