Long-term Outlook For California
Real Estate Agent · Georgetown/Austin and Houston TX · Member since 2019 · 4 posts · 6 votes
Howdy Bigger Pockets Peeps, As an agent in Austin TX, I have felt the inundation of California Natives to the Hill Country of Texas. This exodus has only just started but it has had a fairly significant impact on our market giving us a large amount of demand for both rental and luxury properties and a lack of supply (30% less supply than Q3 2019). Have my people inlaces like Nevada,Tennessee, Florida experienced this as well ? I am just curious about the current state of home demand in California and if the home prices will somewhat plateau or if they will depreciate. I feel that it is important to point out how geographically amazing California is, meaning that there will always be some demand to live there even if you are overpaying and taxed out the wazoo. Lastly, I have a question for all of my Californians, are as many people truly considering leaving the state as the internet is making it sound ?
Thanks , Jackson Andrews
To answer your question as someone living in the Bay Area: I am definitely considering leaving California, and I know a lot of people who want too also. My reasons are not only due to insane taxes and HCOL , but also for political reasons that I just can't wrap my mind around anymore. One reason I am staying for now is I can make way more money here with my current job , to help with starting REI.
"I want to leave California because it's too expensive, but I want to stay because I make so much money." Classic!
As an intermediary based in San Diego, I still see a lot of people exchanging for California property. Like everything it varies by region, and I still see great investment opportunities. In the cycle of 1031 Exchanges, naturally I see more investors approaching retirement age will choose to move their rentals out of California in search of higher cash flow. On the note of Texas, I just played golf with someone moving from Austin, Texas to Los Angeles, CA. Sample Bias!
San Francisco resident here. Agreed with most conclusions. It seems more like a balance than an exodus for CA.
With that said, for San Francisco specifically, rental market has cooled and continues to cool - some drops of 20-30% in prices within the last month or two. The market has changed from rentals flying off within days of listing to being on the market for a month or so for the deal. I'm hearing more that it's not that people living here are leaving, but that there are less people moving in - specifically - to the city. City people are also moving to peninsula, bay area, sacramento, and farther. We all know that companies in the bay area have had the longest remote working policies and some have declared 'permanent' or semi-permanent remote work - which may be contributing to 'new employee' moves being slower.
With that said though, SF just entered COVID stage 'yellow' and will begin to open non-essential offices to operate at.. around 25% I believe? City is interested in making sure work offices are operating to support businesses that cater to those regions. While unclear how this will pan out, if more 'office' staff are needed within SF, rental prices may rebound a bit.
Overall, sales of homes have dipped ever so slightly but in no similar magnitude to the rental market.
I don't believe the story of people leaving in mass numbers. I have family in Texas and they have been telling me for years to move and that sooooo many Californians are leaving and moving there. Are Californians moving, yes! Are people moving to California, yes! Are some people staying in California, yes! To say there is a mass exodus is to grab your attention and is akin to a title reading, if we have a stimulus package, it will include...
Curious as to your thoughts on how the situation oversea with HK might impact the RE market here in a couple month or a year ?
My thoughts are that many HKer are fleeing to Taiwan / other countries as China is gaining control, America and CA has will become more attractive options to the deeper pockets in that crowd. Especially since we are viewed as a liberal leaning social justice state ( for better or worse ), it is exactly the opposite of what they are running away from with China.
Right now Trump's administration has set refugee / asylum cap at 15k / yr ( by contrast it was 85k / yr in 2016 ).
With Biden in office, should we expect the asylum cap dam to burst and a significant influx of HK money driving up the market again ?
"Homeless is out of control (in Los Angeles)! No affordable housing! Tent cities
everywhere! rent control is making things worse! Homeless on every
street corner, under every bridge!
I guess you're hanging out in Skid row. Drinking the Koolaid. LOL.
Long-term outlook- Blame more rich, make more poor, consolidate capital with rich, fire, poop, sun, high taxes, bad schools, dodgers losing World Series, Giants winning World Series; Humm Baby!
@Sergio Testa . lol you literally cannot make the stuff up the CA dreams up!
I see many references to tech jobs but what I will add is that there are over 2million of us working in the Movie and TV industry. Unless you edit, there are not many remote positions in our industry so you can’t very well take it with you to TX. Trust me, we looked into it. Hollywood shut down for a few months for the first time ever this year. We felt that. But it is open now and it is one of the main attractions of CA. Yes there are other states that film, but none as big and steady and Hollywood. People will always flock here for it. There’s no business like show business!
@Jackson Andrews Whats going on G
Im from the San Gabriel Valley in Cali. There is a TON of people everywhere around 100 mile Radius here. Some will move, some will stay, many parientes from mexico are coming thru, u know a minimum wage salary here is like 10 times more than what many of my own fam members in mexico makes. I can tell you what I see here day in and day out. The ones who are depending on a single job to survive in cali are the ones who are hurting bad, have trouble paying the rent / there bills. The ones who have 2,3 streams of income are the ones that are doing decent. They can pay there bills, auto repairs, expenses fine but still end up with very little left. The ones that have 4 or more streams of income are the ones that are just fine loving it here saving some money. Ive seen since a kid ive seen many leave cali and 3- 6 years later come back. I think there will be many that are leaving now will do the same come back years later. Ill say ill never leave cali I love it even tho theres alot of bad to it as you can hear everywhere. I imagine sometimes if I would leave how would it be, but just imagine it and thats it. I have some units here and I got some units out of state, from now on ill only get units here in cali. The reason is the more you learn the more money you can make and I can make way more here than anywhere else in the country.
@Joe Splitrock
Agreed. The remote work trend may actually be a driver that could have an influence on the pace of outward migration. Put on top restrictions on foreign worker visas, fewer international students coming to the US, you can start to see a new trend emerge. How that plays out remains to be seen.
What is ironic however is that Wuhan where the virus originated is back to normal and experienced massive tourist inflow this past few weeks.
Domestic air travel in China is back to pre-pandemic levels and in Singapore there were all of 5 positive cases of Covid as the country has been diligent on preventive measures and contact tracing. There is no vaccine in either country. The US on the other hand is a sad story and thinks a vaccine will be the answer. I don’t think it will and even if it did, it will be a long time to adopt.
So net/net - looks like the virus is here to stay and grow. That means remote working and yes that is an impetus for people to start thinking if they want to live outside of the state.
You made a lot of really great points.....however, I prefer to quarantine in my home in California. When I do go outside, it is beautiful and like many others have noted we have so many different temperatures and different activities. The issue is if they won't allow us to go to to the beaches, national parks, etc. Otherwise, I still prefer so cal. A side note I have also noticed a strong migration to cheaper cities in California.
"Homeless is out of control (in Los Angeles)! No affordable housing! Tent cities
everywhere! rent control is making things worse! Homeless on every
street corner, under every bridge!
I guess you're hanging out in Skid row. Drinking the Koolaid. LOL.
I don't think that's necessarily true. I live in West LA and work in Koreatown. The amount of homeless on the streets has absolutely increased since the beginning of this year, probably due in part to the pandemic. It is hard to pass a few blocks without seeing tents. It's impossible to pass a single block without seeing trash all over the street.
I am biased but I do think there are a lot of folks "fed up" with California and moving out. I don't think it's more than a small percentage, but even that is a significant number. That's not to say that they won't be replaced by East Coasters and Gen-Z. I'm originally from Houston, live in LA now and personally cannot wait to get back. Some parts of California is beautiful, but that's about it. The politics, taxes, people, prices, everything else is just too far out there for me.
I keep seeing cars with license plate from other states driving in Bay Area. Yesterday just signed a lease with a tenant moving from Seattle to Bay Area.
Older people moving out of CA is normal. Young people moving to CA is routine.
That is what I have been seeing as well. We have a net loss of about 130,000 people per year. That sounds like a lot until you consider we have almost 40M. I am not a mathematician but I think we can stand to lose approx 0.003% of our population and still be ok as long as its not the top of the top. According to a Sacbee article in 2017 800,000 of the 1.7M people that left CA from 2010-2015 were at poverty level. The average person moving into CA was earning $121,000 (pre CA wages) so you have to assume they got a raise to come here. I know a few millionaires that have liquidated and cashed out but they are not the norm. I know this is a very small sample size but Bezos just dropped $250M on two homes in LA so clearly not all the wealthy are running away. I have older clients retiring in Idaho and Montana but my mid 20's successful cousins (attorney and programmer) moved to the Bay Area from Montana. Another mid 20's friend moved from Mizzoula to LA. I know you can read a lot of doom and gloom and know a few people personally that leave and it feels like its a huge trend... but objectively its not. You hear that 1800 businesses have left and there are some big names on that list but CA has averaged 29,200 new jobs a month for the past 9 years. That ties a record set in the 60's. You can try to argue that CA is falling apart but we added 300,000 jobs last year. Mostly high paying. I totally understand people leaving CA for multiple reasons but lets not pretend its imploding without objective facts to back that up. Needless to say I am still positive about CA real estate. A wise investor in Southern Cal has said.... "you cant make 6 figure profits on 5 figure houses."
The numbers you are using really do show the main thing I saw as a problem in CA. The wealthy come to CA for the high paying jobs. That population increases and drives up the cost of everything, housing and so on. They also seem to be a population with enough wealth that they do not mind paying high taxes--property, income, sales to fund what ever they desire. e.g. high speed trains to nowhere, special medical research, social programs, renewable energy. And that makes sense as they can afford it...but instead of setting up non-profits to do it they do it through laws and propositions, so everyone has to fund their wishes.
Then you have the number of people in poverty in CA also increasing so the poorer population has increased significantly also. This requires more funding for social services. This population does not pay much in taxes, but benefits from the social programs the rich desire to put in place.
The middle class is the population on the decline in CA. They do not qualify for any of the benefits the poor get, but also can not afford to fund all the programs the rich desire. Those are the people who are leaving. I was one of them.
I was born and raise in CA. I left in the 1980s after college to follow a job in PA, then moved to AZ then back to CA. Why did I return to CA? Same reason as I went to AZ -- to care for my parents. When they needed more help than I could do from 5 hours away in AZ I moved to within an hour of my childhood home where I could find a job. Were it not for my parents needing help, I would not have returned. After my mom passed away I could retire a year later from my job. The day I retired I drove out of CA never to return as a resident. But I do return to visit friends, go to a museum, etc. as a vacationer. Best way to go to CA. It has a lot to offer, but is not a place to live.
In CA the property tax last year for my house was $5316. My house in TN, the property tax for this year is $640. And my house in TN is better than my house in CA. IT is sitting on a lake with a dock in by backyard! I pay NO income tax in TN, no one does. There is income tax in CA. Sales taxes are similar. Plus everything else is cheaper. MY insurance for a brand new Subaru Ascent is less then $300 for 6 months of 250/300 coverage in TN. Never get that rate in CA! I can go to a restaurant with my two 17 year olds and myself and pay less than $30, including tip. Gas is less than $2 a gallon. In general pretty much everything is less.
Only thing I am concerned about is there are a lot of my new neighbors coming from the NE and CA and many of them want all the costly social programs they left behind. So they will try to recreate what they left. The locals say those are the ones they try to return to their original states, but they like me, I can stay!
Folks leaving CA need to look carefully at where they are going. If they like the CA politics, Austin or Washington are great places to go. TN is better suited for those that do not like to political aspect of CA's culture. The native of TN seem more into conservative politics. I am guessing that Idaho will end up like Austin; it will change to be like CA.
I have always lived on the border of L.A. and the O.C., I have known of many people recently leaving for other states mostly for the more affordable living, one person I know quickly realized they want to come back to CA from Texas and plans to as soon as they can. 2 of my neighbors on my street left, one to Nashville and one to Idaho, they love it there. Their houses sold fast and one was bought by a family coming back to Ca. from Oklahoma. The houses are not getting cheaper and they sell quick. Our rentals here are also in high demand. So it is true that many people are leaving but a lot of people come back and many Californians can't see themselves living anywhere else. I also hear of many families moving to more affordable areas in So Cal like Riverside. I am interested in buying a rental in another state at a fraction of the cost... feel free to share where your favorite cash flow rentals are located.
@Nick Ro
Exactly my own experience. I live in an expensive zip code in Silicon Valley and even in the last few months I have seen people move in to the area from different parts of the world including Europe and Asia. That has not stopped and home prices have risen unabated. I have not seen anyone leave. I have rental properties in Silicon Valley and SF and all of them got renewed for the next 12 months.
For every person who leaves there are just as many who move in and likely 4x that number of folks who wish they could afford to move in.
I know of several families who moved to Texas over the past few years only to move back because of weather or career concerns. Good friend took up a very senior C level executive role in Texas, did not work out for him. Had zero offers in TX, had 4 offers in the Bay Area and he took one of them and move back.
Clearly those paid media “exodus” articles are not painting the full picture. I sure do hope though that the homeless problems get addressed. Those are ravaging through some pretty good and once very safe urban areas in the state.
I'm a CA native and my impression is that people have been "leaving CA in droves" for as long as I can remember. Oregonians have hated us at least since the 90s. It's a huge state. It's been expensive since my parents moved here in the 70's and will always be expensive because it's gorgeous and the weather is awesome. Yes, a lot of people are leaving right now but trust me - we still have A LOT of people left.
I'm a Bay Area native and my impression is that people have been "leaving CA in droves" for as long as I can remember. Oregonians have hated us at least since the 90s. It's a huge state. It's been expensive since my parents moved here in the 70's and will always be expensive because it's gorgeous and the weather is awesome. Yes, a lot of people are leaving right now but trust me - we still have A LOT of people left.
For Bay Area: Rents are tanking in some neighborhoods, stable in others but as far as I now the housing market hasn't taken a hit. There are a lot of millenials who are ready to snatch up a house if anything becomes affordable.
I see many references to tech jobs but what I will add is that there are over 2million of us working in the Movie and TV industry. Unless you edit, there are not many remote positions in our industry so you can’t very well take it with you to TX. Trust me, we looked into it. Hollywood shut down for a few months for the first time ever this year. We felt that. But it is open now and it is one of the main attractions of CA. Yes there are other states that film, but none as big and steady and Hollywood. People will always flock here for it. There’s no business like show business!
Not necessarily. The reason Los Angeles originally became the hub of the TV and film industry in the first place is because of the natural lighting (sunshine most of the year) which was a necessity at the time and because of the nearby environments which allowed all kinds of scenery to be filmed within a few hours of the city.
need a beach scene? Drive an hour to Malibu.
need a snow scene? Drive two hours to Big Bear.
a desert scene? out to the Sonora you go!
etc.
However, cameras, lighting rigs and editing have evolved so that the California sunshine isn't nearly as needed as it used to be, and as you well know, tax credits in other cities can make it much more lucrative to film elsewhere.
As local and state costs and taxes continue to rise in LA (which they will) larger and larger segments of the industry will continue to leave LA. That doesn't mean they'll all head to Texas, but this is big country and a bigger world and California is not nearly as important to many of its most prominent industries as Californians seem to think.
I went to UCLA and loved it and lived in La Jolla for years afterwards, so I get the appeal. But California is simply no longer the Golden State, and a lot of folks are gonna be in for a rude awakening as companies decide to set up shop elsewhere.
Just food for thought. Cheers
@Danny Grey
Hey Danny. I hear what you’re saying, but the tax incentives have always been there to film elsewhere. I lived and worked in Atlanta for 3yrs before moving to CA. Other cities film too. The real difference is -the infrastructure isn’t there to sustain the amount of filming, the sheer volume of productions- anywhere else...yet. It doesn’t have much to do with pretty locations as much as studios, unions, man power etc. Unless Viacom, Disney, or Netflix move out I don’t see it making a difference.
@Danny Grey
Hey Danny. I hear what you’re saying, but the tax incentives have always been there to film elsewhere. I lived and worked in Atlanta for 3yrs before moving to CA. Other cities film too. The real difference is -the infrastructure isn’t there to sustain the amount of filming, the sheer volume of productions- anywhere else...yet. It doesn’t have much to do with pretty locations as much as studios, unions, man power etc. Unless Viacom, Disney, or Netflix move out I don’t see it making a difference.
"Yet" being the key word there. Los Angeles simply doesn't have a lock on the industry forever. Time will tell how much longer it lasts. Cheers
My townhouse in San Jose had an upcoming vacancy. It took 4 days to find a new tenant. At a slightly higher rent than the last one. So
Very good discussion here.
I don't know the exact overall numbers of who is moving from/to California. What I will say is that at this point I probably have someone every other week from California tell me they want to relocate to Nashville or are at least thinking about it. Always for the same reasons, high taxes, high cost of living etc.
The new development homes I have sold in the past-about half of them were sold to Californians moving to Nashville.
I'm also noticing a large number of businesses that are moving out as well.
Again, I don't know the large data numbers just what I hear and see myself. Of course I have a bias as no one is going to reach out to me that is moving TO Cal so I have no idea what that looks like.
You can find out by calling Uhaul: ask them how much it costs to rent a truck to go from Nashville or Austin to LA. Then ask them how much the reverse trip costs. In March 2020 just before the s hut down it was factor 2 to leave CA! According to Bruce Norris. He has transferred all his real estate to Florida. 2 days ago I noticed on Facebook my realtor from San Diego is now in Florida!
No need for an opinion when you can get facts - Census Migration Mapper
Only problem is that I wish they would do it on state-level so we could settle this debate once and for all; regardless, worth looking by county to see the patterns.
While I'm not sure on the data we've actually seen an influx of people moving into San Diego from other areas. A lot of the public figures that are leaving California live and built their business in and around Los Angeles. Having previously lived in LA everything they mention is true. What we do have in common with LA is the outrageous taxes. LA is one of the most expensive most populated city in the country. I think there will be continued movement especially out of NYC and LA as more people are able to work remotely.
Clearly no exodus is happening in CA. People are moving out and people are moving in. Home prices have been rising unabated and local
tech companies are printing money and hiring people. They are hiring people outside the area for lower level roles but for senior and the well paying roles all of them are looking to have people local and the companies are willing to pay topmost dollar for that talent.
My head was spinning when I heard some comp figures recently. Talent which was available for mid-six figures total comp, is now asking / getting 30 - 50% more due to high demand. Crazy!
For those investors waiting OOS for CA to crash and then get in to invest, it may be a very long time for that to ever happen.
For those who want to benefit from CA migration into their area. That will continue to truckers but at risk is your local younger population who will move to CA at the drop of a hat.