Migration patterns for high income earners from urban cities

Migration patterns for high income earners from urban cities

Rental Property Investor · New York City · Member since 2020 · 3 posts · 14 votes

Hi all - I feel that we're about to see some major migration shifts coming from the expensive urban cities such as NY, Seattle, SF given the new work from home policies that is becoming permanent. It started with the tech sector - twitter, facebook and now other sectors are catching on. I work in the financial services sector in NYC and sense that all the banks/insurance companies etc... are about to do the same because they've seen super high productivity from remote staff over the past few months. they haven't announced it yet but they've implied that they will in a few months. so even after Covid, going into the office will be optional. for most high income earners crowded into the cities - that's a big deal. That means that they no longer have to be tied to a specific city. Some will move to the suburbs but even if 15% of these high income earners were to move elsewhere in the country - that would be a game changer for some of those recipient cities... and it would be good to get ahead of that as investors! I was thinking people will want to move to warm cities in low tax states. the place would also need to have some diversity and fine dining that they're accustomed too. 
->> What cities do you think will benefit from this demographic migration?

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Stella Xu:

Hi all - I feel that we're about to see some major migration shifts coming from the expensive urban cities such as NY, Seattle, SF given the new work from home policies that is becoming permanent. It started with the tech sector - twitter, facebook and now other sectors are catching on. I work in the financial services sector in NYC and sense that all the banks/insurance companies etc... are about to do the same because they've seen super high productivity from remote staff over the past few months. they haven't announced it yet but they've implied that they will in a few months. so even after Covid, going into the office will be optional. for most high income earners crowded into the cities - that's a big deal. That means that they no longer have to be tied to a specific city. Some will move to the suburbs but even if 15% of these high income earners were to move elsewhere in the country - that would be a game changer for some of those recipient cities... and it would be good to get ahead of that as investors! I was thinking people will want to move to warm cities in low tax states. the place would also need to have some diversity and fine dining that they're accustomed too. 
->> What cities do you think will benefit from this demographic migration?

Income tax's are generally owed in the State were your employeed..  IE a lot of folks work in Oregon and live in Washington across the river.. they still pay Oregon income tax.. so thats something to check.

I think folks are going to scatter with the wind.. but seems to me suburbs of NJ  CT  PA would benefit but there is a whole lot of little towns in those areas for folks to scatter.. I would be looking at school districts.

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  • Member since 2020 · 2 posts · 1 vote
    6y

    If we're thinking globally, I imagine Kuala Lumpur would be attractive in that situation.  Low-cost of living, plenty of land, great amenities and food, relatively safe, and in an economically strategic trading location.  Some Americans are even exempt from typical US income taxes depending on how their compensation is structured.

  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    6y
    Originally posted by @Stella Xu:

    Hi all - I feel that we're about to see some major migration shifts coming from the expensive urban cities such as NY, Seattle, SF given the new work from home policies that is becoming permanent. It started with the tech sector - twitter, facebook and now other sectors are catching on. I work in the financial services sector in NYC and sense that all the banks/insurance companies etc... are about to do the same because they've seen super high productivity from remote staff over the past few months. they haven't announced it yet but they've implied that they will in a few months. so even after Covid, going into the office will be optional. for most high income earners crowded into the cities - that's a big deal. That means that they no longer have to be tied to a specific city. Some will move to the suburbs but even if 15% of these high income earners were to move elsewhere in the country - that would be a game changer for some of those recipient cities... and it would be good to get ahead of that as investors! I was thinking people will want to move to warm cities in low tax states. the place would also need to have some diversity and fine dining that they're accustomed too. 
    ->> What cities do you think will benefit from this demographic migration?

     Yup, here in California this started months ago.

    "Chris, why would I continue to rent a small apartment in San Francisco for $4k/mo when I could own in Sacramento for $2700/mo?" is indeed a very good question. B/C of what I do I mostly only talk to buyers, not renters, but it's hard to imagine higher income renters will not be asking themselves the same question.

    One person I respect started calling it the "Great Migration" months ago.

    In terms of "where?" - there does seem to be a pattern. The Work From Home Crew (WFHC) still needs to come into the office a couple times a month, for the most part. So about a 2 hour drive during commute hours, that seems to be the limit for a lot of them. For SF / Oakland, that's Sacramento. 

    Prior to COVID there was already a steady stream of younger folks living in the Bay Are moving to Sac, now it's picked up a whole bunch. Wine Country too (Napa / Sonoma) to a lesser extent. 

  • Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y

    "What cities do you think will benefit from this demographic migration?"

    I don't know if its metro areas, but I think places like Bellevue will benefit from the crazies in Seattle.

    Beyond that, I'd guess lower cost places like PHX, Boise, Austin will benefit until they get over-priced.  Places like LAX and NYC will hurt.

  • Rental Property Investor · Fishers, IN · Member since 2016 · 335 posts · 470 votes
    6y

    I agree this trend is happening and will continue.  It just makes sense.  "Geographic arbitrage" has been a primary strategy of the FIRE community to accelerate wealth.  Start your career in a major metro hub, then take that high pay to a low cost area of the country via promotion.  

    Who wants to deal with long commutes, high cost of living, more stress, people on top of people?  How do you get ahead financially?  Food, Transportation, Housing are the big 3 to reduce in your budget and grow your wealth.  Much harder to do on overpriced, taxed-to-death coasts of this country.  

    I'm bullish on the heartland of America.  

  • Realtor · Austin, TX · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    @Stella Xu I do believe that was already occurring at a slow rate of migration away from high priced and disadvantageous tax regions.  Industries are already relocating to favorable markets and the pandemic has forced companies to consider the option of remote work and cutting the tie to their current office location.  In general, there is a historical trend for increased migration towards the Southern half of the United States, and as @Andrew Oskoui mentioned, the market effect could be global as well.  Very interesting to watch.  

  • Realtor · Austin, TX · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    I thought I recalled a BiggerPockets podcast about it, #317 with Chad Doty

    https://www.biggerpockets.com/...

    @Chris Mason @Stella Xu @Steve Morris @Paul Shannon

  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    6y

    @Stella Xu I talk to people from California, Seattle and NYC on almost a daily basis who want to move to Austin, TX for that exact reason. Florida is getting a lot of them too.

  • Investor · Sacramento, CA · Member since 2016 · 96 posts · 41 votes
    6y

    I agree with Chris that the migration is not going to be very far as folks will be required to show up in the office a few times a month.  

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Stella Xu:

    Hi all - I feel that we're about to see some major migration shifts coming from the expensive urban cities such as NY, Seattle, SF given the new work from home policies that is becoming permanent. It started with the tech sector - twitter, facebook and now other sectors are catching on. I work in the financial services sector in NYC and sense that all the banks/insurance companies etc... are about to do the same because they've seen super high productivity from remote staff over the past few months. they haven't announced it yet but they've implied that they will in a few months. so even after Covid, going into the office will be optional. for most high income earners crowded into the cities - that's a big deal. That means that they no longer have to be tied to a specific city. Some will move to the suburbs but even if 15% of these high income earners were to move elsewhere in the country - that would be a game changer for some of those recipient cities... and it would be good to get ahead of that as investors! I was thinking people will want to move to warm cities in low tax states. the place would also need to have some diversity and fine dining that they're accustomed too. 
    ->> What cities do you think will benefit from this demographic migration?

    Income tax's are generally owed in the State were your employeed..  IE a lot of folks work in Oregon and live in Washington across the river.. they still pay Oregon income tax.. so thats something to check.

    I think folks are going to scatter with the wind.. but seems to me suburbs of NJ  CT  PA would benefit but there is a whole lot of little towns in those areas for folks to scatter.. I would be looking at school districts.

  • Member since 2020 · 437 posts · 675 votes
    6y

    Every suburban realtor’s fantasy is that the rich tech native from SF or the wealthy banker from NYC is going to call them and give them a deal. Same applies to every broker sitting in Texas, Utah, Arizona, Nevada or New Jersey. It’s a stronger possibility given that Covid-19 has lingered so long and is forcing businesses to innovate around the challenges posed by social distancing.

    There are a few impediments though. Only 3 firms (Shopify, Twitter and Square) have announced permanent WFH. This out of a few thousand tech companies. ZERO financial services companies have announced the same. 2 large tech companies - Google and Facebook have extended WFH through July 2021 and that does not look permanent to me!!!!!

    The talk in boardrooms right now is about mental health consequences of WFH as well as Covid-19

    therapeutics, vaccines etc and how the office will look like then. The consensus is that WFH will be a bigger component of the “normal” working cycle but the work week will have a hybrid component that has people showing up to the office a few times a week at the minimum.

    So if Jane who lives and loves San Francisco and thinks Sacramento is just like a “cheaper” version of SF (as has been suggested in an earlier post on this thread) is considering moving to Sacramento, she better have a plan to make the commute a few times a week once things normalize. I don’t know about Jane but IMHO the two cities are very different in what they offer under a normal situation. Of course if we all expect Covid-19 to linger and force social distancing for the rest of our lives, then Jane ought to move to Sacramento for sure.

  • Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
    6y

    @Stella Xu, I'm also in financial services (formerly) based in Manhattan, now based in my spare bedroom. I agree that we're going to see a lot more options for employees to WFH and/or commute less. I strongly disagree with many of the assumptions being made and impacts being predicted, both here on BP and in the press more widely.

    • People are going to live where they want to live. Yes, people are drawn to urban centers for jobs, but they are mostly drawn there for the culture, vitality, education, and the intersectional opportunities of those places. I don't care how cheap Jacksonville is, there's no way you're dragging me down there. This impacts quality of life just as much as cost of living.
    • Don't assume that if you move from SF to Tulsa that big, fat SF salary is moving with you. Facebook has already announced that it will cost adjust salaries for employees that move from the Bay Area to areas with a lower cost of living. I bet this becomes de rigeur across the board.
    • BTW, these areas don't want fat SF salaries coming to their towns. It is a shock to the system and completely skews the economics of the town. The Marketplace podcast "Make Me Smart" had a great exploration of this several weeks ago.
    • There will still be an organizational disadvantage to living outside your company/industry's hub. I see all the people that get promoted to Managing Director at my company each year and the vast majority of them are based in NY or London. Even though those cities only represent a small fraction of where our total workforce is. 
    • There are potential negatives for smaller, cheaper cities where (up until now) many companies were moving jobs. Large companies had struck a kind of bargain with the devil. Due to much lower salaries and fixed costs, they were willing to move jobs to cities like Dallas, Tampa, and Phoenix. The compromise was much shallower talent pools. The numbers made that compromise work, up until now. If the high cost of Manhattan or Silicon Valley office space is off the table, it's to a company's advantage to pay the higher salary of a WFH person in the Bay Area (or Greenwich, CT), if that means appreciably better talent from which to choose. I've already heard rumblings about large companies contracting their footprints in secondary and tertiary cities.

    @Jay Hinrichs, my CPA explained it to me differently. I pay income taxes in NY (where I work), my home state of CT levies income taxes as well, but gives me a credit for what I already have paid in NY. Since NY taxes are higher, I never have to pay anything to CT. Perhaps this is a local thing? NY-NJ-CT have their own system in place?

    As far as scattering, we're seeing exactly what you describe here in Greenwich. My realtor friends are busier than they can remember. The coop where I Iive has had 2X as many closing in the first half of the year than they did in the entirety of 2019. New Canaan home prices are up 29% year-over-year. Darien is seeing the same trends. No surprise that these are the three wealthiest towns in SW CT, with the best schools, and lowest taxes.

  • Specialist · NY · Member since 2016 · 82 posts · 60 votes
    6y

    I pulled the below from an article about Facebook’s work from Home policy. I wonder what kind of impact this will have if similar companies follow suit. So you can move to Anytown, USA, but your salary will be most likely reduced. I still think people would jump on it as NYC has a host of problems now including increasing crime rates. However, some people my be a little more hestaint. 

    Facebook CEO Mark Zuckerberg recently announced the company will allow most of its employees to request a permanent change in their jobs to let them work remotely. The catch? Facebook will localize employees' compensation based on where each employee chooses to live. Zuckerberg confirmed the salary fluctuations – in most cases, expected reductions – via Facebook Live.

    https://amp.usatoday.com/amp/5...

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Jaysen Medhurst:

    @Stella Xu, I'm also in financial services (formerly) based in Manhattan, now based in my spare bedroom. I agree that we're going to see a lot more options for employees to WFH and/or commute less. I strongly disagree with many of the assumptions being made and impacts being predicted, both here on BP and in the press more widely.

    • People are going to live where they want to live. Yes, people are drawn to urban centers for jobs, but they are mostly drawn there for the culture, vitality, education, and the intersectional opportunities of those places. I don't care how cheap Jacksonville is, there's no way you're dragging me down there. This impacts quality of life just as much as cost of living.
    • Don't assume that if you move from SF to Tulsa that big, fat SF salary is moving with you. Facebook has already announced that it will cost adjust salaries for employees that move from the Bay Area to areas with a lower cost of living. I bet this becomes de rigeur across the board.
    • BTW, these areas don't want fat SF salaries coming to their towns. It is a shock to the system and completely skews the economics of the town. The Marketplace podcast "Make Me Smart" had a great exploration of this several weeks ago.
    • There will still be an organizational disadvantage to living outside your company/industry's hub. I see all the people that get promoted to Managing Director at my company each year and the vast majority of them are based in NY or London. Even though those cities only represent a small fraction of where our total workforce is. 
    • There are potential negatives for smaller, cheaper cities where (up until now) many companies were moving jobs. Large companies had struck a kind of bargain with the devil. Due to much lower salaries and fixed costs, they were willing to move jobs to cities like Dallas, Tampa, and Phoenix. The compromise was much shallower talent pools. The numbers made that compromise work, up until now. If the high cost of Manhattan or Silicon Valley office space is off the table, it's to a company's advantage to pay the higher salary of a WFH person in the Bay Area (or Greenwich, CT), if that means appreciably better talent from which to choose. I've already heard rumblings about large companies contracting their footprints in secondary and tertiary cities.

    @Jay Hinrichs, my CPA explained it to me differently. I pay income taxes in NY (where I work), my home state of CT levies income taxes as well, but gives me a credit for what I already have paid in NY. Since NY taxes are higher, I never have to pay anything to CT. Perhaps this is a local thing? NY-NJ-CT have their own system in place?

    As far as scattering, we're seeing exactly what you describe here in Greenwich. My realtor friends are busier than they can remember. The coop where I Iive has had 2X as many closing in the first half of the year than they did in the entirety of 2019. New Canaan home prices are up 29% year-over-year. Darien is seeing the same trends. No surprise that these are the three wealthiest towns in SW CT, with the best schools, and lowest taxes.

    correct if you work in a state with income tax and live in a state with income tax..  Like CA and Oregon.

    But WA has NO income tax.. so if your employed in Oregon you pay tax. 

    If your employed in CA and live in Vegas you Pay CA tax..  etc..  yes migration of those higher end communities / cities in my mind will follow the school systems.

  • Member since 2020 · 8 posts · 4 votes
    6y

    I’ll add one more angle to the discussion in that all of these beliefs about working from home can be true or untrue but they could be a bit short sighted flippers excluded). If we’re long term investors then we should be careful with short term impacts.  Professor and Dean Emeritus of the NYU Stern School, and economist Peter Henry spoke recently on a podcast about the 'end of life illusion.'  I'll paraphrase: 

    The concept is that at any point in time we feel stronger about what is happening right now and believe it to be the new standard forever.  We forget that this is not the end of life and that short term changes may have long term impact, but they will not last full force in the long term.  He offers a great story about his belief that eventually humans, as social beings, crave human interaction.  He posits that serendipity never happens over zoom because it happens in chance encounters at an office.  Professor Henry believes that in the medium to long term the draw to human interaction and innovation will draw us back to offices in some scale.  

    While commercial spaces will no doubt go condo in the near term, offices, commutes and activity centers will still fight their way back in some scale.  It's up to us to imagine how long this will take, and if this move back will come to major urban areas or simply more, smaller activity centers.  Thanks for all of the thoughts above!

  • Ryan KellyBusiness Member
    Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
    6y

    @Stella Xu I feel like this trend has been happening for over a decade and is simply accelerating because of COVID post-quarantine syndrome (“Honey, we need to move”) and Work From Home. Here in a Austin, a good majority of my clients, especially investors, are out of state or international.

    Ryan Kelly Group - Keller Williams5110 Reviews
  • Investor · Tampa, FL · Member since 2015 · 78 posts · 30 votes
    6y

    I work in tech in NYC. Just let my apartment go and looking to buy a place in West Palm Beach as it's just a 2 hr flight to NYC should I ever need to be back. Eventually may end up getting a crash pad in NYC but no reason to do so now since prices are just starting to drop

  • Member since 2020 · 437 posts · 675 votes
    6y

    Only time will tell.

    Many brokers in smaller cities and suburban markets will tell you that they are getting plenty of calls from city dwellers to find them homes. I bet that is happening. That said the brokers I work with in SF have stayed super busy as well

    But as a poster has raised a relevant question on if this trend is for real or just a fad we don’t know. I am a landlord in SF and NYC and all my leases got renewed at par with one year extensions. All my tenants are tech professionals. So I am personally not seeing the urban flight yet.

    I think longer Covid lingers, urban flight will accelerate but how will it move once Covid is under control via a therapeutic or vaccine etc, no one knows yet. This event is unprecedented and we will just wait and watch.

  • Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
    6y

    Two regions will get hit the most:  Bay Area and part of NYC.  

    First the Bay Area:   This region had the best economy during the last real estate cycle and the region has the most innovation and some of the most skilled workforce in the country.  With the boom of the region, the housing stock was unfortunately constricted, and supply could not keep up with demand.  Housing prices are absurd.  Tech companies will be very adaptable for telecommuting.  Middle class Bay Area residents had already been leaving pre-pandemic.  The overall region will remain strong and real estate pricing will not collapse.  Educated people will still migrate to the Bay Area.  I'd bet that places in Sonoma County, Marin County, Sacramento will all have growth because of out migration.

    NYC:  This City has more problems.  People are leaving for several reasons.  The City's safety seems to be eroding a bit.  It is a dense city with lots of shared infrastructure.  This is bad in the era of covid.  And telecommuting will erode office occupancy and business hotel occupancy.  With decreases in revenue, the City becomes fiscally challenged. Parts of Manhattan got looted and the famed restaurant and nightlife scene is closed.  Tough Tough Tough.

    Outside of NYC are lots of nice places to live.  But they remained affordable because they were too far for a daily commute.  Maybe that will change now.

    I am betting that Covid is not long term and we get back to normal eventually.  Telecommuting has amplified, productivity remains, and companies will enable it if they find value.   This might be a moment like the early 1950s, when people left for the suburbs.  Urban decline was a 40 year trend, which reversed itself the last 30 years.

  • Architect · Sonoma, CA · Member since 2013 · 53 posts · 30 votes
    6y

    I am on the receiving end of the Bay Area migration.  Selling a Sonoma duplex I hacked in 2014. Purchased $344k, put $130K into it, Listed for $750k, in contract for $802k.  Multiple offers before formal listing. 80% of the offers were from San Francisco.

  • Rental Property Investor · Member since 2018 · 826 posts · 809 votes
    6y

    @Stella Xu we shouldn’t overlook the fact that as companies find efficiencies in managing remote workforces that more offshoring will possibly occur. If this were to happen that would dampen growth 2nd tier US cities.

  • Los Angeles · Member since 2018 · 464 posts · 471 votes
    6y

    I expect most people will move to a neighboring suburb. It has all the advantages of the Big City with only a moderate transportation cost for that twice monthly "Waste-of-Time" Meeting, plus it will be culturally very similar to the Big City.

    Yah you can work from Kuala Lumpur, but that monthly flight will be a killer.

    Don't discount culture -- yah, you can work from Kuala Lumbur, but who'd really want to? If you move to Kensington, everybody there already speaks the language -- "Neoo Yawrkah".

  • Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    I suspect that the people who initially thought they could take their Sf salary to San Antonio were in for a rude awakening when they were told no. As another poster indicated, there will still be enough people that will still want to live in The City so they can make eye contact with the higher ups so they can get the plum promotions and opportunities. Will there still be an exodus? Yes, but it won't be en mass. Will prices in The City and Oakland go down? Yes,....they actually had flattened until Covid 19 hit.....then because of (lack of) supply less people kept their houses on the market. If it didn't sell then some sellers jut let the listing expire and let it stay off the market. Now a lot of properties have fewer days on market and are getting snapped up by eager buyers that are outbidding each other and at least in Alameda and Contra Costa County it is a very strong sellers market right now. I suspect that as restrictions start getting lifted and we start to legally be able to have actual open houses instead of virtual....there will be a glut of properties come on the market at ridiculously high prices because people will see what their neighbor's property sold for in June and July and the seller's will think they can get a price higher than that. It won't work becuase buyers will have much more inventory to choose from....and banks will slowly creep their rates up from these historic lows so there will actually be possibly less buyers and much more supply.

  • Specialist · Tampa, FL · Member since 2018 · 32 posts · 5 votes
    6y

    @Stella Xu that’s insightful and I think you are correct it’s just a matter to what degree.

    A lot of folks already commute from suburbs so they’ll just stay put

    another factor driving this will be a desire to be in less dense areas (reduce the odds of virus transmission)

    I think you answered your own question you’re j going to see continue migration south towards Florida Texas maybe South Carolina

    I’m still concerned about long-term employment impacts to the real estate market... once the Federal Reserve stops printing money abd forbearance periods end

  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    6y

    @Stella Xu great question.  I'm still waiting for actual data, though - even if there is a significant amount of migration out, I still see that being at least partially offset by migration in.  Anyone have any hard data?

    Also, lots of folks on this thread have identified Austin as an example of this trend... this to me is actually a counterexample, as Austin is absolutely a "bit city" and is more populous than San Fran, Seattle, Denver, Washington DC, even if it's lower cost.  In a few years, we'll be asking when the migration out of Austin is going to start. =)

  • Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
    6y

    I think the recent work from home hysteria is a fallacy. Conceptually, working from home has NOTHING to due with covid 19. If it’s so awesome, why wasn’t it adapted en mass years ago? Yahoo a couple years back even rolled back WFH. It’s a trend that will have some effect yes, but it’s being way over hyped. For two main reasons: 1- I’m not sure it will really provide long term benefits to the tech firms jumping on the bandwagon now 2- I’m not sure how many employees will ultimately like it, after the forced-Covid-novelty wears off. i.e. it’s hard to get all those cool tech co benefits like free gourmet food, gyms, awesome office spaces, etc., etc. piped over a zoom meeting ;)

    As for WFH effect on the Bay Area, keep in mind that when people work from home, their direct environment becomes MORE, not less important. Would you rather be home based in the Bay Area with tons of things to do nearby, good weather, lots of nature, etc. or someplace with little culture, extreme temperatures, bland immediate environment, etc., etc. There is a reason many people, who can afford to do so, aspire to live in CA and especially the Bay Area. Working from home isn’t going to radically change those aspirations.

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