Americans picked up and moved south in droves during the pandemic, presumably motivated by remote work and a desire for cheaper housing and more wide-open spaces. So why, two years after the Covid crisis began, did the number of people moving to the South keep setting records in 2022?
While remote work trends have persisted, recent data released by the U.S. Census Bureau showed that more people were going back to the office in 2022 than in 2021—yet the great southern migration hasn't slowed. So we need to think bigger.
The pandemic has clouded two other major factors in domestic migration that boil down to an aging population and regional housing prices.
Key metro areas in the U.S. Northeast and West are finally surpassing the stratospheric home-price levels from the mid-2000s. Meanwhile, millennials and baby boomers now find themselves in a different phase of life, with different needs and wants, than in the 2010s when migrating to the South wasn't as popular.
Those needs and wants are part of what determines which cities and regions appeal to which population groups. New York City and San Francisco are great places to live for a certain kind of ambitious young person who doesn't need much space to live in. The suburbs of Atlanta and Charlotte are great for 30- and 40-somethings with kids who value having a lot of living space over nightlife. And Florida's balmy weather is an attractive destination for many retirees from colder climes.
And while these place-based dynamics may not have changed much over the past decade, the phases of life of America's two biggest generational cohorts has. In 2010, the U.S. had a lot of 20-somethings and not many 30-somethings or 60-somethings. That was good news for cities, but less so for traditional suburban and retirement destinations.
In 2022, that's no longer the case. Yesterday’s 20-somethings have become today’s 30-somethings, making suburban living more desirable. That's friendlier turf for the South to compete on than when the biggest bulge of young millennials were looking for apartments to start their careers. There’s a tool from the Joint Center for Housing Studies at Harvard University that lets you visualize this by state and age cohort. The shift from the under-26 age bucket to 35 to 44 shows a pronounced tilt away from New York, Illinois and California toward Texas, Florida and other states in the Southeast.
For members of the baby boomer generation, the biggest change over the past few years isn't just aging, it's that many homeowners are finally "in the money" on homes they bought at the height of the housing bubble in the mid-2000s. While home prices in many affluent parts of the country have soared over the past decade (even before the pandemic) to well above mid-2000s levels, a lot of places were still behind.
According to the S&P/Case-Shiller home price index, for instance, values in the New York City metro area didn't eclipse their 2006 peak until November 2020. Even in Los Angeles—which has a lot of divergences in its metro area between the coast and some of the harder-hit inland communities—prices were only 7% above 2006 peak levels in February 2020.
So for millions of homeowners all over the country, particularly older owners, the huge increase in home values during the pandemic finally gave them the home-equity cushion to make an interstate move that they might have been wanting to make for years. It's a kind of pent-up migration demand that the pandemic finally unlocked.
The housing market adjustment that we're going through right now brought about by higher mortgage rates might slow this down for a bit. But a retiree in New York or California looking to move to Florida or Texas will see the impact on the market from higher mortgage rates as a nuisance more than a reason to cancel their plans, and retirees don't need to worry about a potential downturn in the labor market.
Even if 2023 turns out to have a pullback in migration due to the slump in overall housing market activity, we should still expect migration flows from the Northeast and West to the South to be greater in the 2020s than they were in the 2010s, when most millennials were starting their careers and boomers had a lot less equity in their homes.
The big question now is whether the South can build enough housing to keep up with the demand.
Conor Sen is a Bloomberg Opinion columnist. He is founder of Peachtree Creek Investments and may have a stake in the areas he writes about.
This article was provided by Bloomberg News.