I used to believe this “wealthy Californians fleeing” narrative and… I’m just not sure I buy it any more.
135,000 more people left California than moved in last year. Even if they overwhelmingly moved to only ten other states, that’s just 13,500 extra ex-Californians in each one of those unlucky states. And not all of them are going to be wealthy, surely some non-negligible portion will be less well off. Maybe they’ll be wealthier on average, but it’s not 100% tech millionaires.
Somehow this is supposed to be responsible for skyrocketing prices in Austin, Portland, Atlanta, Denver, Boulder, Seattle, Aspen, Jackson, Tahoe, and hundreds of other cities, towns, and locales across the country. All the while the price of housing in California suburbs is going up too!
At the same time, interest rates are plummeting. For a given house sale price, this can dramatically affect the affordability of monthly payments: refinancing last year from 4.325% to 3.375% cut my payment by a full 20%. Sub-3% loans aren’t too hard to find right now. In a competitive market like housing, this has the extremely well-known effect of causing sticker prices to rise. Put another way, if you can afford $1,500/mo payments and the rate drops such that you would only need to pay $1,150/mo, the market will quickly react to increase prices to keep the overall monthly payment the same.
This isn’t a novel mechanism. It’s part of the reason housing has been such a wildly successful Investment vehicle over the last few decades. Interest rates fell, prices went up accordingly.
Are emigrating Californians responsible for some of these price increases? Sure, both generally and probably in some specific markets, I totally buy it. But everywhere simultaneously? I’m skeptical it’s responsible for as much of an effect size as people appear to believe.
I think you are overestimating sales in rural areas and the number of houses. Here’s an article from Vermont where housing prices have soared during the pandemic and there’s a market shortage.
>The tax department logged 3,795 sales to out-of-state buyers in 2020, compared to 2,750 in 2019. That represents about 27 percent of all residential sales in 2020, according to Deputy Tax Commissioner Rebecca Sameroff.
>The value of that real estate increased even more: $1.43 billion in residential real estate was sold to out-of-staters in 2020, a 79% increase over the $799 million sold the year before.
135,000 Californians could consume the real estate market of Vermont many times over.
> 135,000 more people left California than moved in last year.
If two rich Californians move out of the state and one poor starry-eyed college graduate moves in, the view that only one net-person moved out is too simplified.
There are more than Californians and I think this story applies to all “rich states moving to lower tax states.”
There were many states [0] with net migration loss and while California alone isn’t enough, you have to lump in NY, IL, NJ, CT, MA, MD you get significant numbers and that’s year after year.
135,000 more people left California than moved in last year. Even if they overwhelmingly moved to only ten other states, that’s just 13,500 extra ex-Californians in each one of those unlucky states. And not all of them are going to be wealthy, surely some non-negligible portion will be less well off. Maybe they’ll be wealthier on average, but it’s not 100% tech millionaires.
Somehow this is supposed to be responsible for skyrocketing prices in Austin, Portland, Atlanta, Denver, Boulder, Seattle, Aspen, Jackson, Tahoe, and hundreds of other cities, towns, and locales across the country. All the while the price of housing in California suburbs is going up too!
At the same time, interest rates are plummeting. For a given house sale price, this can dramatically affect the affordability of monthly payments: refinancing last year from 4.325% to 3.375% cut my payment by a full 20%. Sub-3% loans aren’t too hard to find right now. In a competitive market like housing, this has the extremely well-known effect of causing sticker prices to rise. Put another way, if you can afford $1,500/mo payments and the rate drops such that you would only need to pay $1,150/mo, the market will quickly react to increase prices to keep the overall monthly payment the same.
This isn’t a novel mechanism. It’s part of the reason housing has been such a wildly successful Investment vehicle over the last few decades. Interest rates fell, prices went up accordingly.
Are emigrating Californians responsible for some of these price increases? Sure, both generally and probably in some specific markets, I totally buy it. But everywhere simultaneously? I’m skeptical it’s responsible for as much of an effect size as people appear to believe.