California Trends: Movement From Large Cities to Smaller Metros and Suburbs

California is experiencing noteworthy demographic changes as residents are migrating to different cities within the state. In particular, residents are leaving San Francisco in significant numbers and moving to the Central Valley, Sacramento, and other smaller (and less expensive) markets. California’s fastest-growing cities in 2020 were Beaumont, Folsom, Roseville, Dublin, and Menifee.
This trend of migration out of the bigger cities is already raising housing prices in smaller metros and is anticipated to drive future development projects in these regions as well.

Significant Outmigration, But Not an “Exodus”

From July 2019 to July 2020, California’s population of roughly 40 million people only increased by 0.05%, or about 12,000 people. During that time, 135,000 more people left California than moved in. The majority of people leaving California make under $50,000 per year, and many have cited high housing prices as motivating their move.
You may have heard this trend classified as an “exodus” in the media, but in reality, demographers have noted that the actual outmigration numbers from California have been “slight.” Data shows that most people moving out of California cities have been moving to smaller cities or suburbs within California, not out of state.
Experts have also indicated that key components of California’s population decline are falling immigration rates and its aging population, which tends to result in a higher number of deaths and fewer babies born each year.
Yes, the trend of more people leaving California than entering led to overall population decline in 2020. But experts cannot say whether that trend will hold now that the state has reopened. And while outmigration may be affecting specific markets, like San Francisco, its overall effect on housing in California is likely to be minimal given the state’s housing supply crisis.

Expanding Latinx Population

California has the largest Latinx population of any state at 15.6 million, and that number is expected to keep growing. This is noteworthy for the housing market because a significant majority of Latinx Americans are currently aging into their prime homebuying years.
Latinx Americans have a median age of 29.8, compared with 43.7 for non-Hispanic whites.In 2020, despite the pandemic, the number of Latinx Americans who purchased a home with a mortgage increased 13% from the previous year.
Over the last decade, Latinx Americans have accounted for over 50% of homeownership growth nationwide. This will be a significant growth market for California moving forward.

Key Takeaways

Smaller metro areas are gaining popularity, which could spur seller interest in these regions as housing prices rise.
California’s outmigration “exodus” has been exaggerated, and those leaving the state have tended to be lower-income residents. Don’t expect current outmigration patterns to have a significant impact on the housing affordability crisis in the short term.
The Latinx community accounts for significant homeownership growth. Consider how your business can best serve this community.

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