Property data curator ATTOM released its third-quarter 2023 report analyzing qualified low-income Opportunity Zones targeted by Congress for economic redevelopment in the Tax Cuts and Jobs Act of 2017.
In this report, ATTOM looked at 3,465 zones with sufficient data to analyze, meaning they had at least five home sales in the third quarter of 2023.
The report found that median single-family home and condo prices rose from the second quarter to the third quarter in 54 percent of Opportunity Zones around the country and rose at least 5 percent in close to half. The price improvements in and around low-income neighborhoods where the federal government offers tax breaks to spur economic revival again tracked closely with a nationwide rebound from a temporary dip in home values that hit last year.
“The third-quarter price data shows that many of the country’s lower-income neighborhoods continue to come back from the brief downturn we saw last year, right along with the rest of the U.S. housing market,” ATTOM CEO Rob Barber said in a release. “While there were exceptions, Opportunity Zones overall saw no extended backslide and continued to benefit from the boom that has spiked home values around the nation for more than a decade. That trend is likely connected to financially marginal house hunters getting priced out of more expensive locations and turning to places like Opportunity Zones for affordable homes. This should give investors looking to take advantage of Opportunity Zone tax breaks more welcome news about the potential for those neighborhoods.”
Renewed price growth also continued a long-term trend of home values inside Opportunity Zones following along with broader market gains for at least the last three years – an ongoing sign of economic strength inside some of the country’s most distressed communities.
Opportunity Zone markets even showed signs again, by one key measure, of doing slightly better than other neighborhoods around the country during the third quarter. A slightly larger portion of Opportunity Zones versus other locations saw median values rise annually at a faster pace than they did nationwide.
As they have historically, typical home values in most Opportunity Zones fell well below those in other neighborhoods around the nation. Median third-quarter prices were less than the U.S. median of $350,000 in 81 percent of Opportunity Zones. That was about the same portion as in earlier periods over the past year. In addition, median prices fell below $200,000 in 49 percent of the zones.
Considerable price volatility also continued in Opportunity Zones, with median values either dropping or increasing by at least 5 percent in more than three-quarters of those locations from the second to third quarter. That again likely reflected the small number of sales in many zones.
Still, the latest trends marked the second straight quarter in which Opportunity Zone home values, in general, erased losses seen during the downturn that lasted from the middle of 2022 into early 2023. That highlighted an extended scenario of home-price runups across the U.S. leaving a significant cluster of potential buyers with limited resources and few choices other than the lowest-priced communities.
Apparently healthy demand in the third quarter continued even as home-mortgage rates climbed back up toward 8 percent for 30-year fixed-rate loans over the summer and inflation inched upward cutting into what buyers could afford, ATTOM said.
“Like most places with fewer resources, Opportunity Zones remain especially vulnerable to negative forces affecting the housing market or the broader economy, so we will continue to keep a close watch on prices in those locations,” Barber added. “But the ongoing tight supply of homes for sale combined with high home-buying demand around the country suggests that Opportunity Zones are in a good position to remain on pace with the broader national trends.”