As recently as last year there was concern about people leaving the state. But now we are begging you to leave….please! And we’ll shower you with money! The future migration trends – starting in 2023 – should show a remarkable pivot and either everyone who was going to leave has left, and/or California isn’t so bad after all.
An excerpt:
Perhaps most striking, California is now losing higher-income households as well as middle- and lower-income households. During the pandemic, the number of higher-income households moving to California declined a bit, but the number leaving the state increased dramatically (from less than 150,000 in 2019 to almost 220,000 by 2021).
The losses of college graduates and higher-income households are likely related to the ability of many highly educated and highly paid workers to work from home. The Census Bureau’s Household Pulse surveys show that about two-thirds of the almost three million Californians who telework full-time (five or more days per week) have at least a bachelor’s degree. Among recent higher-income Californians leaving the state, over half (53%) report working from home.
However, while the migration of higher-income and more highly educated households is notable, these outflows are still relatively small in proportion to their shares in the state as a whole. For example, in 2021 California was home to 8.2 million adults (ages 20 to 64) with at least a bachelor’s degree; that year, the net outflow of this group amounted to 1.1% of the number of college graduates. Similarly, California was home to 9.0 million 18–64 year olds living in higher income households in 2021; the net outflow of this group was 1.1%.
Most people who move across state lines cite employment, housing, or family as the primary reason. Since 2015, California has experienced net losses of over 500,000 adults who cite housing as the primary reason, according to the Current Population Survey. About half of those who leave the state buy a house in their new state, whereas only one-third of those moving to California buy a house. Net losses among those who cite jobs as the primary reason totaled 309,000 and among those who cite family 307,000. The PPIC Statewide Survey finds that 34% of Californians have seriously considered leaving the state because of high housing costs. Political outlook might also play a role for some movers, as conservatives are more likely to contemplate leaving the state than liberals.
The picture painted by these trends illustrates the frustrations and economic challenges faced by many Californians. The state’s high cost of living, driven primarily by comparatively high housing costs, remains an ongoing public policy challenge—one that needs resolution if the state is to be a place of opportunity for all of its residents. Moreover—if these interstate migration patterns continue—California could experience sustained population losses for years to come.
Price-wise, we are back to where we were at the end of 2021, so the data above should still be in the ballpark. Glad to see that San Diego isn’t considered as wildly overvalued – it’s expensive here and people can afford it, apparently.
I like that the J.P. Morgan guys who wrote this article are focused on the individual metros! The more affluent areas will keep losing population to the more affordable towns, and the balance will be determined by how many rich people move here. Could it balance out nicely?
An excerpt:
The end of the U.S. housing market’s pandemic-induced volatility seems in sight.
A recent and telling stabilization of single-family home sales—surprising in the face of high mortgage rates—has us expecting prices to finish bottoming out across the nation by the end of this year or in early 2024.
By the second half of 2024, we believe, the national housing market will return to a pre-pandemic historical norm in which residential home prices climb slowly and steadily, keeping modestly ahead of the rate of inflation.
However, we also expect each city’s path back to normalcy to be very different.
Cities are on very different paths back to normal
Last fall, as the housing market was cooling, we said that national statistics, while informative, would fail to tell the whole story. We expected cities to experience widely differing drops in home prices based in large part on how overheated their particular housing markets were at the start of 2022, before interest rates rose.
Subsequent home price drops have been dispersed, and in the general direction we anticipated.
For the buyers who want to live in a master-planned community with good schools, how bleak is it?
No one will be surprised to see the newer tracts hunkered down for another decade or longer, so let’s look at the older communities – those that are 20-25 years old. Those original owners are bouncing around in their empty nest, and should be cashing in and downsizing by now, shouldn’t they?
Yeah….no.
For homeowners who are planning their move carefully, April should be seen as the ideal month to list a home for sale. Yet look at the results:
The Carmel Valley tracts used were Belmont, The Breakers, and Lexington.
I know there are still a few days on April left this year, but it doesn’t look good for buyers so far!
We know that 80% of readers don’t go past the headlines, so the UT is challenging their customers lately to figure out the direction of the real estate market.
These are their headlines from the past two days:
Yesterday
Today
I have reached out to the author previously, but no response.
It looks like the San Diego market is surviving the current conditions quite well, while the rest of the country is being crushed by soaring inventory. The Californians must be staying home, and those feeder towns are suffering!
Any town that has a +50% increase year-over-year would be feeling it – which includes virtually every area that people relocating from here would consider.
These are ideal conditions for those who are willing to sell here, and move out-of-state. Sell here, and go rent there for a year or two? Might as well 1031 your house here, and defer those capital-gain taxes!
Wondering how the local market can survive higher mortgage rates? It starts with the cash buyers laying the foundation of comparable sales, and financed buyers deciding if they can keep up.
Thanks to Julie Chang for posting this data – her thread of comments here:
Last week, a reader suggested that we highlight the Under-$3,000,000 market.
It is astonishing that in an area of 300,000 people, there are fewer than 100 houses for sale priced under $3,000,000 (and none under $1,195,000).
Our standard for a healthy market is a 2:1 ratio of actives to pendings, and today it’s under 1:1….there are more pendings than actives!
The Under-$3,000,000 market is doing great, and if it weren’t for the buzz around higher rates and the uber-frenzy at the start of 2022, we’d be on our merry way through the spring selling season.
But last year’s first quarter was NOT normal:
If someone you know is thinking of selling their home, tell them to go ahead – the market is fine.
It was the most insane frenzy ever, and it was the most intense at the beginning of last year as inventory started to thin out. Compared to that environment, I think these stats look pretty good:
NSDCC Monthly Sales and Pricing
Down 5% to 10% YoY, and on the rise? I’ll take it!
The market could deteriorate into a cash-only environment, where the buyers and sellers who can avoid mortgages altogether are the only players left. If mortgage rates get into the 7s and 8s, the temptation for financed buyers and sellers to wait it out will be overwhelming.
Sellers who are downsizing/leaving town are home buyers who won’t care much about mortgage rates because the only way it makes sense for them to move is to pay cash for their next home. Especially those who are older.
There are plenty in this category, thankfully!
From FATCO:
Of those who owned their home free and clear, nearly 78 percent were owned by homeowners aged 55 or older. Not surprisingly, older homeowners are more likely to own their homes free and clear. As the Baby Boomer generation, which is larger than any generation before it, has aged, the share of homes owned free and clear has increased. This gives some hope that while many existing homeowners remain rate locked-in, there is a large cohort of older homeowners who are not. However, older households are typically less likely to move than younger ones, which is especially true as seniors today increasingly age in place. So, while some portion of the free-and-clear inventory will come to market in the next decade, it will likely trickle in slowly.
Free-and-Clear Homeowners May Hold the Key
As demand for homes starts to inch up as we approach spring home-buying season, a key question is, will there be more inventory for those potential home buyers to buy? Existing-home inventory makes up the bulk of available home inventory, and many existing homeowners refinanced into sub-3 percent mortgage rates over the course of the pandemic. But there’s a large group of homeowners who are not deterred by higher mortgage rates—those without a mortgage on their existing home or those with a small remaining balance. These homeowners may hold the key to unlocking more supply and, in turn, more home sales.
Local sales recently have been purchased all-cash about a third of the time. As sales drop further, the percentage of all-cash sales should end up at half or more of the total sales – and help to provide a floor.
Jessie says we are in the top 3% of local realtors, which means she is counting 16,000+ agents in the county. She doesn’t include out-of-area or off-market sales, and because we made it into the Compass Top 50, we’re hoping it might mean we’re a little higher. Stay tuned.
In the discussion today, it quickly became obvious how important it is for agents to be able to discuss scenarios and solutions. These days, a buyer-agent will just email an offer to the listing agent, and hope it gets accepted or an easy counter-offer comes back. Any tougher than that and the buyer-agents just turn to their clients and say, ‘what do you think?’ and because no other solution is presented, everyone gives up.
The wicked seller’s market during the last 10-12 years has caused everybody to expect that buyers will just pay the sellers’ price – and if they don’t, then they are called names and declared not serious. Being able to craft these scenarios into sales is where this market will benefit greatly.
It may sound simple to expect agents to discuss offer terms, but don’t underestimate how limited that opportunity is. Not only do people who are used to texting and emailing all day find it a struggle to stitch together a sentence or two in person, they usually have little or no experience with actually discussing offers and how to find a win-win solution. It’s too easy to give up instead.
