Migration Trends & What They Means for Investors
We’re constantly hearing about the high price of homes in California, and how that’s driving people away, especially from the San Francisco Bay Area. If it’s true, where are all these people going?
Redfin did a migration study that could be very useful for real estate investors. Migration trends tell us where the demand for housing may be weakening, and where it may be growing. In this study, the metro with the biggest outflow of residents was the pricey Bay Area. There are several major destination metros for all those people, but the one that attracted most of those Bay Area expats was Sacramento, followed by several out-of-state locations.
This new study looked at search results for almost one million Redfin users across 75 metro areas during the first three months of this year. Of all those users, one in five searched “mostly” for homes outside their current metro area. About half of those users searched “exclusively” in other cities. And of all those searches, Redfin identified “three” main trends.
Redfin found that Bay Area residents looking to move to more affordable parts of the country dominated the nation’s migration patterns. It also found that people moving from coastal areas were more likely to move to the South. And that people who live in the Chicago, Boston, and Seattle areas were the most loyal to their current locations. Redfin says these search patterns are also very similar to the purchase of homes by Redfin customers.
1 – Californians on the Move
The survey shows that almost 20% of Bay Area search results were for homes outside the area, and 22% of those users looked in Sacramento. After Sacramento, Seattle grabbed the largest share of Bay Area residents, followed by Portland. Other cities that attracted people from the Bay Area include Austin, Denver, Chicago, Las Vegas, Phoenix, Dallas, Washington, D.C., and Reno.
Redfin says it has been following the movement of Bay Area residents for six years, as home prices continued to climb. And now that a typical Bay Area home costs around a million dollars, Redfin says residents are more likely than ever to look in more affordable areas.
The survey shows that while Bay Area residents fled east to Sacramento and north to Seattle and Portland, Southern Californians went to places like Las Vegas, Phoenix, Dallas, and Austin. San Diego is also attracting a lot of people from the L.A. area.
The Census Bureau shows that Phoenix has been booming. In 2016, it gained more than 222 people “a day”. That’s more than any other region in the nation. Dallas was one of two metro areas gaining more than 100,000 new residents between 2015 and 2016. Houston was the other area. Austin and Las Vegas were also among the fastest growing metro areas with higher “inflows” of people than “outflows”. Those Southwest areas were also very attractive for East Coast transplants.
2 – North Heads South
Looking at the nationwide migration pattern, Redfin says that Florida and Texas were the most popular destinations. Of those southern destinations, Austin had the highest inflow, and one in six of those users were from the Bay Area. Others were from Southern California, the Northwest, the Chicago area, the Northeast, and Washington D.C.
Redfin Chief Economist Nela Richardson says: “Austin is the gold standard of healthy migration, driven by its booming jobs market and a vibrant housing market.” She says: “In order for cities to attract and keep a talented workforce, win corporate investment and generate tax revenues, they have to prioritize the basics for their residents — ensuring an adequate supply of homes that are affordable to live in.”
3 – Staying Put
Of those 75 metros, Redfin says that four out of five people looked mostly within their home metro areas. Chicago residents showed the “most” loyalty. 92.5% of those users searched only in the Chicago area. More than 9 out of 10 homebuyers in Boston, Seattle, Nashville, Washington, D.C., and Atlanta also showed extreme loyalty. People in Dallas, Portland, Raleigh North Carolina, and Los Angeles were also more likely to “stay put”.
Redfin says that despite a Gallup poll showing that twice the number of people move long distances, and despite the exodus from high priced areas, domestic migration has actually been going down. That Gallup poll shows that 12 million people or 3.9% of the U.S. population changed counties last year. But that’s a big drop from past levels of migration. Redfin cites a 6.4% movement in 1948.
It’s possible that some of those searches of California residents looking at property outside the state, were investors. They certainly can’t find cash flow in California.