Housing & Mortgage
California Transplants Overwhelming Other Housing Markets? Maybe Not
Their most popular destinations are cities wisely adding to housing stock
The pandemic may not have spawned an all-out urban exodus, but it has driven some residents of America’s most populous state to seek shelter elsewhere.
California, with its increasingly unaffordable locales and worsening housing shortage, had a net population loss of about 173,000 people between July 1, 2020, to July 1, 2021. Move-outs weren’t totally to blame — fewer move-ins from other states, a drop in foreign immigration and births, plus pandemic-related deaths, played a larger role than people fleeing the state because it got too expensive, experts say.
Still, thousands of people did move out of California’s pricey coastal cities in search of cheaper living. Should residents of those destinations blame Californians for the home price increases they’re experiencing? In most cases, no. Net move-ins accelerated across Sun Belt cities like Houston, Dallas, Phoenix and Austin during the pandemic, but housing construction is keeping up, and other factors account for the bulk of home price increases in those markets.
Most Californians moved just down the road
A CBRE analysis of U.S. Postal Service data paints a clear picture of migration patterns across the country, comparing 2019 to 2020 figures.
Notably, people who moved from California’s urban centers during the pandemic didn’t go far. More San Francisco residents headed for nearby Sacramento in 2020 than in 2019, while more Los Angeles residents headed for lower cost cities in the Inland Empire such as Riverside (In Riverside, price per square foot is $329).
When Californians did move across state lines, they most often went to mid-sized cities in Texas, Arizona, Nevada, Idaho, Colorado, Washington, Oregon and Florida.
These movements seem to reinforce the narrative that deep-pocketed California transplants are wreaking havoc on once affordable housing markets and defacing the down-home culture. But a look at housing supply should offer relief — at least on the issue of home prices.
In several of the most popular destinations for former California residents, there’s adequate housing to go around. That’s according to the National Association of Realtors (NAR), which tracks the number of single-family home building permits issued monthly in the country’s metro areas. Coupled with housing starts, these figures are a leading indicator of a local market’s ability to meet buyer demand.
What’s up in Austin
Consider Austin, Texis, where the number of move-ins from California increased by about 17% from 2019 to 2020. In total, just over 4% of Austin’s new residents — renters and homebuyers — came from California.
One might assume that this uptick in demand would put major strain on the housing market in Austin, a city of fewer than 1 million people. Alas, NAR’s data shows that construction is keeping up. For the 12-month period ending June 2021, Austin was among the top five metro areas in the U.S. for the number of single-family building permits issued. (In Austin, price per square foot is $387.)
Perhaps more renters are moving there than buyers. CBRE found that the biggest cohort of movers nationwide in 2020 was well-educated, affluent young adults with no kids and the ability to work remotely. Probably not your typical homebuyer.
Two other Texas cities, Houston and Dallas, each saw a near 20% increase in the number of California move-ins from 2019 and 2020, according to CBRE’s data. But both cities issued even more building permits per month than Austin with just over 50,000 each by June 2021, NAR reported.
Fewer bidding wars
There’s still some home buying competition in these cities, to be sure, particularly at the entry level. But nothing like the real estate bidding wars we’ve seen in supply-strapped cities mostly on the coasts.
Phoenix was another hotspot for California transplants in 2020. There was a nearly 9% increase in the number of Golden State residents moving to Phoenix in 2020, accounting for just over 5% of total move-ins. Meanwhile, the metro area issued more than 36,000 building permits per month in the 12-month period ending June 2021, ranking among the top five metros.
Of course, home prices are still going up in Phoenix and the Texas cities despite sufficient housing supply. Prices are rising everywhere. But the California transplants aren’t to blame. Remember that falling mortgage rates have played an outsized role in housing price gains over the last 40 years.
Other cities that welcomed more residents from California during the pandemic than in the previous year, including Boise, Reno and Denver, may not be as well-equipped to handle a surge in housing demand. While none of those cities has a code-red supply shortage akin to California’s, NAR data indicates supply is lagging, pushing home prices higher.
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