California is steadily losing residents, but a few cities are experiencing an infusion of out-of-staters.
A dearth of low- and moderate-income housing is forcing many Californians to postpone homeownership or rent indefinitely. The state’s housing crisis, a combination of stunted construction starts, skyrocketing prices, restrictive zoning laws and rising interest rates, has pushed potential homeowners out of the market entirely.
Now leaving California
For some, moving out of the Golden State altogether has become the only viable option. For over a decade, California has experienced a net outbound migration pattern, meaning more people have left the state than moved into it. About five million people moved to California from another state between 2007 and 2016 while six million left, according to the American Community Survey.
The most popular destinations among exiting Californians are Nevada, Texas, Arizona, and Oregon. These states offer an abundance of what California lacks: low- and middle-income housing. Unsurprisingly, residents making less than $55,000 are the ones leaving in droves, according to a California Legislative Analyst’s Office report.
But California isn’t exactly hemorrhaging residents. In fact, this net loss of residents is historically low. Net outbound migration from 1990 to 2006 was more than twice the levels of the last decade, according to the Internal Revenue Service’s data on income tax filers’ movement in and out of the state.
As moving becomes more expensive and Baby Boomers delay downsizing, Californians aren’t moving as much as they used to. Within the state, home sales are sluggish and will continue their decline in 2019 thanks to rising prices and interest rates.
Welcome to California
Out-of-staters, on the other hand, are streaming into a few of California’s booming metro areas. California may be experiencing a net loss of residents, but these neighborhoods are gaining popularity in 2019 according to Redfin’s search data from out-of-state searchers:
- Merriewood/Montclair, Oakland;
- Mission Terrace, San Francisco;
- San Rafael Hills, Pasadena;
- South Pasadena, Pasadena;
- Berkeley Hills, Berkeley; and
- Mount Washington, Los Angeles.
Some of Redfin’s hottest neighborhoods for 2019 reflect California residents’ inland-moving trend, but others are still found in pricey coastal areas as in previous years. The median sale price for a home in these attractive areas ranges from $977,500 to $1,380,000.
Their popularity this year may be surprising given the current housing crunch, but the bigger picture becomes clear when you consider that high earners making $150,000 or more accounted for nearly half of inbound moves to California in 2018, according to United Van Lines’s National Movers Study.
Most inbound movers in this study report jobs as the primary reason for relocation. This is consistent with the locations to which they’re moving. These neighborhoods maintain a comfortable distance from urban centers but are close enough for an easy work commute. They’re also anchored by thriving industries nearby.
California’s migration patterns paint a picture of statewide gentrification. The largest age demographic moving to California in 2018 was the 18 to 34 range. 27.03% of inbound moves were from people in this cohort. These high-income and college-educated inbound residents will compete for the more desirable coastal areas while long-time residents are priced out. Meanwhile, low-income residents and retirees are also packing up and heading east.
Expect displaced coastal residents and even new Californians to shop for homes further inland, settling in less expensive but growing metro areas. The following California metro areas experienced the most population growth from migration according to a 24/7 Wall St. data review of the U.S. Census Bureau’s Population Estimates Program:
- San Francisco-Oakland-Hayward;
- Riverside-San Bernardino-Ontario;
- San Diego-Carlsbad; and
- San Jose-Sunnyvale-Santa Clara.
Some of these areas correlate with Redfin’s 2019 hottest neighborhoods list, but others highlight the demand for low- and moderate-cost housing. Redfin’s search data reveals that many in-state searches for fast-growing areas like Sacramento and San Diego originate from San Francisco and Los Angeles respectively, nearby metros suffering from a shortage of housing for low- and moderate-income households.
Out-of-staters are also looking at these same cities. Nearly a quarter of Redfin searches for San Diego, one of their top five metros by net inflow of users, originated from New York City, the nation’s 2018 leader in population decline.
With mortgage rates on the rise, even some high-income out-of-state shoppers will be considering investing early these booming neighborhoods.
Agents—how has this migration pattern affected your practice? Leave your thoughts in the comments below.