Internal Migration
A few days back, I published my inaugural post at the new Finance and Economy community, where I explored how much does it take to own a home at various urban population center across the United States. We saw four cities in the state of California tops the chart on the most expensive housing in the United States:
- San Jose
- San Francisco
- San Diego
- Los Angeles
So obviously it is probably not a surprise that people are leaving the state of California in large numbers. This 2023 data below shows that state is losing population at a rate of 268K/year.
The next on the list is no surprise, New York. The reason is the same. Where do all these people are going to you think? Yeah, you guess it right, Texas! My home state! Well, also Florida. Why do you think they are moving Texas and Florida?
- Job Market: Texas has a strong and diverse economy with opportunities in various sectors like energy, technology, healthcare, and manufacturing. Did I say Energy sector? (not to show by bias, but large in-bound movement is in fact in technology)
- Healthcare, with largest cancer research, numerous hospitals perhaps provides stability
- Lower Cost of Living: Housing and everyday expenses are generally more affordable in Texas compared to many other parts of the US, especially California
- No State Income Tax: This can lead to significant savings, especially for higher earners
- While this is indeed correct, property tax is very high here to offset the state tax
- Business-Friendly Environment: Texas offers lower taxes and fewer regulations attracting businesses and creating more jobs
- Diverse Culture and Lifestyle: Texas has a wide range of lifestyles and cultural influences, offering something for everyone
- More Space: Texas provides more space and less population density compared to many other states
Same data plotted differently to show the net migration, positive up, negative down, obviously!
Again, to bring the story back to houseing, because in the US that controls 60% or higher of our total expenses is the most important factor in personal finances.
This is the median single family home prices plotted as solid lines in Texas (green), and California (red). Also plotted the change of prices as a fraction (%) compared to previous year in dotted lines in Texas (green dotted) and California (red dotted). What are the observations?
- Well, prices in California are always higher than Texas (probably will be as well)
- Over the last 20 years the average gap between the two states is $345,930, say $350K
- Gap was lowest in 2011 ($195K), and highest in 2022 ($525K), at post covid high
- Prices in California are dropping rapidly, and likely will continue to drop
Hopefully you can sell your home soonish, if you live there. I will likely be in the market as a buyer in 2027!
A couple really expensive housing markets that do not fit this narrative are Washington and Hawaii, both places are very expensive in terms of housing and neither is showing significant migration out of the state! In fact Hawaii is positive.
"In the report, Seattle ranks fifth in the U.S. for the highest median home price, trailing major metro areas like San Francisco ($1,160,000), Los Angeles ($925,000), San Diego ($875,000) and Bozeman, Montana ($737,250)."
https://www.fox13seattle.com/news/5th-most-expensive-housing-market
I am guessing people are not leaving Washington because we do have a lot of well paying tech jobs... Also, after Covid there was a trend of people working remotely and moving to cheaper or better locations, that trend is going back in reverse with all of the RTO (Return To Office) mandates...
Even locally I know of people who sold their homes and moved to cheaper states or areas of Washington and now they are looking for new jobs and some are considering coming back to the Seattle metro area...
I don't know about Washington much, but can speak of Hawaii. It's a difficult but desirable market. So not significant inflow or outflow. The Maui fire is impacting locally, but the numbers are small. Majority of the population is Oahu and that population is not really dependent on "jobs" that much.
Would you want to move to California though?
Nah. But a cheap rental there would be great for a visit! It's an excellent area to visit and there are numerous stunningly pretty places there.
Man.. Here I am, living in CA for over 11 years now and barely got my life in order to be comfortable to start looking for houses. It's still crazy expensive! I used to live in San Jose and some of the houses there that are worth at least $1m aren't even pretty!
One of the VPs at the place I work asked me to model a warehouse for him. It is currently being built next to his house (also under construction) in Arizona! He's been over CA for a while and will probably move states soon.
Prices over there need to go down 50% and it will still be expensive!
America is such a big country, so population migrations are expected.
it's the same in Europe, people move from poorer countries to richer ones in search of better paying jobs, in order to provide themselves with better material security.
When they do that, they seriously consider moving to another country where they will spend the rest of their lives in peace.
When you mention the prices of apartments, in the city where I live for the last 10 years, partly because of inflation and partly because of increased demand, they have increased from 2 to 3 times.
All my friends (and me with them), we moved to the outskirts and sold (left) our apartments in the center, because some people with a lot of cash were moving to the center and by buying without haggling, they directly affected the base.
So will I, in 10-15 years, go to enjoy the garden and nature of some house near a forest, mountain or lake.
Serbia?
Which city?
Yes, Belgrade.
Still the mass exodus might drop prices in Canada again no?
Maybe, who knows! :)
Interesting data. Do you think that there's a political component to it, too? Every time there are elections in the US, we have an influx of people moving down here, because the winning party will destroy the US. Hence my question.
Without deeper knowledge, it looks like many people are moving from blue states to red states.
lol! That exodus from US is happening for a long time. Costa Rica, Panama, now Ecuador. Mind you in present remote work environment it doesn’t matter where you are working from. So if you can find a expensive place with good internet that is often better than LA or Seattle!
Yes, we have influx since around 25 years I think. But since I'm here, it's especially after elections that the influx is higher :-D
Texas has definitely become a hotbed. I know several people who left the San Francisco area to move to Texas. I wish Detroit would see a revitalization like that. Home prices in Michigan are dang cheap compared to the coasts.
It’s still cheaper, relatively speaking. Also there are jobs.
and that's only the tip of the iceberg : former middle class of usa is becoming poorer with many living now in motels and streets
Yes, true.
This is happening all over the world what some folks are doing though is going to countries where their money has alot of value and purshase a property there I've seen countless do this and i think its a smart move
Absolutely, America is a country with a very large population, and the four cities you are mentioning are also very large in terms of population, and housing societies here are also very expensive, so you have to develop the mountainous areas and empty plains so that there is no problem of population.
Interesting trends, Housing market shifts are always attractive
Interesting work!
Thanks!
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