How big a difference can relocation make? As an example, the authors cite a hypothetical homeowner in Santa Clara, California, where the average house price in 2019 was $1,034,000. The homeowner relocates to Merced, in another county, where the average house price in 2019 was $266,000. The net difference of $768,000 is the amount of home equity the homeowner could have unlocked, not including potential mortgage and transaction costs.
The paper focuses on two types of relocators:
- “Lottery winners,” whose preretirement homes in booming housing markets appreciate at higher rates than the national average. They represented 31% of all migrations and unlocked an average home equity equal to 55% of their new house’s value in 2019.
- “Bargain hunters,” who shop for homes in low-growth markets where prices have lagged the national average. In 2019, they represented 19% of all migrations and unlocked an average home equity equal to 51% of their new house’s value.
When housing prices are on the upswing, lottery winners tend to make up a higher proportion of those retiring and relocating, the authors find. Bargain hunters, by contrast, tend to be more prevalent during housing market downturns and appear to prioritize unlocking home equity regardless of the market cycle.
As a side benefit, living costs are often lower in a cheaper housing market, allowing each dollar to go further.