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California Leavin’: Many Escaping High Housing Costs

Texas, Florida Prime Beneficiaries

Tuesday, October 4, 2016

High housing costs – or at least a lower income-to-housing-cost ratio – ranks as one of the primary reasons people move from state to state. Various surveys show that California, one of the priciest housing markets, is losing population to states with lower shelter costs. 

  • A Pew Research study found that 77,219 more people making interstate moves in 2015 left California than came to the Golden State. Texas, meanwhile, saw a net gain of 170,103 residents, while Arizona gained 45,934; North Carolina, 38,197 and Florida, 202,510. Although if international migration is included, California is adding population.

  • A study by CoreLogic, as reported in “The Wall Street Journal,” found that “2½ home sellers left California for every out-of-state buyer coming into the state.” Meanwhile, in-migration outpaced out-migration among homeowners in Texas, Arizona and North Carolina, the article stated.

"Austin is attractive to California's tech workers, while Dallas has snagged corporate relocations from the state,” said Axiometrics Real Estate Economist Chuck Ehmann. 

The same cost-of-living argument could extrapolate into the apartment sector. Three of the four highest-priced apartment markets in August are in the San Francisco Bay Area, and eight of the top 15 are in California. Although the South Florida metros have average rents among the top 25, other Florida markets recorded average rents lower than the national average. So do all Texas, Arizona and North Carolina markets. 

Of course, some of the difference is mitigated by the fact that Californians generally have higher incomes.

“The Journal” quoted Sahar Pezeshki, a Dallas-based real-estate broker for Redfin, as saying she has seen Californians “coming in by the busloads” to Texas. One of her clients sold a condominium in West Los Angeles and afterward had enough money to buy separate homes in Dallas for himself and his daughter. 

As shown in the chart above, rents in Texas’ major cities are up to $2,000 per month less expensive than California apartments. Someone in Dallas could rent almost three apartments for the cost of one San Francisco apartment or two apartments for the cost of one Los Angeles unit. The highest-priced Texas market, Austin, is still more than $180 per month less expensive than California lowest-priced major market, Sacramento. 

The same holds true for Florida. Renters can get an apartment in Miami, with the 17th highest average rent in the nation, for about $1,600 less than they could in San Francisco and $250 less than in San Diego. 

Meanwhile, a renter in Phoenix will pay an average of $467 less than one in Sacramento. 

There should be no surprise that the states with the most expensive markets outside of California also have negative interstate migration. New York, with an average rent of $3,042 in the city and $1,190 on Long Island, lost a net of 157,992 in 2015, according to the Pew report. Boston had the fifth highest average rent in August, and Massachusetts saw 21,805 more people move out than move in. 

Housing cost is only one reason people move out of state. Many people will come to Texas and Florida because they have no state income tax, unlike California and New York. Others come for job opportunities. But there’s no doubt these interstate migrants can get more housing for less outside the high-rent states.

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