Nearly three times as many Californians are moving out-of-state than moving in

Californians are taking a tip from Billy Joel, and they’re movin’ out.

For every 37 moves into the Golden State, there are 100 California residents migrating out, according to moveBuddha, a moving company referral service and data reporter.

In fact, California is the state with the second greatest outflow, second only to New Jersey. This tracks with news of California’s population declining for the first time in living memory in 2019, down a slight 0.1% from the prior year. This decrease continues a declining growth rate experienced over the past decade. The annual rate of population change is usually closer to +1%.

Four of California’s counties experienced the highest population declines in the nation, according to the U.S. Census. From April of 2020 to July 2021, each county lost:

• 184,500 residents in Los Angeles;
• 58,800 residents in San Francisco;
• 50,800 in Santa Clara; and
• 33,800 Alameda.

It’s hard to not be romantic about California, but the data doesn’t lie. People are leaving the sunshine, star quality, and seaside for states which are less costly.

Housing prices are high across the nation, which means prices are extremely high in California. Homebuyers are looking for relief from the unbearable weight of high costs of living.

But where is everybody going? When Californians pick up and leave the state for greener pastures, they’re on the prowl for lower prices.

The top out of state cities welcoming in the California outflow consists of:

• Texas;
• Seattle;
• New York;
• Denver; and
• Las Vegas, according to moveBuddha.

These metro areas offer some relief from California’s steep prices. Even parts of Seattle and New York can offer higher income-to-costs ratios, especially for Los Angeles and San Francisco residents looking to exit California. Texas, Nevada and Washington are all states with zero income tax. Nevada is a popular state for retirees to save money during retirement, creating a lot of appeal for suffering Californians.

Domestic migration was on the rise throughout the pandemic and recession hangover. However, the migration trends in California had a clear direction: out. California’s population declined the most in its large, coastal metros. As Californians emigrate out of these areas, they are heading for less costly metros, and states.

For example, San Francisco and Los Angeles see some of the highest housing costs in the nation, making it close to impossible for mortgaged homebuyers to compete. The result: slowing sales.

San Francisco’s year-to-date (YTD) home sales volume is 17% below a year earlier as of Q1 2022. Similarly, Los Angeles County home sales volume is 6% below a year earlier. Dragged down by rapidly rising interest rates and waning enthusiasm from homebuyers, sales volume will continue at a slower pace throughout 2022 and into 2023.

Residents unwilling to leave the state seek 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. More than that, of course, many are fleeing the state entirely for the promise of reasonable housing costs.

Related article:

California’s high cost of living outweighs local incomes

Keeping homeownership at home

More long-term emigration trends show how Californians have been struggling with inventory constraints and high prices for a long time. These obstacles have only grown more prominent during the worsening inventory shortage of the post-pandemic years.

The truth is: 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.

For those who remain, rapidly rising home prices and rents which exceed the pace of incomes will hold back the rate of homeownership, household formations and turnover.

To combat this vicious cycle, home prices need to decrease, which means California’s inventory imbalance needs to be solved.

Looking forward, we can expect inventory to gradually climb heading into 2023. Today’s seller’s market has already begun to tip, with prices to follow in Q4 2022 as inventory grows and homebuyers increasingly take a wait-and-see approach to buying.

But the long-term cure for California’s housing shortage is residential construction.

To keep Californians in California, more homes and rentals are a necessity. California legislators are working to encourage more construction, but it is not enough.

Real estate professionals — how many of your clients are looking to leave the state? How many want to stay? Share your experience in the comments section.

Related article:

Legislative steps toward more affordable housing