Californians are making moves to other states. California’s population recently decreased for the first time in memory, declining 0.46% from January 2020 to January 2021. For reference, the past two decades have seen the population increase around 1% each year.

Where are all of these California residents going?

Of those former Californians who purchased a primary residence outside the state in Q1 2021:

  • 23% migrated to Texas;
  • 18% migrated to Nevada;
  • 12% migrated to Arizona;
  • 9% migrated to Tennessee;
  • 7% migrated to Florida; and
  • 5% migrated to North Carolina, according to CoreLogic.

These states each offer migrating Californians a lower cost of living. For example, Texas, Nevada, Tennessee and Florida are all states with zero income tax. Arizona and Nevada are also some of the most popular states for retirees to save money during retirement.

Domestic migration has been on the rise throughout the pandemic and recession hangover. However, the decline of California’s population is most apparent in bigger cities.

Expensive coastal cities like San Francisco and Los Angeles do not offer homebuyers enough space or opportunities for homeownership, thus housing costs continue to skyrocket.  Therefore, it’s become a trend for households seeking to buy to migrate towards inland areas like Riverside and Bakersfield. These inland areas are less restricted in terms of zoning which allows for more construction and healthier housing markets, with more flexibility to react to demand.

High demand and low inventory are major deterrents in the Golden State, causing the price of housing to increase faster than the pace of incomes. Inventory reached a new low towards the end of 2020.

In mid-2021, California also saw major year-over-year inventory declines throughout most of the state, including:

  • Los Angeles for sale inventory declining 14%;
  • Riverside declining 24%; and
  • San Diego declining 16%.

These continued declines in supply coinciding with high demand have created major home price increases. This concoction of events ensures Californians will continue to eye inter-state moves with interest.

Moving on out

The relocation boom which is occurring throughout California was primarily induced by the recession and pandemic. Remote work has been the tipping point for many domestic movers, giving them that final push to seek out lower costs of living.

This ambitious strive for relocation may have slowed down a bit with the cautious return to normal throughout the country, but this movement has not halted altogether. That’s because this burst in domestic moves follows a long-term trend of struggling households seeking out a lower cost of living in other states.

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The popularity and staying power of working from home has created a space for remote work to continue – also allowing for more flexibility in where homebuyers can live. A long commute from a less-costly suburban location does not matter when workers do not have to make a commute to their workspaces.

More long-term emigration trends showcase Californians have been struggling with inventory constrain since well before the ongoing pandemic and recession hangover. This obstacle has only grown more prominent. The cost of housing continues to rise in the midst of the housing shortage — which continues to surge up the price of housing.

As long as these long-term obstacles to obtaining a high quality of living exist in California, the population will continue to decline, and residents will seek out low-cost areas of the state, and beyond.