Source: CBRE Impact on Resident Migration Patterns
There is clearly notable evidence that people are moving south, but the reasoning is what makes this stand out from a short-term trend to a lasting one.
Sun Belt jobs market is thriving
Unemployment skyrocketed during the pandemic across the country. However, certain job markets have maintained steady growth despite the challenging economic times. Austin, Texas, added 11,600 jobs in 2020 and regained 71% of March and April's 2020 pandemic-related job losses and only lost roughly 1% of its jobs from 2019 to 2020. It currently sits as the second- highest city for employment opportunities in 2021 behind Seattle.
But Austin isn't the only city with major employment opportunities. Cities like Jacksonville, Florida; Charlotte, North Carolina; San Jose, California; Tempe, Arizona; and several other major Sun Belt region markets are experiencing steady and significant employment growth, which is driving people and dollars to these areas. Many of the Sun Belt markets have a diverse range of economic industries, meaning there's a long-term need for jobs in a wide variety of employment categories and salary ranges.
Affordability shines in the Sun Belt
While not always the case, generally speaking, the Sun Belt region often has a lower cost of living than the northern part of the country. Northern cities, including major metro markets like New York City, Chicago, Seattle, and San Francisco, are home to some of the most expensive real estate in the country.
The median home price in Seattle is $702,000. Comparatively, the median home price in Austin, an up-and-coming tech city is $465,000, a $237,000 difference. In Charlotte, which is the second-largest financial city in the nation behind New York, the median home price is $324,000 and the median rental rate is $1,545, far cheaper than the median home price in New York City, which is $635,000, and the median rental rate is $2,507.
With the exception of one state, Texas, the top ten highest-property-tax states are all located in the north. Texas, Florida, Nevada, and Tennessee do not have state income tax, meaning residents can save not just in property taxes but also on their annual taxes. Your dollars can go a lot further in the south, and considering the country is facing a major affordable housing crisis, affordability matters.
In search for warmer weather
Job opportunities and affordability may be major factors for residents making the move south, but weather is also a huge contributing factor to the decision. Winters that are cold, dark, and long can get old quick. The Sun Belt region is known for milder winters and more sun exposure, welcoming weather for its northern neighbors.
Warmer weather is especially appealing to the older generation, including baby boomers who are entering or well into retirement. There are a number of areas, including the Villages, outside of sunny Orlando, Florida, that are directly catered to this demographic, offering a wide range of amenities for this demographic.
There's also long-term concern surrounding global warming. As certain areas of the north experience threats of rising sea levels, wildfires, and hurricanes, certain inland areas of the country offer reprieve from these threats.
As property owners seek more favorable weather, job opportunities, or more affordable housing, as well as attempt to evade environmental threats, there are a lot of reasons this trend is here to stay. Knowing how to participate in this trend is key. Clearly, owning real estate investments in these areas is one of the most obvious ways to take advantage of the shifting demographics. Short-term and long-term rentals and commercial real estate, as well as other real estate investments, can prove profitable in the right markets. However, investors can gain more diversified exposure to the Sun Belt region by investing in real estate investment trusts (REITs) that specialize in owning real estate in these markets.