The AEI housing arbitrage index aims to measure the extent of how much money an individual could save by selling a home in their current location and moving to another. The data for the index are based on actual homeowners who have sold one home and purchased a home at a new address – either within the same metro or elsewhere across the entire country.
To view the data interactive, go to https://www.aei.org/the-housing-arbitrage-index/
The interactive Tableau allows users to:
- See how much homeowners save by moving to a less expensive metro area.
- Find out the most popular destinations for any given metro area of origin, and vice versa.
- Compare metrics such as estimated property sale price, home footage ratio, origin Walk Score, and destination Walk Score from traced home purchases across metros that highlight the arbitrage opportunity for homeowners in expensive metros.
Fundamentally, this arbitrage opportunity exists because of home price differentials across the country. For example in April 2021, the median sales price was $1,350,000 in San Jose and $390,000 in Phoenix. The median owner thus could in theory, pocket almost $1,000,000 by selling their home in San Jose and buying the median home in Phoenix and likely get a larger and newer home on a larger lot.
In the past, not many homeowners could take advantage of the opportunity as workers needed to live where they worked. However, because of the increase in Work from Home (WFH) in the aftermath of the pandemic, more people, especially higher income individuals, can now do so. The index details the arbitrage opportunity for those that have already moved.
For the moment, it looks as if the pandemic and WFH have caused a shift in preference from walkability to nearby amenities to amenities provided within one’s home. This shift is largely concentrated in the 100 largest metros (accounting for 69% of sales) and across all price tiers. Within these 100, impact is greatest on the most walkable metros and the higher price tiers.
It is reasonable to assume that the same desire for walkability that existed in more dense and large urban areas pre-pandemic, will ultimately be desired by buyers in more suburban areas, hence the logic of a focus on Walkable Oriented Development across the nation.
Both Authors will be speaking at the November 17, 2021
Edward Pinto, Director, AEI Housing Center (PintoEdward1@gmail.com)
Tobias Peter, Assistant Director, AEI Housing Center (Tobias.Peter@AEI.org)