Home Prices In Opportunity Zones Declined in Fourth Quarter

Median home prices declined in the fourth quarter in more than half of the opportunity zones targeted for economic redevelopment. 

The median price of single-family homes and condos dropped by at least 5% in nearly half of the opportunity zones in the U.S., according to real estate data provider ATTOM’s fourth-quarter 2022 report analyzing qualified low-income opportunity zones. ATTOM looked at 4,119 opportunity zones across the country with sufficient data to analyze, meaning they had at least five home sales in the fourth quarter.

Opportunity zones were created under the 2017 Tax Cuts and Jobs Act to provide a tax incentive for private, long-term investment in economically distressed communities.

“Home values inside opportunity zones are falling. But, on balance, they aren’t dropping any faster than in more well-off neighborhoods around the country,” ATTOM CEO Rob Barber said. “By a couple of metrics, they are even doing a little better. That speaks to the continued strength of opportunity zone housing markets and their potential to lure investors who still want to take advantage of the program’s tax breaks even in the current uncertain economic environment.”

Tax benefits for investing unrealized capital gains in opportunity zones include temporary deferral of taxes on previously earned capital gains until the end of 2026 or when the asset is sold, according to the Tax Policy Center. Investors pay no taxes on capital gains earned through their investment in opportunity funds — the vehicles that invest in opportunity zones — for investments held for at least 10 years.

The fourth-quarter report found:

• Median prices of single-family homes and condos declined in 56% of the opportunity zones across the U.S. while increasing or staying the same in 44%.
• Median home prices remained up at least 10% in 45% of opportunity zones.
• Of the 4,119 opportunity zones in the report, 36% had median prices that were less than $150,000 — down 39% from a year earlier. Another 17% had median prices ranging from $150,000 to $199,000.
• Median values ranged from $200,000 to $299,000 in 23% of opportunity zones.

ATTOM’s analysis saw signs that opportunity zone markets were withstanding the national market retreat better than other neighborhoods — just as they outperformed nationwide increases by some measures during the boom period. For example, larger portions of opportunity zones saw typical values rise by at least 10% both quarterly and annually compared to the rest of the country during the last few months of 2022. 

Higher mortgage rates and inflation combined with a faltering stock market have cut into what homebuyers can afford, pushing prices down across most of the country. Still, the continued limited supply of homes for sale could help opportunity zones withstand steeper drop-offs.

“These areas targeted for redevelopment tax breaks may be less vulnerable to taking a big hit if the market keeps dropping because they are still some of the most affordable markets,” Barber added. “The spring buying season should say a lot about whether they can maintain their strength.”

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