As they began planning their future together, Ashley Brown and her fiance, Aaron Shuman, concluded that they could no longer remain in Los Angeles because it was getting much too expensive.
“Our rent in L.A. was $1,500 for a tiny, 650-square-foot apartment with no amenities,” said Brown, 29, a native New Yorker, actress and New York University graduate. She and Shuman, a 28-year-old musician, began looking at Austin, Detroit, Portland, Oregon, and Columbus, Ohio, before settling on Atlanta.
“There’s a great arts community here (in Atlanta), and it’s a growing city with lots of entrepreneurs,” said Brown, who is now working several jobs and plans to open a business. Also, the dollar stretches much further in their new city, giving them breathing room.
“We pay $1,200 a month for more than double the space, with two bedrooms, two bathrooms and everything brand-new,” she said.
Brown and Shuman are part of a wave of people migrating from coastal cities to “secondary” cities – drawn by a lower cost of living, lighter tax burden, job growth and a better chance to buy a home they can afford.
Nashville, Sacramento, Atlanta, Phoenix, Austin and Dallas are among the top 10 cities with the largest influx of new residents, according to new data from the Redfin real estate brokerage.
Not surprisingly, high-cost cities from which people are fleeing include San Francisco, New York, Los Angeles and Washington.
“People in the coastal markets are just fed up with double-digit price increases, and they’re moving to a commuter town or to the middle of the country,” said Daryl Fairweather, chief economist for Redfin. “In our most recent ‘hottest markets’ report, Indianapolis tied for third place with Boston among the cities where homes go under contract fastest. People are moving there from Chicago, Los Angeles and the Bay Area because it’s affordable.”
The migration also is driven by the Republicans’ tax overhaul, which, among other provisions, eliminated the state and local tax deduction for six states with high property taxes: California, Illinois, Pennsylvania, New Jersey, New York and Texas.
“If you can’t itemize your taxes, you’re not getting the tax benefit that offsets your high mortgage-interest payments, which also cuts into affordability,” Fairweather said.
Other research illustrates just how out of reach a home purchase is becoming for typical Americans.
In the third quarter of 2018, the ability to afford a home was down to its lowest level in a decade, according to an analysis by ATTOM Data Solutions, an Irvine, California-based property database. In 78 percent of markets, home prices were less affordable than their historic averages.
“We found that 30 percent of the population lives in a county where you need an annual income of at least $100,000 to buy a median-priced house,” said Daren Blomquist, ATTOM senior vice president.
Many people relocating initially thought moving to a secondary city was trading down, but they quickly discovered that wasn’t necessarily the case.
What they did trade was stress in return for a higher quality of life.
When Meg Epstein moved from Southern California to Nashville because of her husband’s job, she said, she expected to find friendly Southern-style hospitality. She didn’t expect to fall in love with the culturally rich city, which, she said, is much easier to enjoy than Los Angeles.
“I spend so much less time in the car and in traffic. Valet parking is free, and I don’t need reservations to go out to great restaurants,” said Epstein, founder of California South Development, which builds condos in Nashville and other cities. “Nashville is known for its music scene, but a lot of people don’t realize it has a great symphony and access to all kinds of arts and culture.”
Sacramento, which tops the list for the most net inflow of residents, has the highest percentage of new residents coming from San Francisco. Sacramento’s median sales price in September was about $350,000, a fraction of San Francisco’s $1.5 million.
The highest percentage of Atlanta’s and Nashville’s new residents are from New York City. New residents in Phoenix, Dallas and San Diego are mostly from Los Angeles; Portland’s and Austin’s new residents are largely from San Francisco.
Miami is seeing significant traffic both ways: Inbound migration is from New York and Orlando, while outbound migration is to Tampa.
“We started to notice this trend a few years ago, that despite real estate investor focus on ’24/7′ gateway cities like New York and San Francisco, there’s stronger growth happening in the next tier of cities,” said Ed Walter, global chief executive for the Urban Land Institute, a Washington-based organization representing urban land use and real estate experts around the world.
ULI also has a top-10 list, focusing on markets poised for a real estate investment boom.
“Emerging Trends in Real Estate 2019,” a joint project of PricewaterhouseCoopers (PwC) and ULI, includes eight midsize markets, some of them also on Redfin’s list of where people are moving.
ULI’s list includes Dallas-Fort Worth, Raleigh-Durham, Orlando, Nashville, Austin, Denver, Charlotte and Tampa. Walter calls these “18-hour cities,” meaning that their downtowns have changed from purely office space to include residential development and nightlife.
“While these are not 24-hours-a-day busy like New York City, there’s lots of activity, from early-morning coffee through the time the clubs close around midnight,” Walter said.
Brown and Shuman said they have found plenty of clubs, bars, theater, concerts and restaurants in Atlanta. Moreover, tickets, alcohol and food all cost less than in Los Angeles, they said.
“We’ve seen a bunch of comedy shows with performers from L.A., so we can see the same people for less money,” Brown said.
Rents are lower in these secondary cities, too, said Nat Kunes, vice president of product at AppFolio, a property management software company.
“Even though rents are rising faster in secondary cities like Nashville, Austin and Atlanta than in New York, Washington, D.C., San Francisco and Los Angeles, they were lower to begin with,” Kunes said.
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