The US Census Bureau just released 2022 Migration data for every County & Metro area in America. And the results are very interesting. Some Housing Markets experienced record gains in people moving in. While others posted huge losses. This post will explore the Top 10 Cities that people moved to and also provide broader analysis on what these migration trends mean for the US Housing Market.
If you're a homebuyer or real estate investor, it's imperative you understand this data. I recommend you watch the video below first. And then read the article for more in-depth analysis.
1) the South absolutely dominated in Migration in 2022. Again.
I have to start by eating some crow on this one. I thought the heavy migration push to the South would have peaked in 2021 after the first year of the pandemic. But I was wrong. The people kept flooding into states like Texas, Florida, and Tennessee in 2022.
The South added 1.3 Million net people from migration flows in 2022. A figure which crushed the previous record of 907k set in 2005 during the last Housing Bubble. The South's gains came at the expense of every other region in America.
The West, which includes states like Utah, Arizona, Washington, and California, was net 0 in terms of migration. Which is pretty bad considering since the West was heavily positive in migration historically.
Meanwhile, the Midwest lost about -28k people in 2022. Which was a moderate improvement over the losses in previous years, but looks about normal compared to trends over the last two decades.
The big loser was the Northeast. Which lost -246k people in 2022. Now, the Northeast always loses people. But this was a particularly bad year that registers as the worst on record in terms of migration losses from the US Census Bureau.
Specific states drove these migration losses in 2022. In particular: New York (-222k) dragged down the Northeast. Illinois (-110k) dragged down the Midwest. And California (-218k) dragged down the West. Most other states in these regions were close to net 0, or slightly positive.
2) Does Migration matter for the Housing Market?
Before getting further into the 2022 migration data, and going over the biggest winner/loser cities, I want to tackle a question that was on mind recently...
"Does Migration even matter for a city's Housing Market?"
This might seem like a dumb question at first. The initial reaction is, "Of course Migration matters. The more people moving into a city, the better for the local Housing Market." But diving into the data, both in the short and long-term, presents a murkier picture.
The scatter plot below 2022 Migration % in every large county (50k+ population) across America to how much inventory has increased over the last year. What you notice is something startling.
The more migration a county received in 2022, the more its available housing inventory grew in the subsequent year. Which is counterintuitive. Because the theory goes that the more people moving in, the more homebuyers there should be, and the more inventory should go down. But that's not happening.
In fact, the exact opposite is happening. The counties losing the most people have the lowest inventory. As this post goes on I'll explain why this is the case. And what it means for you as a homebuyer.
But first we need to talk about another complicating factor. And that's the long-term relationship between Migration and Home Prices. Theoretically, the highest migration markets should have the highest home price growth. But once again, the theory does not stand the test of reality.
The Counties with the highest migration over the last 23 years, from 2000 to 2022, do not show substantially higher home price growth than the counties with migration losses (indicated by a meager r2 of 0.06 - indicating virtually no relationship between the variables).
To illustrate this point, consider a comparison. Philadelphia v Nashville.
Philadelphia County, PA and Williams County, TN both have nearly identical appreciation rates over the last 23 years at +270%. But Philadelphia earned that appreciation while losing an astounding 183k people to migration. Meanwhile, Williamson County gained 106k people.
And they ended up in the same place in terms of returning appreciation and growth to homeowners. How is that possible?
3) If you want to focus on Migration, you also need to focus on Home Building.
The bear trap that most real estate investors run into when frothing over high migration markets is that they're only considering the demand side of the equation. But the supply side is just as important. Specifically, the amount of Home Building that is occurring.
And the general rule of thumb is this: builders usually adapt to the levels of migration in a county or metro. And the result is that structural housing inventory does not change by much in the long-run, even when there's lots of people moving in.
To understand this point, consider Austin, TX. The graph below looks past 30 years of Migration v Building Permits in the Austin metro. And what's abundantly clear are two things:
1) Austin has always been a high migration market.
2) Builders build to match the levels of migration.
In fact, the "migration surplus" over building permits in Austin has been remarkably consistent over the last 30 years at about +12,000 per year (which is actually not much of a surplus when you consider it's typically 2 migrants who occupy 1 housing unit).
So yes - Austin was once again a top migration market in 2022 (#7 in terms of total migration), adding a net 47,000 people. But builders also permitted an insane 43,000 units. Which was too much. This excess building is a big reason why Austin home prices are down 15% in the last 10 months and inventory is up 300% YoY, despite the metro still having "high migration".
4) Beware of the Migration "Cliff".
An additional problem for high migration metros comes when a high level of home building gets combined with a "cliff", or sudden drop off in migration.
What happens in this situation is that builders ramp permitting up based on an exaggerated migration level for several years. And then once a recession and higher interest rates take hold, the migration figures plummet. Just as builders are still working on a huge pipeline of construction.
This is what happened to Phoenix, AZ in the last bubble in the mid-2000s. You can see the Phoenix metro added over 120k people in 2005 and 2006, record levels still to this day. Many realtors and investors in Phoenix circa 2006 thought the migration train would keep running until...WHAM!
Migration plummeted from 120k down to 20k, an absurd 83% reduction in people moving in. Robbing the market of housing demand. And causing the 2007-12 crash in Phoenix to be even worse.
And I think Phoenix could be in the midst of another migration cliff today. With migration levels already dropping from a peak of 89k in 2020 down to 64k in 2022. I suspect these migration figures in Phoenix will keep falling as the recession worsens and as home prices in California get cheaper.
Another market that could be hitting a cliff right now is Boise, ID. Migration in Boise peaked at an absurd +26k in 2021 and then got cut in half in 2022.
+12k people is still positive migration, but is the lowest mark Boise has recorded since 2016. And I suspect that total will continue declining as the drip feed of California tech transplants gets obliterated by the recession.
One market that is not yet at the cliff, but could be soon, is Dallas, TX. Dallas was actually the #1 migration market in America in 2022 adding nearly 130k people. That was an all-time record in the DFW metro.
And that increase in migration helps explains why prices in Dallas went up so much in 2021 and 2022. But as you can see on the graph above - Dallas is no stranger to migration cliffs. Big run ups in migration in 2001 and 2006 were followed by very sharp drops. Suggesting that homeowners and realtors in Dallas should be prepared for structurally lower homebuyer demand going forward.
5) To be clear: migration is GOOD. But excessive migration can destabilize a Housing Market.
All things the same: higher levels of migration are good for a local housing market (given the slight positive relationship with home price growth long-term).
However, in my view, excessive levels of migration are not so good (think Dallas in 2022, Boise in 2021, or Phoenix in 2006). Because these excessive migration levels tend to be destabilize the local housing market by driving up prices so much that local residents get priced out. And then start moving out.
These long-term residents start moving out just as builders reach peak construction. Just as the economy goes into recession. Which is a nasty combination that can drive down prices and push up inventory.
I think we're already starting to see this situation play out in Dallas. Inventory on the market in the DFW metro is up an insane 200% YoY. And is back to "normal" levels historically.
But there's still a massive pipeline of construction coming in DFW. And the local unemployment rate is still a very low 3.8%. What happens to home prices in Dallas as those under construction units get delivered in 2023-24 and the unemployment rate inevitably rises as the recession worsens?
If I were an investor, I wouldn't want to be involved in these cities where migration boomed. You're walking into a situation that could get ugly very fast. Particularly in a state like Florida where a variety of metros set all-time records in migration in 2022.
Instead - I would target moderately strong migration markets. That have shown a consistent trend of adding people. And where home prices are still at affordable levels for locals. These type of markets can give you the "best of both worlds".
6) How to find Moderate Migration Cities with Affordable Prices
Luckily, you can use Reventure App to do that. Specifically, the filtering functions on Reventure App.
I applied 3 filters to get the following list of metros that are Moderate Migration Markets with good Affordability:
- Population over 150k (to make sure there are actual people that live there)
- House Payment as % of Income below 30% (to make sure locals can still afford the houses)
- Migration % between 0-2% in 2022 (to make sure the metro had positive migration in 2022, but not crazy destabilizing migration)
Hitting "Table View" allows you to see the metros in list form.
You'll note that, with the exception of Huntsville, most of these markets have reasonable (not crazy) inventory growth rates and a low shares of price cuts. Probably because people are still moving to these areas and locals can still afford the mortgage paments.
Let me know in the comments below if you have tried out the filtering tools on Reventure App. They're very powerful.
7) How about that list of the Top 10 Migration Markets in 2022?
If you've read this far I assume you still want to see the list of the Top 10 Migration Metros in 2022. Well, here they are:
Texas knocked it out of the park, with 4 metros (Dallas, Houston, Austin, and San San Antonio) making the Top 10 list.
Florida also registered 3 with Tampa, Orlando, and North Port/Sarasota.
And then Arizona, Georgia, and North Carolina each had one.
What's interesting is the varying level of performance in these housing markets over the last year. Austin/Phoenix are crashing. Dallas has seen inventory triple and prices go down by about 5%. But places like Atlanta, Orlando, and Charlotte have held on very strong.
Once again indicating that migration figures on their own do not paint a full picture of housing market health.
8) One Final Warning about the Migration Data...
Oh yeah - one final thing to note about the migration data is that the Census collects in on a fiscal year. So "2022 Migration" figures actually track the 12 months from July 2021 to June 2022.
Which means this data is 9 to 21 months "stale".
Migration figures covering the period from July 2022 to June 2023 won't be released until March 2024.
I suspect many of the migration trends we saw during the pandemic are starting to reverse course. Especially as people get called back into the office and get laid off. A recession will likely mean a greater desire for people to live near job centers. Which could mean that states like New York and California start to see an improvement in migration trends in coming years (to be clear - they will still lose people. Just fewer people than before).
A recession could also change where people move within metros. I suspect outlying suburban and rural areas will struggle as there will be a greater desire (requirements?) for people to go into the office.
Let me all know what you thought about this post and the data contained inside of it. Also make sure to use Reventure App to track this data for yourself. Right now you have access to 30 years of migration history in every county and metro in America for free.