Space, the New Frontier

Space Real Estate migration

Urban locations with great walkability were in great demand…until Covid hit. These locations became far less desirable as congregating was either not allowed in large numbers or people didn’t want to gather together in close quarters for fear of exposing themselves to Covid. Throw in remote work and more suburban, less walkable locations became a lot more desirable since they had more living space and often at less cost. The following table published on Bloomberg is very interesting in that it captures this phenomenon quite well.

Housing Arbitrage - New Yorkers who moved to Florida bought less expensive homes migration

One can see a pretty large migration to the south, particularly Florida by New Yorkers. This corroborates the many stories being reported of this trend occurring as well as how migrants are giving up walkability for cheaper housing and more space.

The article references a study done by a Federal Reserve economist. He has studied migration patterns from high-cost areas to lower ones and provided some interesting tables in his report.

One can see that high-cost metro out-migration has been growing, including to other high-cost locations. A much greater percentage growth occurred among those going to lower-cost metro areas. Not surprisingly, there was a reduction in migration from lower-cost metros to high-cost, large metros. The only category that received positive growth in migration were small metro areas, towns, and rural areas. 

Table 1. Estimated Interregional Gross Migration by Type of Region during the Pandemic

Smaller areas receiving large amounts of migration will undoubtedly experience upward pressure on housing prices. This has definitely been the case in areas like Boise, Colorado Springs, etc. Double-digit appreciation isn’t just in very small metro areas. It is a pervasive phenomenon but small metros with strong in-migration are doing particularly well.

Here is an excerpt from the latest report from the National Association of Realtors shows.

Continued low levels of housing inventory, combined with record-low mortgage rates spurring housing demand, have caused an increase in median sales prices for existing single-family homes in all but one of 183 measured markets during the second quarter of 2021. That is according to the National Association of Realtors®’ latest quarterly report, which reveals that 94% of 183 metro areas also experienced double-digit price increases (89% in the first quarter of 2021).1

Here is another way of seeing how strong appreciation of home prices has been.

Annual change in Case-Shiller National Home Price Index Jan - Dec 2016 - 2021

The next chart shows those areas that experienced a high percentage of net migration from high cost, large metro areas as a percent of the area workforce. Phoenix, Austin, Las Vegas, Atlanta, and Orlando lead in absolute numbers of people while other smaller metros have a larger percentage. Fortunately, CWS is invested in three of those five markets (not Orlando or Las Vegas) and we can see the benefits of this in-migration based on the demand for our apartments and the higher rents we are able to attain.

Table 4. Metro Areas with the Greatest Increases in Met Migration from the High-Cost. Large Metro Areas as a Percent of their Workforce during the Pandemic

Pew Research released survey results corroborating this data. Here is the headline from the report.

More Americans now say they prefer a community with big houses, even if local amenities are farther away August 26, 2021

Here is how the percentages have grown for people wanting to live in more spacious homes and communities. 

Most Americans prefer to live in a community with houses farther apart, up from prior to the pandemic

And yet there is a huge difference between political affiliation and the desire to move to more spacious communities in larger homes. Democrats want to stay in more urban, walkable areas with less space while Republicans want the opposite. The disparity is huge, although this is probably not that surprising given the huge political divide in the country. This will only serve to create more of an echo chamber as communities become less diverse politically.

Liberal Democrats prefer walkable communities, conservative Republicans prefer drivable communities

The demand for our larger apartments also corroborates this trend for people wanting more living space. And with Covid statistics only seemingly getting worse, I think this trend will continue to remain in force for a while.


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