So-called “opportunity zones,” identified in the 2017 tax cuts passed under the Trump administration as areas in need of economic redevelopment, have seen significant growth in home prices this year, largely keeping up with broader market trends even with rising mortgage rates, according to an analysis by ATTOM Data Solutions.
Median single-family home and condo prices rose from the fourth quarter of 2021 to the first quarter of 2022 in 55% of opportunity zones around the country, the report found, even as the pace of increases slowed compared to last year.
“Home price trends in opportunity zones mirror what we’re seeing elsewhere in the housing market,” said Rick Sharga, executive vice president of market intelligence at ATTOM, in a statement. “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.”
Investors who pump money into these areas—defined as low income or “distressed” communities and neighborhoods, according to the IRS—are able to defer or avoid taxes on capital gains, depending on how long they maintain their investments. The initiative seemingly has been a success at least superficially, with more opportunity zones seeing a price spike of 25% or higher compared to other areas of the country.
“With so little entry level inventory on the market, homes in opportunity zones represent some of the few remaining affordable options for prospective homebuyers,” Sharga added. “This is especially important for first-time buyers, who typically have to stretch their finances in order to be able to afford a home.”
The report noted that home values in these zones remain significantly lower than the market at large, with typical values under $200,000 in 51% of the zones during the first quarter of 2022.
Key findings:
- Median household incomes in 87% of the opportunity zones analyzed were less than the medians in the counties where they were located, the report found. Typical incomes were less than three-quarters of county-level figures in 56% of zones and less than half in 13%.
- Almost a quarter (24%) of zones topped the national median home price of $320,500 in Q1 of 2022. More than a third (35%) had median home prices of less than $150,000.
- The Midwest continued in the first quarter of 2022 to have the highest portion of zones with a median home price of less than $150,000 (61%), followed by the South (39%), the Northeast (39%) and the West (3%).
