Are home prices jumping in opportunity zones?

The regions named as Opportunity Zones may already be seeing strong gains in home prices.

According to a new analysis from Zillow, prices in these areas have jumped by as much as 20% as investors are tempted to buy by discounts on capital gains taxes.

The 8,700 zones across all 50 states have been selected due to their low-income or high-poverty status.

When the initial eligible areas were known, sales prices surged in those areas but slowed down once the actual Opportunity Zones were selected; but in selected areas the upward trend in sales prices remained.

"It's still early, but we're already seeing some signals that folks have begun to take up Uncle Sam on this offer," said Zillow Policy Advisor Alexander Casey. "The rationale behind the zones is relatively simple. Proponents argue that a lot of the money generated as capital gains could be used as seed money in traditionally neglected communities – revitalizing infrastructure, fueling economic growth, and spurring job creation and overall prosperity. But whether this tax break will direct funds to the communities that need them the most – or what happens when money arrives – remain open questions.”

Casey added that it’s clear in the meantime that among the vast array of neighborhoods selected as Opportunity Zones there are wildly different housing market trends up to this point, which might hint at the future of these communities.

Zillow is expecting a better insight in the months ahead as the Opportunity Zones are still relatively new and the influx of investor capital may not endure.