In its January/February issue, Avenue magazine highlighted the movement of hedge fund managers from New York City and other parts of the Northeast, to Palm Beach.  (Avenue is described as a society magazine for the discerning, stylish and savvy reader.). If you can work from home and cannot enjoy New York City’s theater, museums, restaurants or high-end shopping, why stay when you can move to a state with no income tax?  Young, financially successful New Yorkers are lowering the average age of Palm Beach residents.  This is all additive to the migration of the Trump family and their acolytes to locations along the south Florida West Coast.  It has been reported that Ivanka and Jared Kushner bought a $30 million parcel on tony Indian Creek island, which has some of the highest priced real estate in the country. 

Jon Gray, President and COO of Blackstone mentioned that his company is opening a second hub in Miami at last week’s Bloomberg conference “The Year Ahead”.  SoftBank too, has announced plans to expand in Miami and others commented on the efforts of Miami city governance to attract technology firms to the city.  SoftBank intends to invest $100 million in tech startups in Miami. Needless to say, the migration to this area has been favorable for real estate valuations — although these are not likely to show up until the next assessment cycle.

Fingers crossed that hurricane season won’t upend these trends. We note that Miami was early in producing a Climate Action Plan.  (The city’s most recent activities and many more resources can be found here.) The Miami Climate Alliance is also leaning in on issues around clean energy, affordable housing, public transit, disaster preparedness, immigration and climate gentrification.  Whether there will be a conflict among the environmental action folks and the new residents remains to be seen.  Perhaps there will be a meeting of the minds on the need to deal with climate change. 

The annual United Van Lines survey, released at the beginning of January, offers some insight into today’s inter-state movers.  They looked at places that had more than 250 moves or more (with their company) and sorted the inbound % of total and outbound % of total.  The top inbound states (based on % of total) in 2020 were South Carolina, Oregon, South Dakota and Arizona.  Top outbound states included New York, Illinois, Connecticut and California. 

“Throughout the pandemic in 2020, major metropolitan areas and hotspots, such as New York City, Newark and Chicago, experienced greater outbound migration, while lower-density cities like Wilmington, North Carolina and Boise, Idaho saw high levels of inbound moves.” (United Van Lines National 2020 Movers Study.) 

While inter-state migration has picked up, intra-metro area moves have also accelerated.  Some young nesters that assumed they would eventually leave their small, expensive inner-city apartments have pulled forward their homebuying timelines and moved to less dense, suburban and exurban locations. 

  • Annual migration in the US hovered around 20% of the population in the 1950’s and 1960’s but steadily fell to around 9.8% in 2019, according to William Frey, noted demographer and Senior Fellow at the Brookings Institution.  He spoke to Michel Martin on All Things Considered at the end of 2019. 
  • Diving into the intra-metro migration data, Bankrate.com analyzed USPS change-of-address data and found that many leaving inner city locations stayed in the general metropolitan area.  For example, “East Hampton, New York was the top mail forwarding location for people leaving Manhattan; Katy, Texas was the most popular with those leaving Houston; and Mesquite, Texas was the primary destination for those leaving Dallas.” 

The new migration’s impact differs from trends during the lead-up to the Great Financial Crisis (GFC).  Then, those of modest income moved further and further into the outer rings cities to be able to afford homes.  Adjustable-rate mortgages with initial “teaser” rates made entry easier.  This, coupled with low gas prices made long commutes affordable (“drive until you qualify locations”).   Today’s migrants are affluent and moving to tonier communities around major cities.  Ultra-low fixed rate mortgage rates help too. 

For those inquisitive readers wishing to go further, we wrote about migration trends in the aftermath of the GFC on thepublicpurse.com in 2010 here, and posted a longer white-paper here on this topic. 

Is the new migration strong enough to be characterized “white flight” leading to a renewed urban crisis?  Hard to say without concrete data.  However, there have been ample studies that the pandemic has intensified inequality. United Van Lines queried movers in their survey about their reasons for a move.  Not surprisingly, states with no income tax came up at the top of several lists.  Wyoming was in first place for “health or personal reasons” as well as first for “lifestyle change”.  Wyoming also placed fifth for “top states where people want to retire” but did not make the top 10 for moves base on “cost of living”, “closer to family” or “new job”.  Florida came up second for retirement, fifth for lifestyle change but not in the top ten for other categories.  New Hampshire came up third for health/personal reasons, sixth for closer to family, third for cost of living and fifth for lifestyle change.  (We note that New Hampshire does tax interest and dividends.)

Anecdotally, we heard from several sources that some moved because they were frightened by the summer’s violence during Black Lives Matter protests and rising crime rates in several cities.  The Van Lines survey shows the highest outbound moves from Nassau-Suffolk, NY; Bergen-Passaic, NJ; Trenton, NJ; New York, NY; Newark, NJ and Chicago, IL.  The USPS analysis does show that New Jersey had the largest net gain of address changes.  We suspect these are likely New Yorkers moving in and others moving from Newark, Trenton and Bergen-Passaic to neighboring New Jersey locations.  Texas, New York and Washington, DC had the highest net losses.  Again, these two data sets are apples and oranges and need further review.  Nevertheless, places with the highest out-migration bear watching for signs of declining tax revenues over the next two years in all the major categories: property tax, income tax and sales tax. 

Is Compensation the Next Wayfair?

Speaking of New Hampshire, the state recently sued Massachusetts for continuing to tax remote workers who formerly commuted into the state. Fourteen other states have filed amicus briefs siding with New Hampshire. The case was filed directly with the US Supreme Court given the court’s jurisdiction over cases involving one state against another. More information with useful links here. The case could have major implications for our federal system.

Interestingly, a number of Silicon Valley companies sought to reduce the compensation for remote workers, in locations where the cost of living is much lower than their home communities in California. See Wall Street Journal article here.

Trend-watchers are busy trying to figure out what changes during the pandemic will be enduring and which will revert to pre-pandemic levels (at some point).  For those that bought new homes, we assume they will stay put.  For those that already own multiple homes, there will be choices about which becomes the primary residence post-pandemic.  These trends are serving to lower housing prices in the out-migration cities – which makes renting and buying more affordable.  With interest rates that are likely to keep mortgage costs “lower for longer” younger workers may ultimately be enticed to move back to the cities once weather improves and vaccinations are more widespread – late summer, early fall.