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The Great South Migration: An Era shaping Exodus for the Northerners real estate markets
It didn’t start with the pandemic. It certainly won’t stop after the pandemic! The great south migration can only be stopped by one thing- affordability! Homebuyers looking to reenter the housing market is today looking to buy in the areas that are located outside the densely populated areas. Illinois, New York and New Jersey are some of the states that have so far recorded the most outbound moves while moving to the west, California is losing its population at a rapid rate. Here’s what we know so far; • People now prefer living in Texas and Idaho than in California. • The most significant outbound move has been recorded in the states of Illinois, New York and
New Jersey. • In 2020, the states of Idaho, Arizona, Tennessee,
South Carolina and North Carolina recorded the most inbound moves with Tennessee taking the lead. • More people are flooding the states of
Florida, Texas and Colorado which are now in the top eight states for inbound migration. • The pandemic never stopped people from moving. On the contrary, in some instances, people moved at rates higher than they did in 2019. On average, inbound moves were recorded at comparable rates to 2019.
WHY ARE PEOPLE MOVING?
Real estate is becoming a hot topic mostly in areas recording high outbound moves. Take California for example, once hailed as the golden land for golden opportunities, which has now become a nightmare for most low-to-middle income earners. The median price for a house in California now stands at $813,930 according to a recent report by the California Association of Realtors. This is almost triple the national average. And that is not all, California has four of the country’s five most expensive residential markets that is, the Silicon Valley, San Francisco, Orange County, and San Diego. In addition, the
poverty rate in California is even worse, Californians account for 12 percent of the country’s population, but a quarter lives below the poverty line and are homeless. In terms of the share of its population that is cost-burdened, California has the highest share with people spending more than 30 percent of their incomes on housing alone.
HOW DID WE GET HERE?
Bad policies, bad governance, outdated zoning laws, tax policies, and provisions that simply do not work, just to name a few! When you combine all these factors together, the result is a severe shortage of affordable housing which consequently pushes the prices of the homes upward. The problem had been boiling for quite some time but has now reached a critical point for the state and the people cannot take it anymore. And while the state itself has in the recent past been passing sweeping bills to address the housing shortage in the state, and also tech giants throwing billions of dollars into the problem, that is not enough to remedy the situation. “Broadly speaking, there is no solution to the California housing crisis without the construction of millions of new houses,” said David Garcia, policy director for the Terner Center for Housing Innovation at the University of California, Berkeley.
However, it would be unfair to say that California is alone in this. In fact, as severe as this may sound, the rest of the country is slowly approaching the condition California is in right now. Reports show that during the longest economic expansion to ever be recorded in the United States, the country built fewer homes than it usually does which has been putting pressure on housing prices all over the country.
CALIFORNIA MAY BE WORSE… BUT NEW YORK CITY
Just like many other densely populated areas, New York city’s housing supply is by far worse. The demand for housing by far outpaces the supply just like in California, where prices are forced to spike beyond what people can actually afford. There’s however a general consensus that the state needs to build more housing to accommodate the increasing demand which now brings another issue of contention, whereby there is a disagreement about what kinds of buildings should be built and how large they need to be. Housing in the State of New York is a top issue and will have huge implications for the future of the state and while many bills have been passed, I say it is about time we stopped talking and actualize the building plan. Elections are already on the way, and I like it that not only do many of the candidates agree to the house to be a major challenge for the state this means they also propose to spend more on housing which means, in the next five to ten years, we might be experiencing a construction boom in the states of California and New York. but, does that stop people from moving to other southern states?
Partly, It will stop the exodus! We are not building fast enough. In fact, a 2016 report by McKinsey & Co. estimates that California needs at least 3.5 million more homes by the middle of the next decade. This is one of the things Governor Gavin Newsom has taken very seriously and made part of his administration’s goals. At the current rate, it may take the state until 2050 to realize it.
Another reason why people are moving out of these states in droves is that they are looking for better employment opportunities elsewhere and the southern
states offer a better solution. But, if we can provide a solution such that Californians do not have to spend more than 40 percent of their income on housing, then we’ll also have solved the southern migration problem. One thing we have to agree on is the fact that this migration is not a California’s or New York’s problem, but rather a national problem. Over the past decade, we have seen a rise in homelessness coupled with anti-development sentimentalism and growing frustration among the nation’s middle-class workers who have been consistently locked out of the housing market. Inbound migration will just create another problem where the competition will be stiff; consider this, housing costs are relative which means, for the people leaving the expensive states and cities, they will find almost any other city relatively flush with a selection of affordable homes. However, for the natives who are tethered to the economy, the influx of outsiders only puts pressure on housing costs.
Jobs Supply and Could they too be A Problem? Let’s talk about jobs, I just briefly touched on this issue but leaving without doing somewhat a full coverage, I would be doing a disservice to this article. What you realize about any community, jobs are the primary growth catalyst and here in the united states, the nation’s inequality highlights this fact perfectly. The United States is growing bifurcated where one section -the high-paying jobs- is flush with opportunities in the tech and finance industry while the other- the low-paying jobs- in retail and personal services. If you thought this mass exodus involved people alone, you are so wrong. Big businesses are also moving out of California for states like Florida, Texas, and Arizona. In 2020 alone, Oracle, Palantir, and HewlettPackard were among the companies announcing they would be relocating their headquarters from California.
The jobs in California and the incomes are simply not enough to offset the rising and high taxes, the cost of living, and the tight regulations. To help you understand just how worse the problem is, in 2020 over 135,000 people left California, marking the third-largest loss to ever be recorded in the state. This was however heightened by the rise of remote working due to the pandemic, which gave people more options to choose where they work from. A recent survey by a company called Blind found that two of every three Bay Area workers would leave the area permanently if they could continue to work from home indefinitely.
Therefore, leading the exodus are the younger less educated, and lower-income people who are being replaced by high-income earners with graduate degrees, and this will eventually create a bigger gentrification problem.
SO, WHERE DO WE GO FROM HERE?
These states experiencing some sort of hemorrhage needs to build more! But what happens where the local jurisdictions hold powers over what gets built, as in California? Many state officials have often caved to the Not In My Backyard (NIMBY) pressure in the name of protecting the environment. Some zones were downzoned in the 70s which effectively made it harder to build further contributing to racial segregation and sprawl. To as much as threequarters of the residential area in LA is restricted to single-family homes.
Further, environmental pressures in California have also made the problem worse. According to Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto “At some point, the regions that are under pressure to build more housing are going to find areas that are prone to more frequent fires.”
The Governor of California isn’t taking this problem lightly. He has vowed to be more aggressive and in some instances even suing a city for refusing to build affordable structures.
Sources
https://www.bloomberg.com/graphics/2019-california-housing-crisis/ https://www.nytimes.com/2021/02/12/business/economy/california-housing-crisis.html https://www.foxbusiness.com/real-estate/suburbs-southern-states-surge-popularity https://www.ppic.org/blog/whos-leaving-california-and-whos-moving-in/ https://www.cnbc.com/2021/01/23/why-companies-are-fleeing-california.html https://usblog.teamblind.com/wp-content/uploads/2020/05/RelocationSurvey.pdf https://kutv.com/news/nation-world/where-are-americans-moving-report-shows-migration-to-western-southern-states https://www.foxbusiness.com/economy/americans-fleeing-ny-california-illinois-for-arizona-idaho-and-others https://www.cssny.org/publications/entry/rental-housing-affordability-in-urban-new-york-a-statewide-crisis
