California Emigration Surge?

48 Replies

California is great for people selling homes here.  Prices have doubled or so in 5 years and a bigger part of it is CA migration.  2 problems though:

1. When you go to buy your paying higher prices now. 

2. The long run and I have already seen they are changing the policies of state.  So I guess if there is any Montana people on this tread watch out because we will eventually be coming there as it is more and more difficult to conduct business prices become more and more unaffordable for working folks.  

Yes, that's all I've been hearing lately here in San Diego, that the Silicon Valley techies are paying all cash for homes here. So much for any hopes of a Covid softening in prices.  I recently represented a buyer in Lake Arrowhead, CA which is typically a balanced market - it's absolutely going crazy up there like never before with folks moving out of LA to escape to a quiet mountain town.  The telecommuting factor is playing a major part to enable. Many are being motivated to move due to the deteriorating quality of life in the big cities.  Lake Arrowhead is close enough to OC and LA if you still need to go into the office once in a while. 

"the much-hyped "California exodus" isn't a thing."


Well, except for a couple of things:

1) San Jose has shrunk for the first time in 50 years +.  This is the heart of SIlicon Valley a large revenue generator for state coffers.

2) LA Times - "California population growth slowest since 1900 as residents leave, immigration decelerates".

3) Biggest problem - The majority of people leaving have jobs, skills and money, leaving behind those that don't.  That means the state gets to keep residents that are more expensive (ie they pay less taxes and take more services).

4) Losing Toyota and Tesla isn't going to help and a lot of SIlicon Valley manu jobs are going to China/Korea.

California has seen a slow down in recent years in population growth. 2019 was the first year where emigration exceeded immigration since 2010. Births exceeded deaths by enough that there was still net population gain, but 2019 was the lowest annual growth percentage since 1900. 

The question is will this trend continue and is it significant enough to make a difference? As others pointed out, the population of CA is so large that even a small increase is a large number of people. We are talking a slow down in growth, not a decrease in population. Those are two very different things. 

In my opinion some states are much worse off than CA. I won't name names, because I don't need people coming at me to defend their state, haha. At the end of the day, CA has amazing weather, ocean, mountains and a thriving technology and entertainment industry. Those are serious advantages that will not disappear overnight. 

Complaints of the influx from CA has been going on for 30+ years. Growing up in Spokane in the 80's and 90's, we were complaining about the influx from CA then.  There were bumper stickers saying welcome, now go back home etc.  Most of the people moving in were nice and simply seeking a better life (however personally defined)  The few that were bringing their ideologies and forcing them on others are the real source of angst for the "locals".

All that to say this flood of people to neighboring states is nothing new.

Despite CA being incredibly liberal and ridiculous in so many ways, it will always be crowded and expensive due to so many natural geographical offerings.


I thought  question here is if people leave California what will the impact be on the places they go, not are people leaving California. Regardless of how many people move to California, if those leaving go to the same locations, of course the demand will increase prices. 

Frequently, people are mentioning telecommuting as a factor.  One thing you have to keep in mind is telecommuting is happening alot now but once travel is on again many companies will want to see employees "live" at least some of the time and companies don't like to pay large travel costs. For many jobs, telecommuting  employees and employers will want to be close to transportation hubs and those locations will do the best.  Yes, there will be more spread to smaller towns in California if the employees work for California companies. That will expand the traffic issues in California from some more outlying areas now.   Expect to see location based salaries,  some companies have them now so you may not see people move at all for that reason.  There is a promotion gap if you are remote. If they see you,  you are more likely to get promoted. Some people won't want to give up on those opportunities so they will stay location based even if that means California.  I just don't think telecommuting will be as big a driver as people think.  

@Maxwell Ventura

SD is my favorite city and I’d love to live there. This is coming from a Bay Area resident who has lived in some fascinating cities all over the world.

I am not surprised to see the growth in prices and migration in to the city of San Diego.

I am surprised it has not happened faster. Glad it’s catching on.

@Aleejandro Dela Vega - I don't know anything about commercial there so I won't comment. There are a lot of little strip malls.

There are opportunities in SFR flips and rentals, but you have to be careful where you're buying. In many places, (especially now) the value is too inflated and the rents are fairly low. It's a workforce town and one of the most affordable areas in SBC. But there's also a lot of gang activity so cheaper properties will be in those areas. Check Orcutt area too.

I grew up in SoCal, so I have a few things to say.

The main reason for the exodus is the cost of living. And the main item for high cost of living is expensive real estate.

Analysis:  For the last 30 years, California has been unable (or unwilling) to add new housing stock to keep up with demand,  to keep up with the growth in population.  This artificial scarcity shot the prices up very high, which places a huge burden on middle class earners.  

The house I grew up in, cost around $380K in today's dollars.  But today it's worth perhaps $1.5 million.  The median price of a house in Los Angeles today is $859K.  That's more than double the price of an average home in Dallas.

Further, there is a homeless surge in California due to the shortage in housing.  In most markets, affordable housing is older housing stock.  In California, it gets rehabbed and repositioned into middle class housing because of the shortage.

California was rated as the most difficult place to develop real estate in the country.  Zoning laws prohibit larger buildings to go up - which is needed for mature larger cities.  

There are many other annoying things going on in California.  But it is offset by an attractive climate, surroundings and strong job market.  So it is the cost of living that is driving people away.

The Bay Area is even worse by the way.  The median home there is almost one million.

@Jesse Stein I agree that there are some people moving out. It has to do with affordability, getting away from the fires, and to take advantage of their equity. There is also a migration to smaller towns outside of San Francisco.

I help people relocate to Washington state. Most of my relocations are from California. It’s not just tech, but retirees.

@Brian Ploszay  Interesting points.   "...to keep up with the growth in population. This artificial scarcity..." What do you mean by artificial scarcity?  You believe there was not the housing scarcity that supposedly has existed?

 I grew up in the Bay Area so saw the whole mess as it unfolded. Much of the Bay Area was once just a nice place with nice weather where the average person could live comfortably enough. Now, as you know, one needs to make very good money to make even a comfortable middle class living...whatever that means anymore. And I am aware that, as you mention, there is a strong job market in CA, but that job market (I'm thinking primarily of tech) is not accessed by or accessible to everyone so it has created alot of haves and have-nots. There has always been money in the Bay Area but it has clearly changed and personally I don't like the wealthy vibe that the Bay Area now has; aside from the unaffordability much of the character has gone away. That said, I do wish I had the foresight to buy when I was very young in CA. Might be able to be done working now.

@Holly Horn

Must be interesting to work with people relocating and hear their reasons for doing so. As I wrote before, even though nobody, myself included, likes an influx of people from out of the area moving into their town (increased market values, more traffic) I can't blame people from places like California for moving somewhere more affordable; I'd do it myself. I wish I was drawn to, say, rural Missouri as real estate is so ridiculously cheap there....but I'm not.

Having grown up in the Bay Area I've seen, as you mentioned, people moving to smaller towns outside the Bay Area for purposes of affordability. But really it often doesn't solve all their problems as they then often commute back to where they moved from for work. So now they're spending more time in that atrocious traffic (main reason I left) and paying more for gas, etc. I don't know how familiar you are with the Bay Area, but all towns connected to it are very expensive.

@Rob W Saunderson The influx of people causing prices to rise means that your strategy and pricing expectations will need to be adjusted.  This is really hard to do as we naturally anchor our pricing expectations based on what we have paid in the past.  There are always deals in every market, but they require that you are able to either move quickly or see an opportunity that is overlooked by others. 

The other option is to look at moving just outside of the current hot area and focus on those "in the path of progress". As such, it's really important to focus on understanding which areas are in highest demand and why. This way you can focus on those areas that have the highest likelihood of above average appreciation (not guaranteed though) and factor that into your purchasing decisions. I think your investment should generate at least your minimal acceptable level of cash flow and then ideally be in an area that you expect will have greater than average appreciation.

Hope this was helpful.

John


People have been saying this for 25 years....yet amazingly California's population keeps increasing. 

@Robert Sutton I have heard there are alot of people from California moving to Texas, largely the Austin area(?) By "entitled minded", what do you mean? I know there are state to state variations on landlord-tenant policy.

@Emy Bernardo , are you active in San Diego? I occasionally get clients who are selling in Austin to move to SD. The agent I've been recommending has been dropping the ball recently, so I'm looking for a new contact there. Would you be willing to have a chat in the next few days to discuss?