“Flocks and hordes of people are fleeing California and New York to the warmer, affordable, freer bastions of Texas and Florida! The continued influx of these new, often high-earning migrants, is propelling the Sun Belt Housing Markets to the stratosphere. You better buy now before it’s too late!”
No doubt you have heard this narrative repeated over and over again in the US Media. The logic goes that the pandemic unleashed a swarm of people moving to the South in America unlike anything we’ve ever seen. And that this swarm is responsible for the +44% YoY Home Price Gains in Austin, TX. Or the +33% in Phoenix, AZ. Or the +29% in Tampa, FL.
Except there’s two problems: 1) the number of people moving down South during the pandemic was never that high to begin with, and 2) whatever home-buying surge there was in these regions is now quickly abating.
These problems suggest that the home price increases across America’s Sun Belt in 2020-21 are not born by higher migration, but rather speculation. And that means a Sun Belt Housing Crash could be around the corner.
Americans Moved at a Record Low During Pandemic
For the “Californians fleeing to Texas in droves and pushing up home prices” or “New Yorkers invading Florida” narratives to be true, people need to be moving. Buying a residence in a new state, changing their address, getting a U-Haul, and physically moving!
And many people have taken it as a solid fact that Americans moved in record numbers during the pandemic. Fleeing the oppressive Blue States for the free Red States in droves. A trend that will assuredly continue, right?
Well, while that might have happened to some degree in 2020-21, it happened at the lowest rate ever according to data from the US Census Bureau.
The share of Americans who moved in 2021 (to be specific – April 2020 to March 2021) fell to a record low 8.4% (27 million / 322 million population of 1+ year old). That’s down from 9.3% in 2020 and well below the 12.5% levels in 2010. And markedly from the 20% figures in 1950!
Meanwhile, the share of Americans moving to a different state registered 1.4% in 2021 (4.4 million). That share has stayed relatively consistent over the last decade. Moreover, the share of Americans who made a move of more than 500+ miles was a tiny 0.8% (2.5 million).
So, to recap, we have:
8.4% moving in general, an all time low
1.4% moving to different state, no different than previous years
0.8% moving 500+ miles, no different than previous years
Home Buyer Relocation Interest Did Surge, Though
Raise your hand if that data surprised you…
The mainstream media, and most Housing Market pundits, spun a narrative that there was a deluge of Americans moving during the pandemic. That turned out to be completely false, putting a big dent in the argument that there is stronger inbound migration demand supporting the sky-high appreciation we’re seeing across Sun Belt markets like Austin, Phoenix, and Tampa.
However, despite the lower move figures, there did seem to be an increase in home buyer relocation interest during the pandemic according to data from Redfin.
The share of Redfin users searching for homes outside of their metro-area increased from 26.0% in Q1 2020 (pre-pandemic) to 31.5% in Q1 2021 (height of pandemic). This indicates that there was a legitimate increase (albeit a small one) in people looking to buy homes in other parts of the country.
But now that trend is going into reverse, with only 29.5% of Redfin users searching for a home outside their metro in October 2021. This follows declines in Q2 and Q3 2021 as well.
Something to note: Redfin classifies this data as representing homebuyer relocation interest. But it could also represent external investor interest. AKA, people who buy a home in a new metro area but don’t actually move there.
The Sun Belt is Coming Down to Earth
This decline in users searching outside their metro has also corresponded with a decline in interest in hot Sun Belt markets such as Austin, Phoenix, and Atlanta, GAaccording to Redfin.
First, let’s start with Austin:
Net inbound homebuyer migration into Austin, based on Redfin user searches, totaled approximately 5,000 per quarter prior to the pandemic. Then that figure exploded to 11,000 in Q1 2021, corresponding with the peak month in homebuyer relocation interest in Redfin’s national data.
But since then interest in Austin from outside the metro has waned considerably, declining to approximately 4,200 in Q3 2021 – similar to pre-pandemic levels.
How about Atlanta?
The same exact trend plays out. Homebuyer migration measures around 5,500 pre-pandemic, then surged to 9,000 in Q1 2021. But then it dropped to below 5,000 in Q3 2021, actually lower than the 2018/2019 levels.
Additional Note: do yourself a favor and check out the amazing migration data tables that Redfin has made publicly available. They have this data on dozens of Housing Markets. Make sure to check out the ‘Historical Net Flow’ tab.
Is the Sun Belt in a Massive Housing Bubble?
So, what to make of all this? Let’s run it down, point by point:
Home prices across many Sun Belt markets are up 20-40% over the last year, well above the US average, particularly markets in the Midwest and Northeast.
The consensus argues that this massive price appreciation was caused by a new wave of migration into the Sun Belt. And that hordes of people left lockdown states like New York and California for greener pastures in the South like never before in 2020-21.
But movement data from the US Census Bureau suggests this isn’t true. The share of Americans moving fell to a record low in 2021, while those making big moves (500+ mi) stayed flat.
Despite this, there was a legitimate increase in external homebuyer interest in Sun Belt Markets in early 2021 according to Redfin data. However, it is unclear how much of this increase came from homebuyers moving to a new metro, or investors buying homes in new metros.
Whatever the true source of demand, it seems to be abating. External homebuyer interest in Austin and Atlanta has plummeted over the last several quarters.
My main takeaway from the data is that 1) the surge in fundamental demand into the Sun Belt is grossly overstated and 2) the price increases in many Sun Belt markets are not warranted by fundamentals. And if there ever truly was a big increase in people moving to the South, it appeared to be short-lived.
And now the 44% higher prices in Austin, or the 25% higher prices in Atlanta, will need to be supported by locals, whose wages have only increased by 3%.
Get the popcorn out.
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