Where Are People Moving in 2021? The Demographic and Migration Patterns Impacting Real Estate
Posted by Jeff Biebuyck on Thursday, July 29, 2021 at 4:35 PM By Jeff Biebuyck / July 29, 2021 Comment
The COVID-19 pandemic prompted a new wave of migration nationwide. Millions of Americans have relocated since March 2020.
Some sought less crowded metros to reduce their risk of catching the virus; others took advantage of work-from-home and bought in a less expensive ZIP Code. Some moved back in with family members; others found after a few months of quarantine that they needed a home with more space.
And local housing markets will feel the impact of these new migration patterns for years to come.
Migration patterns impact local housing demand, which impacts production, which shapes availability for years to come. As stated in recent Freddie Mac research on U.S. population growth: “Housing is a long-lasting investment, so investment decisions made today in the type of housing built will shape the availability of housing long into the future.”
Understanding who is moving in and out of state — and why — is critical to understanding where local housing markets are headed. Below, we’ll dig into demographic and migratory trends impacting California, Texas, and Florida, as well as their forecasted impact on each state’s housing market across the next decade.
Population Growth Decreasing
According to the U.S. Census Bureau, population growth has slowed in the last 10 years to its lowest level since the 1930s.
Average annual growth between July 2010 and July 2019 was 0.66%, down from the previous decade’s 0.97%.
This trend is not expected to have a significant impact on housing markets, however, as inventory continues to trail demand across the country. Currently, the United States needs 3.8 million additional housing units to match long-term demand.
Furthermore, the population is still increasing, albeit at a slower rate than in decades past. The three states experiencing the most significant growth in the past decade were Texas (grew by 3.85 million people), Florida (grew by 2.67 million people), and California (grew by 2.26 million people).
Figure 1. US Population Growth for Decades: Censuses 1790 to 2020
Population Growth Decline Unlikely to Influence Prices
Even though the growth has slowed, the populations of California, Texas, and Florida do continue to increase each year. Even so, research suggests it’s not population growth but income growth that has the greatest impact on housing prices. In a 2003 study, Karl Case and Robert Shiller compared U.S. housing prices and income growth rates since 1985 and concluded that income growth alone caused nearly all housing price increases across 40 states.
Figure 2. Per Capita Personal Income Growth, 2010 to 2020
What matters most when it comes to pricing, then, is not how many people are moving to or from each state, but how those trends impact per capita income levels. In 2020, per capita personal income in California was $71,480, up from $43,636 in 2010. In Texas, per capita personal income was $58,814, up from $38,276 in 2010. And in Florida, per capita personal income was $55,337, up from $38,137. If per capita income continues to rise, housing prices are likely to continue to rise as well.
Declining population growth is not expected to impact home prices — do not assume affordability will increase as population growth slows.
Per capita personal income growth has a greater effect on an area’s housing prices than population growth. Anticipate housing price hikes in cities currently experiencing an influx of new, wealthy residents.
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