What’s Driving Migration to Certain Areas? 3 Things Investors Should Know
Americans are migrating in search of housing. Investors need to understand what’s driving these migration patterns.
The latest pandemic served as a catalyst for migration across the United States. On a local and national level, the COVID-19 pandemic caused many to reconsider their living situations. Initially, many flocked from cities to surround areas with more space. Others decided to relocate to different parts of the country.
Specifically, people favored places in the west such as Boise and Sunbelt states like Florida and Texas. There are a variety of things that contributed to this mass migration, this article identifies three. As both a local and out of state investor, these insights can help you spot areas with high upside based on factors that lead to migration.
One thing that’s spurring the hot real estate market across the U.S., regardless of the city, is the historically low interest rates. Interest rates will likely stay low at least through the end of 2022 and that will boost a continued rise in housing prices into 2022. Buyers want to lock in lower interest rates to secure lower monthly payments. Another way to lower monthly payments is by moving to places deemed more affordable. Those migrating are comparing certain areas to others.
Aside from Boston, no popular migration destinations are on Investopedia’s list of top 10 most expensive cities in the U.S. The push for more space combined with a need for affordable housing has pushed buyers and renters to smaller cities or outer metro areas. In a survey by Realtor.com, it listed Raleigh/Durham among the most affordable markets in August 2021.
It also noted that “Affordability is a common factor among these top markets. The average median list price among the top 20 was $299,000 in August—21.4 percent lower than the national median of $380,000.” Additionally, Forbes named Raleigh as the fourth most affordable place to live in the U.S., with Austin at number seven.
2. Growing job markets
Even with the work-from-anywhere mentality, hot housing markets favor areas with a robust economy and growing job market. While many workers can now do their jobs from home, many industries — from hospitality to health care to construction — still require showing up in person. These workers need housing in areas where the jobs are. Additionally, robust economies need to be in place to support those who work-from-home.
Among the top 20 cities for job seekers, there’s a clear trend. According to MoneyGeek, seven of the 10 places on PwC’s hottest list were featured. These cities are as follows: Nashville, Raleigh, Austin, Tampa, Charlotte, Dallas, and Atlanta.
Going back to affordability, these are areas with generally lower taxes and lower living costs. This likely contributes to job growth and migration patterns for those working remotely. Whether you’re buying a home for yourself or as an investment, job growth is a crucial factor for identifying areas with upside.
3. Millennials and younger generations
More than half of Americans are millennials or younger, according to the Brookings Institution.
Whether renting or buying, millennials tend to prefer turnkey homes.These are either renovated or newer properties with more modern amenities. This includes fancier appliances, electronic monitoring systems, and environmentally conscious design. As some millennials look for more space and start to have children, they’re seeking additional rooms.The push for multifunctional spaces such as an extra bedroom, office, or craft nook are considerations.
This combination of newer, nicer things plus more space are often easier to find in cities such as Phoenix and other parts of the Sunbelt. There may be opportunities in cities with older housing stock for investors to buy and renovate properties, though.
Of course the push for affordability comes as housing prices continue to rise, in part due to a lack of available inventory. A combination of supply chain issues, labor shortages, and other factors have led new construction to lag. Additionally, many houses built will not be for sale as more investors implement the built-to-rent model.
With the continued gap between supply and demand, flippers are competing over available inventory to create turnkey properties.
When searching for your next deal, it’s important to understand factors that contribute to migration. As you explore new potential markets, be sure to identify opportunities based on the factors mentioned above. If you don’t plan on expanding to new markets, you can still use this information. These patterns exist on a local level as well. Look for areas people deem as affordable with growing job opportunities that cater to millennial preferences.