by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Greg nailed it today (and before)– people are leaving America’s cities and it ain’t cuz of COVID. Studies like this one go out of their way to explain that New York and San Francisco are “Safe” and attribute the exodus to financial reasons. But if you read THIS study, by the Cleveland Fed, you’ll see that Greg is right:
Initially, the urban exodus stories reported that people were afraid of contracting the novel coronavirus in elevators and subways. Then the narratives suggested remote work had freed office workers from long commutes, allowing them to relocate. With both remote workers and students at home full time, a desire for home offices purportedly rose, and low interest rates made buying a larger suburban home attractive. Urban amenities such as restaurants and theaters were shuttered. Later, the protests sparked by the killing of George Floyd and others were cited for motivating some urban residents to leave. Most major cities experienced increases in violent crime during 2020, and crime rates have historically predicted migration changes.2 The proposed and enacted cuts to police funding were also cited as a reason to leave by some people who feared that crime would increase further.
The Wuhan virus didn’t directly cause the urban exodus, it was the political responses to it. When big city mayors defund police departments, refuse to deploy the police to shut down riots, and decriminalize property crime and drug use, people won’t move there. IN both studies, they cited that it wasn’t so much that a lot of people are moving OUT, it was that new people weren’t moving IN. Thus, net migration from blue states is high and net migration to red states is up.
Take a look at the net migration map from North American Van Lines. It has a very cool slider which allows you to watch the net migration for the last ten years. The colors are inverted, probably so that North American Van Lines doesn’t get hammered by the woke folks, but in each year since 2010, net migration is flowing from states governed by Democrats to states governed by Republicans.
In 2020, 4 of the top 5 “loser states” were Democratic-controlled legislatures and governors. Maryland is a “hybrid”. 4 of the top 5 “winner states” were Republican-controlled legislatures and governors. North Carolina is a “hybrid”. You can toggle through the years and see that Democrats are AWFUL at doing the things which residents expect local governments to do. The political response to COVID just exacerbated the exodus and caught the media’s attention to report a 7-10 year trend.
What does Gen X (the next big generation) want in a place to make a life? Yahoo tells us that they are moving to the midwest and the south— 14 of the top 15 cities to which Gen Z is moving are in Republican-controlled states. When they buy, they plan to live in single-family homes, much like their parents in Generation HOA (aka Gen X). There is a single-family housing shortage in this country so younger people are going to be attracted to states which make it easier to build homes. 7 of those 10 states are governed by Republicans.
If you plan to invest in single-family homes (a really good idea), follow the politics of the states in which you plan to invest. Young people may not have voted for President Trump’s re-election but, without a doubt, they prefer the policies which his political party advances.
