Monday, November 25, 2019

Who’s really leaving California, and why does that matter?

Who’s really leaving California, and why does that matter?

Many California homeowners are cashing out, picking up, and moving inland
By Patrick Sisson Oct 22, 2019, 8:00am EDT

Idaho’s capital—from the city of Boise itself to the surrounding towns that have shifted from farmers’ fields to subdivisions over the past few years—is in the midst of a building boom. While Boise’s economy has been attracting new residents, much of the boom is fueled by migration from others trying to escape expensive coastal cities out west. Even so, the specifics of these moves don’t map exactly onto the stories we tell about who is leaving the coasts and how they’re changing noncoastal cities.

It’s instructive to look past the construction and zero-in on the type of housing being built to get a better sense of what is driving this growth, according to Phil Mount, Boise’s regional realtors president. A lot of the new construction he’s seeing around towns like Eagle and East Boise could best be described as nice single-level homes—with a few added touches, including low-threshold doors that are easier for owners who are disabled, spacious hallways, wide showers, and maintenance-free features. These are easy-to-live-in homes in neighborhoods with clubhouses and walkable access to stores. They are perfect places for older, wealthier retirees to spend their golden years.

“I just had a client, a 70-year-old widow from Northern California, Darolene Mullin, who came out here because she didn’t like what was happening to her home, and the lifestyle here suited her,” he said. “She’s in the area affected by the blackouts (due to fears that downed power lines would spark wildfires), and just decided that Boise is where she’ll spend her retirement years. It’s so much easier here.”

Are wealthier retirees, or those near retirement, having an outsized impact on housing markets? In Idaho’s Ada County, which includes Boise, the inventory of available single-family homes has dropped every quarter since 2014, and the median sales price has increased from $209,990 to $324,950, a 54.7 percent jump. At the same time, demographics have shifted. Between 2012 and 2017, the number of baby boomers in the region, those aged 52 to 70, grew by 30.5 percent.

While much of the inbound migration to Boise comes from elsewhere in Idaho, many newcomers are from high-cost metros on the west coast. Per census data, 17,000 of the roughly 80,000 new Idaho residents in 2016 came from California. According to an analysis by, homebuyers from 82 California ZIP codes made up 4.5 percent of the page views for Boise real estate; many of them were concentrated near the Bay Area.

A Boise realtor report about local residential trends identifies this group as impacting what housing is being built, noting that local builders are focusing on “higher-end homes and amenities versus entry-level projects to meet profit margins and consumer preferences.”
The “myth” of the California retiree

California homeowners are cashing out, picking up, and moving inland, pushing up prices in other states as they look for more affordable places to live and to retire. Boise is just one of many cities seeing this influx, which some have labeled “Californication.” But the story, and the underlying demographics, are a little more complicated.

California is losing people at a fast clip. Between 2007 and 2016, the state lost 1 million residents who picked up and moved elsewhere in the U.S., about 2.5 percent of the state population (the state is still gaining population overall, due to births and immigration). The state lost 38,000 last year alone, part of a migration trend that’s speeding up (the state ranked 49th in total amount of domestic outmigration last year). A LinkedIn analysis of the last four years of profile data found that California professionals aged 55-64 are mostly likely to move to Phoenix, Seattle, Las Vegas, New York City, and Portland, Oregon.

But Mount says the “California fantasy”—that it’s just older Golden State expats causing the rapid escalation of housing shortages and home prices—is a simplification.Anaheim, California. California is becoming stratified, a statewide gentrification that is holding back economic growth and leaving the vaunted California lifestyle “available to an increasingly select few who can afford it.” Shutterstock

“I’m seeing a much bigger mix of demographics coming to the Boise area,” he says. “Recently, it’s a much larger mix of folks, coming from all across the U.S., including New York and Seattle. The 40- to 50-year-old work-from-home group is one of the biggest we’re seeing, as well.”

Is it millennials? Despite recent headlines suggesting an exodus of young adults from large cities, there doesn’t seem to be statistically significant movement of young adults out of big metros.

Maybe it’s just that in a Venn diagram of demographic groups that many like to blame for economic issues and the hoarding of wealth, California baby boomers would be near the center of the chart.
A California exodus

In California, a significant number of older homeowners are hitting retirement. State residents over 65 years old made up 18 percent of the population, a group that grew by 3 percent in 2018 alone, and 80 percent of the baby boomers in the state own their homes. That’s a lot of potential for downsizing and moving out. California citizens aged 65 to 75 are also the most likely of any age group to own property. Some analysts have even said the rush of boomers downsizing will create a “shadow inventory” of housing that will help alleviate the great shortage of starter homes.

These homeowners are feeling an additional push to leave the state thanks to the recent tax reform and the SALT exemption repeal, which increases the tax bill for homeowners. According to Dan Walters, a researcher with the state think tank CALMatters, there’s been a rush of retirees or near-retirees making the move to neighboring low-tax states such as Arizona and Nevada. Researcher Joel Kotkin found that a majority of Californians expected to leave the state in the next 10 years.

These older former Californians have also zeroed in on Texas. According to the Economist, a quarter of those moving out of the Golden State between 2007 and 2016 have relocated to Texas. A city employee in Plano, Texas, who had been helping dozens of new arrivals apply for drivers’ licenses, joked that “Everyone is from California. Are they kicking y’all out?”
The main movers are middle class

But the scapegoating of rich Californians ignores many of the facts about who’s really moving. In a survey of economists taken by the San Diego Union-Tribune seeking insight into the state’s retirement climate, the consensus was that older and wealthier residents had more reasons to stay (and California has been a magnet for residents moving from similarly expensive states). Proposition 13, the state ballot measure from 1978 that froze property taxes for long-time homeowners, is a massive subsidy for the wealthy (it saved homeowners an estimated $7.4 billion last year alone).

The working middle class are “fleeing the state,” according to Kelly Cunningham of the San Diego Institute for Economic Research, due to the state’s “dysfunctional nature.” A large part of the problem is housing; per Zillow, the average house in California has risen from roughly $300,000 in 2012 to $550,000 today. Los Angeles, Riverside, and San Bernardino counties have seen massive outflow of residents over the last few years. California is becoming stratified, a statewide gentrification that is holding back economic growth and leaving the vaunted California lifestyle “available to an increasingly select few who can afford it.”

Public sector workers from California have long sought greener, cheaper pastures. According to a report by the Sacramento Bee, 15 percent of the 561,000 pensioners in the California Public Employees’ Retirement System live outside the state. Cops and firefighters have clustered in Grants Pass and Lake Havasu City, Arizona, and other state employees can be found in Nevada, Oregon, Washington, and Florida.

“Compared to California, Las Vegas was a no-brainer,” Joe Beck, a former Southern California school district maintenance administrator who moved to Las Vegas, told the Sacramento Bee. “I decided that if I could handle the heat three months out of the year, I needed to move to where my retirement check would be tax-free.”

Vegas, which is close enough for an afternoon jaunt back to Southern California, also offers plentiful sunshine, lots of activities for seniors, and the same single-family-home-style subdivisions that retirees had back home.

The national challenge of finding affordable housing is having a trickle-down effect everywhere. And if Boise is any indication, few cities are adequately preparing for shifting populations and new migrations across the country.

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