People can’t afford to move out West, and top analysts are explaining why
“The places that are most expensive are seeing the biggest drops,” explained a Bank of America senior economist.
For the first time in a century, the share of Americans living in the West is declining, mostly in Pacific Coast cities like Los Angeles, Portland, San Francisco, and Seattle. The primary driver? Housing costs: sky-high home prices and rents. People are flocking to more affordable places like the Sunbelt, bolstering a trend of people migrating southward.
In a research note, Bank of America analysts wrote: “Post-pandemic, the share of the U.S. population in the South has been climbing—continuing a decades-old phenomenon. It is really the decline in the share of the population of the West that is new.” For the first time in a century, the share of Americans living in the West had fallen.
“The West was increasing as a share throughout most, or virtually all, of the last 100 years,” said David Tinsley, a senior economist at the Bank of America institute, who contributed to the report. “It was slowing a bit going into the pandemic, that increase—but the West is the outlying story of the pandemic in that its population started to shrink as a share of the U.S. population, which it really hadn’t ever done before, at least, for 100 years.”
The population declines were concentrated in Los Angeles, San Francisco, Seattle, Portland, and San Diego, so three California cities. It hasn’t changed much. More recently, in early August, another note from Bank of America found San Francisco, Los Angeles, Seattle and Portland all saw significant year over year declines. It’s why Tinsely calls this “mainly a Pacific story. So when we talk about the West in the census region terms, it’s really the Pacific West,” he said. So what’s behind the exodus? Mostly housing woes. Home prices and rents are excessive in western cities. People can’t afford it, so they look to the Sunbelt.
The appeal of the South was already becoming a thing before the pandemic, but with remote work possible and a desire for more space, the trend took off. Not to mention, there were suddenly career prospects outside of Silicon Valley for people in technology. People moved to places such as Tampa, Jacksonville, San Antonio, and Austin in droves. And they’re still mostly seeing significant inflows, even if it has slowed or pulled back slightly.
“It’s an affordability thing,” Eric Finnigan, vice president of demographics for John Burns Research and Consulting, said. “People spending more time in their homes means they need more home, and they can’t afford it.”
So you’ll see homes in the millions in Los Angeles, and still they’re considerably smaller than let’s say Austin. It’s hard to even buy a starter home in California coastal cities without family money. Since the spring of 2022, there’s only been one western metropolitan area that’s ranked among the 20 hottest markets by Realtor.com’s standards. “Western markets were once a mainstay on the hottest markets list,” said Hannah Jones, Realtor.com’s senior economic research analyst. Before that, from August 2017 to March 2021, there were as many as 16 western metros that appeared on the hottest markets list, she explained.
“The popularity of West-region markets has waned over the last couple of years as buyers flocked to more affordable locales,” Jones said.
Tinsley agreed. A substantial part of the migration patterns we’re seeing has to do with housing costs, and costs more generally, he said.
“First and foremost is housing affordability,” noted Tinsley. “We’ve looked at the relative mortgage payment you have to pay across cities in the U.S., and correlated that with population change. And this is true for rent as well—the places that are most expensive are seeing the biggest drops.”
In San Francisco, the average home value is more than a million dollars; in San Antonio, it’s about $262,000; and in Jacksonville it’s around $302,000, per Zillow. The difference is more than 200%.
For rents, the median in San Francisco is 55% higher than the national median, and in San Antonio it’s 20% lower than the national median, Zillow data shows. So it isn’t simply buyers fleeing, but renters, too. Last year, on average, more than 40% of those leaving the West and moving to the South had incomes above $125,000, and roughly 10% had incomes above $250,000, according to Bank of America. It was disproportionately single people fleeing western cities, too. There aren’t enough homes in the West, but in the South, the region is constantly building homes to meet demand, and the Sunbelt is cooling off. Austin and San Antonio have actually seen their home values fall in the last year.
An important thing to remember, is that while California does have its own insurance troubles, Texas and Florida, because of weather and natural disasters, are seemingly far worse off. So there are more costs associated with living in the two Sunbelt states that aren’t exactly home prices or mortgage rates. But while there is anecdotal evidence and discussion, there isn’t necessarily anything to confirm that the insurance costs are outweighing other cost benefits. It could change as time goes on, Finnigan said, but at this moment, down payments are the real challenge for anyone wanting to buy. Similarly, Tinsely said, “if you sell your house in San Francisco and move to Texas, you can buy a mansion.”
But is this forever? Has the West totally lost its charm and welcoming vibe? No one knows yet. There are so many factors at play. Tinsley mentioned the artificial intelligence boom could be bringing people back to Silicon Valley; we know it’s helped offices. But the West might never be cheap because of supply and a struggle to build.
“The jury is a bit out on that one, I’d say,” Tinsley noted.
