Is COVID Driving People From Cities?
Regular readers know my background is in geography and geographic information systems, and I’ve done a lot of mapping posts related to finance. I also have a pretty sweet geoarbitrage resources page with tons of tools in one place to help you make sense of how place affects your money.
I’m always on the hunt for new mapping tools and geographic insights, and I’ve been specifically wondering how the COVID pandemic has been changing things.
We’ve all been hearing about an exodus from crowded urban areas since the pandemic. It makes sense. Many who live in big cities have been questioning the high cost of living when they’re not able to take advantage of the amenities that usually warrant the cost.
Others who live in big cities do so to avoid commuting to work. But now that they can work from home and may do so for a long time they’re questioning expensive and crowded city life and moving out.
So far these have mostly been media stories and anecdotal evidence, but has there been an real data to show trends? Is COVID driving people from cities?
Your financial mapping nerd is here to help!
Is The Rent Too Damn High?
According to Apartment Lists National Rent Report, the sharpest drop in rent prices have been in some of America’s most expensive rental cities. From their report:
Price seems to be a key determinant of whether cities are experiencing falling or rising rents during the pandemic. The relationship is made more explicit in the chart below, which plots rent levels against rent changes for the 50 largest cities in our sample. There is a clear correlation between the two; the cities that had the highest rents in March (moving right along the x-axis) have seen the steepest rent drops since then (moving down along the y-axis).
The website AdvisorSmith has it’s own analysis and they’ve shown the cities where rents are rising and decreasing the most. Here’s the cities with the largest decreases in rent:
Here’s the top ten listed:
So these two websites have shown changes in rental data and I guess the assumption is that it’s a supply and demand thing. As people move out of those expensive cities the demand for rentals is decreasing and thus the prices. Markets are brutally efficient that way.
But what about actual moving data?
On The Move
I’ve done posts in the past showing where people are moving in America. It’s still too early in 2021 to get the IRS moving data for 2020 and some of the more comprehensive information. But two moving companies, Allied Van Lines and United Van Lines have released their moving data.
These of course are just a snapshot of overall moves in the country as they only have data on their own customers, but they’re big companies and it gives us a good start. Secondly their data only shows moves by state, so it’s impossible to test the theory of people leaving cities since the data is not aggregated in that manner.
According to Allied Van Lines, here are the top five inbound and outbound states for moves in 2020:
According to United Van Lines, here are the top ten inbound and outbound states for moves in 2020:
United’s report goes into some detail as they do questionnaires of their customers, and they had this to say about COVID related moves:
Data from March to October 2020 also revealed the COVID-19 pandemic influenced Americans’ decisions to move. For customers who cited COVID-19 as an influence on their move in 2020, the top reasons associated with COVID-19 were concerns for personal and family health and wellbeing (60%); desires to be closer to family (59%); 57% moved due to changes in employment status or work arrangement (including the ability to work remotely); and 53% desired a lifestyle change or improvement of quality of life.
And they provide some insight into specific cities:
Throughout the pandemic in 2020, major metropolitan areas and hotspots, such as New York City (72%), Newark (72%) and Chicago (69%), experienced greater outbound migration, while lower-density cities like Wilmington, North Carolina (79%) and Boise, Idaho (75%) saw high levels of inbound moves.
Are Taxes Too Damn High?
Could taxes be a factor in some of these moves? The Tax Foundation did an analysis of the United Van Lines data shown above and one of their analysts had this to say:
Four of the 10 worst-performing states on this year’s [State Business Tax Climate] Index are also among the 10 states with the most outbound migration in this year’s [United Van Lines] National Movers Study (New Jersey, New York, Connecticut, and California). Seven of the top 10 ranked inbound migration states also rank in the top half of states on the Index, which measures tax structure. And the three which do not (Alabama, Arkansas, and South Carolina), while having significant room for improvement in the structure of their tax codes, generally feature low tax burdens. Conversely, all but one of the top outbound states rank in the bottom third of the Index, the only exception being North Dakota (17th), where outbound migration has been driven by a decline in energy markets.
Very interesting. So this is where things get murky and like everything in life, it’s complicated. If you combine the COVID pandemic, the nature of crowded and expensive urban areas, new and more flexible work from home rules for many, and the broad spectrum of tax policies by location, you get a multitude of factors that could affect where folks are moving.
So is COVID driving people from cities? It would be lazy and unscientific to claim that COVID is the main reason people are moving out of cities, or any particular state. Unfortunately that’s what we often get in our 2021 media landscape. It’s clear even with a rudimentary look at the data that it’s far more complex.
I do of course think COVID is a factor though. How much of a factor? Who knows…. the nature of the social sciences is that they’re not as quantitatively precise as other sciences. But as more comprehensive data come in during the year you can count on your resident mapping nerd to keep tabs on it and to keep you informed!
Your Turn – If you live in a large urban area, has the COVID-19 pandemic made you consider moving out? Do you know anyone who has moved for this reason?
Good data aggregation. We’ve done quite a bit of analysis on this question as well. My conclusion is that the pandemic has exacerbated and accelerated trends that were already taking place. There was already a downward trend in net migration, dipping into negative, in the three largest cities in the US before the pandemic. There was already a statistically significant correlation between both total tax burden & total cost of living and state-level migration within the US. If you’re interested in the details Dave here’s where we break down that data
Yeah I’m looking forward to the more official data for 2020 that will come out later this year
One of the things covid accelerated was the ability to work from home with zoom etc. If you do not have to drive into the city to go to work and can now literally work from everywhere it takes away the premium living in the city provided in the past.
I think commercial office space is going to take a huge hit going forward (maybe following the same path as malls).
WFH changes so much in life and the ripple effects will be seen for years
We live 100 miles North of Atlanta in Blue Ridge, a charming little mountain vacation destination. Our inflow has been HUGE, with many folks decided they’d rather WFH in the mountains than in the Atlanta metroplex. It’s almost getting too crowded, will be interesting to see how many stay post-COVID. Definitely a trend, though I agree w you in the difficulty quantifying and identifying true root cause. Interesting phenomenon.
Very interesting, these are the kinds of stories I like to hear. Sounds like there’s some effect near you for sure. Let ’em know you were there first 😉
While anecdotal I strongly believe something has changed here post covid start. Whether it’s covid itself , rules , etc is debatable. But I’m seeing definitive shifts in housing markets in several rural areas across the country. Take my own… very rural and near suburbs. Both the burbs and rural had stagnate prices from 2014 to 2019. Housing languished on the market. Since 2020 I’ve seen prices sky rocket like it’s Bay Area real estate and houses come off the market in mere days. These people are coming from somewhere and it’s not because the weather got better. Lest we think Delaware is now the hotspot of the world I’m hearing similar reports from friends in rural and suburbs around the country. My guess is they won’t show up on your list statistically though, simply because inflows themselves are limited by capacity. So the increase will be significant by percent to the area but not by raw number or in comparison to other locales. Thousands of rural areas with increased inflows add up.
Interesting stuff, thanks for the info. Prices near me have skyrocketed too but I think in my case it’s still mostly a result of Amazon’s HQ2 decision. They’re already moving in and their employees make mad money
if i had to rely on public transportation like a subway or bus during this pandemic i would consider getting out if possible. it all makes me glad we have a couple of decent cars in our house. come to think of it i never really enjoyed big city life or even visiting that much. when we were in spain we had to choose between spending time in barcelona or san sebastian. s.s. won in a landslide. other people can have all that cool and vibrancy to themselves.
Oh man, San Sebastian…. I have some great memories of that town. I doubt I could write a blog post about it as it might not pass the family friendly test… 🙂
But like you I never wish to live in a big city again. Been there done that got the scars to prove it
I definitely think there’s a combination of things, but Covid certainly accelerated trends. The exodus from the major cost of living cities with public transportation is certainly Covid related. But then there are things like wildfires in California driving people out on top of high cost of living.
I would be willing to bet though that the major exodus from the major cities will drop rents low enough to eventually shift things back the other direction. In a few years people will probably forget about the pandemic entirely, no longer be wary of public transportation, etc.
For me personally the pandemic made me really think even more about investing in a vacation property in the mountains. Not that I am a doomsday prepper in any way, but it seems like there are several global catastrophes in which having a safe haven away from a major city could be a big benefit.
A safe haven in the mountains is something I see in my future for sure
I personally think it’s great that people have moved out of the Bay Area. Traffic was horrible, not anymore. Air has improved. Those that remain really want to be here. I will enjoy it while it lasts because people will come back to cities, employers will require people back in the office, and people will want the environment only offered by cities.
There’s lots of reasons people are leaving Cali, and COVID is only one, probably a smaller one from what I hear
I’ve read and heard a lot on this. From all that, I think that commenter G. Brian Davis is spot on. As with so many other trends that the mainstream media would have us believe are strictly COVID-driven, the reality appears to be that COVID merely accelerated already ongoing trends, some faster than others.
However, I also think that in a year or two, a hot story will be that renters and real estate investors (and maybe individual property buyers) are falling over themselves to get back into/invest in property in cities, driving up prices in the process. I take a generally dim view of people, the vast majority of whom I find staggeringly myopic. So, I suspect that a lot of former residents of vibrant cities who moved to more sleepy areas are going to slink back to the city. And I suspect that, like stock investors who sell in a downturn, they’ll regret leaving when prices were becoming much more attractive and getting back in when they’re (fast) rising.
“I take a generally dim view of people” Haha, I do sometimes too, simply based off what I see in popular culture and on social media. I need to try to be more optimistic and give folks a chance, but damn they make it hard don’t they?
I live about 120 miles from the Bay Area in a fairly rural area. Housing was already up before COVID but it exploded as the pandemic dragged on. Move in ready houses sell within days and they just announced a developer bought out the majority of the vacant lots left in the golf course community adjacent to us and will begin building $900k+ homes on the lots. Our community is already mostly built out but lots that were vacant for years are now sprouting new houses.
That stuff is happening in the distant suburbs around DC too, except ours often start at $1.5 million and go up from there. But then again who the hell needs 4,000 square feet….
The top three communities are all major oilfield communities which are seeing a major reduction in work. They all are, especially Williston, as of recently at a high due to the fracking and shale horizontal drilling production boom. I spent time in Williston and it was 100% part of the Bakken boom which is now non-existent. Those communities are cyclical with the boom and bust of the oil industry but I wonder if the bust is long term now due to renewables & tech but also doubled down on one of the largest drops in demand in recent history.
Interesting Chris, the dynamics of those places is foreign to me but as a geography nut I love reading about trends.
I live in Denver and while rents don’t look like they’ve gone down too much (yet!), this is the first year that my rent has not gone up, which normally occurs every March. I’ll take it! Though I’d really like to bail and move to the coast…
Denver has had such a boom over the past 7-10 years, it’d be hard to raise rents higher in a pandemic. I’ve been there a lot, my guess is it’ll keep booming
I live in San Diego and the housing market is hotter than ever for sellers, prices have skyrocketed in the past year. Maybe because we are not a public transportation-reliant city or if you’re going to be stuck at home, at least 70s/sunny year-round makes it more fun. Seeing areas of the country that handled the pandemic very very poorly (like not believing it is real) has definitely made me write off lots of places to live in the future. People can hate on CA but there are some very real advantages to living here, assuming your salary is high enough to match the HCOL. I’m originally from the Northeast, but there’s no where else I would rather have been to ride out the past year.
Overall though the exodus for CA has been huge, and it started before COVID. On the bright side things are less crowded for you 🙂
I’m happy for the work from home movement our economy looks to be hurdling towards. It benefits everyone and evens out the supply demand economics that drive prices up. For me though, the biggest benefit has been less people commuting to work. I get home faster and the environment also gets a win. As soon as I hit my FI number I’m outta the Bay Area.
But I do think big picture wise, people will head back to the cities in droves. There’s something about cosmopolitan city life: the variety of food, culture, and opportunity, that will always beckon us humans to gather in dense environments—especially the youth.
Less traffic is good for everyone, since about 35,000 folks die by car crashes every year. Then there’s the air pollution… And I tend to agree about cities, these things may wax and wane but I think folks will come back.
Like Noel says, I am a huge proponent of the work from home shift that’s occurred recently. Lots of benefits for all (as your recent post highlighted). What we’re seeing here in WA is folks from the Seattle/Coast area that has turned into an over-priced, overrun urban hell-hole coming to the Inland Northwest areas like Spokane and CDL Idaho where it’s equally beautiful but much more affordable and only a 30 plane jump back to Amazon/Boeing/MS/Starbucks/etc. HQ.
Didn’t realize that about a migration out of Seattle, but I know how pricey it’s become. I’ve been a bunch of times but not since 2012, would love to see how it’s changed.
You know I’ve got a weak spot for these data analysis you do. Always an enjoyable read.
Anecdotally, prices have trended up throughout 2020/21 where we are, which is pretty urban. I’d say it’s been at a slightly slower rate than 2013-2019. However, inventory turnover is nearly instant. Stuff that goes on the market has an under contract sign the next time we walk by, which is usually the same week.
If I had to guess, I wonder if constrained supply doesn’t play a big part of this. A lot of people simply don’t want to have strangers traipsing through their place during a pandemic. Less sellers. That’s atop all the other macroeconomic things you mentioned; interest rates, remote work, etc.
As always, thanks for the thought provocation. 🙂
Turnover is instant here in DC as well. few near me literally sold the same day they were listed. Yes, supply was at record lows in 2020 as this Motley Fool article details. It’ll be interesting to see if it changes
One of the theories on the East Coast suburbs is people wanted more space for work from home, school from home, a yard to entertain the kids and a neighborhood for recreation that maybe not have been as accessible in more urban settings. Often not out of state moves, but rather local.
I have thought at least weekly about moving closer to one or the other of my parents. If my job was a bit more wfh and less ink to paper signing, it would be very tempting.
On my walks through the neighborhood it seemed like for sale signs popped up and disappeared as quickly as mushrooms!
More space for kids and to get outside and just go for a walk is probably a big factor indeed. I still shudder at the prospect of being cooped up in a apartment or condo in a high rise and the government like so many did in Europe enforce strict and draconian lockdowns.
Similar to Fritz’s comments, I did the outward migration from DFW to the Southeast two years ago and I’m not surprised at all about how the migration is going.
I’m on the coast in South Carolina and gone are the $300,000 houses within a 15 minute drive to the beach. I can’t believe I thought they were overpriced on a cash flow basis only to see them go up 20% in value and no inventory to be around.
And yes…the tax code in South Carolina isn’t all that friendly and car insurance is New York style expensive (thanks motorcyclists with no hemlets), but low housing/food cost and being next to the water makes it worth it.
$300k 15 minutes form the beach? I didn’t know that even existed before, damn, I should have hogged one of those up!
To think I countered at $275k when one was asking $330k twelve months ago…
I’ll keep enjoying renting the same place and going surfing when the water warms up
I think people will head back to the cities as well. Some people just like the urban environment more.
Young people probably will keep moving into cities. Old people can move out. 🙂
Haha, get those old folks out!! 🙂
One reason that rents are down is that as landlords we’re often not allowed to raise rent or evict people due to covid emergency rules. If I can’t raise rents on existing renters then rents aren’t going up. If people can sit in rentals without paying rent and not get evicted then thats not pressure in increasing rents. So some of this I’m sure isn’t about supply and demand with people ‘vacating’ cities but instead due to artificial constraints on the market due to emergency govenremnt rules.
You know I didn’t even consider that angle Jim but it’s a really good point you bring up. And it further shows how complex the whole thing is when you add up all the factors.
Fascinating analysis and great points. I’m so interested to see how this all plays out in the coming years. I suspect the trend will reverse at least a little bit. I’m in the process of renting out my house in the San Diego area right now, and the overwhelming volume of applicants I’m getting is telling me I should have tried to charge far more in rent, even though I already thought I was being greedy! Some are moving out a little farther from downtown, while many others are moving here from out of town. It’s pretty crazy.
Wow, that’s for that local info. I love your city, been there many times but not in the past 10 years. Maybe I should look into a rental there to make more money 😉
Doesn’t meet any of the basic rules of real estate investing; houses are too expensive. But we have a couple, and they’ve done spectacularly. And while people may be fleeing big cities, I don’t know that they’re fleeing the beach!