Now I get it. The flood of people leaving California are not leaving due to bad policies, lack of jobs caused by a junk science advocate or high crime rates. Nope, these folks are social distancing from California, to save their health—both physical and economic.
“A stunning 30% of sellers of California homes left the state per a survey conducted by the California Association of Realtors (CAR). If you look at this chart, this is an ongoing trend that merely was accelerated by the pandemic. You have places like Los Angeles with $1 million crap shacks for Taco Tuesday Baby Boomers and then a short distance away, you have working-class areas of essential workers living like sardines (so is it any wonder the virus is exploding in LA even though we have some of the toughest lockdown restrictions?). All of this is predictable since telling people to stay in place yet not replacing their income is not going to help. People are going to opt to feed their families even if it means risking their health.”
Newsom is forcing people for their emotional, physical and economic health to leave the State. Watch as major corporations lead the flow of workers out of the State.
Dr. Housing Bubble, 1/2/21
As we embark on a New Year, we can now look back on 2020 and conduct an analysis on what is happening on the ground here in California. Overall real estate prices nationwide did amazingly well amid the pandemic. Even though sales volume was low, record low interest rates, mortgage forbearance, and people being stuck in place, real estate overall did great. Although in places like California, we saw a record number of young people living at home with parents from an already high number. Yet we saw some high profile moves out of California including Tesla, Oracle, and Joe Rogan and they all started singing a similar song: high taxes, NIMBYism mentality, and ultimately a place that is getting too expensive for most working-class residents. And while home prices went up, if you look below the headlines there is a major shift happening.
Where are California Sellers Going?
A record number of people selling California homes left California:
A stunning 30% of sellers of California homes left the state per a survey conducted by the California Association of Realtors (CAR). If you look at this chart, this is an ongoing trend that merely was accelerated by the pandemic. You have places like Los Angeles with $1 million crap shacks for Taco Tuesday Baby Boomers and then a short distance away, you have working-class areas of essential workers living like sardines (so is it any wonder the virus is exploding in LA even though we have some of the toughest lockdown restrictions?). All of this is predictable since telling people to stay in place yet not replacing their income is not going to help. People are going to opt to feed their families even if it means risking their health.
It is too early to get a full scope of what states people are going to for 2020 but Texas is a big winner here so far:
This chart is worth exploring for 2019. You had 653,500 California residents leave the state in 2019. 480,200 moved in from other US states. Net domestic migration was -173,300. You then had 74,000 in-migration from foreigners but that number is going to plummet for 2020 because of Covid-19.
Look where people are going. Texas is the big winner because they have no state income tax and actually have growing metro areas in Dallas, Austin, and San Antonio to name a few with affordable housing. When it comes to weather, Californians for the most part like the sun (other top states are Arizona and Nevada). I imagine if we broke the data down further, we would find SoCal folks going to Texas, Arizona, and Nevada and NorCal people going to places like Washington and Oregon for the most part.
Overall this trend is likely to continue into 2021 as people realize that if you want space and want to raise your family in a home without paying inflated prices for cramped quarters, then looking at another state may be an option. Millennials are becoming bolder in their moves since they now have a taste of the experience of working from home and older boomers realize that the office theatrics are not necessary in the 5-day 8-5 work week. Look at the companies that won this year (Amazon, Microsoft, Tesla, etc.).
But maybe international buyers can save California?
International Buyers
It is unlikely that international buyers will save the market in the long-term:
You already see that home buying by international buyers was going down even before the pandemic hit. It hit a near record low recently and you need to keep in mind that in California, most of the international home buying came from China. Given the recent politics and our current outbreak here in LA, some of the shine of California has certainly been washed away.
These trends while accelerated by the pandemic, were already baked in given that in California nearly half of renters’ income goes to rent. And given California is a renting state, most people basically work to pay the rent or the mortgage on a crap shack. So the choice is clear for many working-class residents of California and given most were stuck at home for most of the year, they realize weather doesn’t matter much if you are stuck in your home office needing to work – might as well get a nicer and bigger place for the family.
