Interstate movers chased affordability in 2023

Rhea-AI Summary

Zillow study shows households moving to more affordable metro areas, saving $7,500 on average. Charlotte, Providence, and Indianapolis saw highest net in-migration. Chicago, San Diego, and Cincinnati had the most outbound moves. Affordability continues to be a major factor in migration patterns, with record-high housing costs driving the trend.

Positive

• Households moving to more affordable metro areas, saving $7,500 on average
• Increase in migration to relatively affordable markets in the South, Midwest, and Northeast
• Affordability continues to be a major factor in migration patterns

Negative

• Record-high housing costs in 2023
• Decline in affordability over the past four years
• Rise in share of median household income needed to pay rent and monthly mortgage payments

Insights

Economist

The migration trends identified in the Zillow study are indicative of a broader economic shift, where cost of living plays a critical role in determining residential and labor market dynamics. The data suggests that as housing costs escalate, consumers are making rational choices to relocate to areas where their income stretches further. This is particularly relevant in the current economic climate where inflationary pressures are affecting various sectors. The movement towards more affordable areas could signal a redistribution of economic activity, potentially leading to changes in local economies, including shifts in demand for goods and services, labor market adjustments and variations in tax bases.

Furthermore, this trend has implications for urban planning and infrastructure development. As growth shifts to these 'new' affordable areas, there might be increased pressure on local governments to accommodate the rising population through investments in transportation, education and healthcare services. This could stimulate economic growth in the short term but may also lead to long-term challenges if the influx of new residents outpaces the development of adequate infrastructure.

Market Research Analyst

An analysis of the relocation data presents valuable insights for businesses operating in the real estate and retail sectors. Companies can leverage this information to anticipate market demand and adjust their strategies accordingly. For instance, real estate developers and investment firms might find opportunities in the growing markets of Charlotte, Providence and Indianapolis, identified as having the highest net in-migration. These markets could be ripe for new housing developments, commercial real estate projects and related services.

Retailers and service providers can also benefit from understanding these migration patterns. As households relocate to more affordable areas, they might exhibit changes in consumer behavior, such as increased spending on home furnishings and local services. Identifying these trends early can give businesses a competitive edge in tailoring their offerings to the needs of these new residents.

Financial Analyst

The observed migration patterns have significant implications for the housing market and can influence investor sentiment. The shift towards affordability can affect the valuation of real estate assets in both the origin and destination markets. For instance, markets with high outbound migration like Chicago, San Diego and Cincinnati may face downward pressure on property prices and rental rates, which could impact the performance of real estate investment trusts (REITs) and other property-related securities. Conversely, the influx of residents in more affordable markets could lead to appreciation in property values and potentially higher yields for investors. It's crucial for investors to monitor these trends as they can materially impact the risk and return profile of real estate investments over time.

Additionally, the migration data can be a leading indicator of future economic activity in these regions. As people move in search of more affordable living, the increased demand could drive up housing prices in the destination markets, creating a new cycle of affordability challenges. Investors should be aware of the potential for such cyclical effects when making long-term investment decisions.

People relocated to metros $7,500 less expensive, a Zillow study of United Van Lines data shows 

• Charlotte, Providence and Indianapolis saw the highest net in-migration among the 50 largest markets.
• Chicago, San Diego and Cincinnati witnessed the most outbound moves compared to inbound relocations.
• Record-high housing costs in 2023 likely drove the continued trend of moving toward affordability.
• Movers are also, increasingly, relocating to areas with more home listings per resident.

SEATTLE, Jan. 9, 2024 /PRNewswire/ -- Households that moved across state lines in 2023 relocated to markets where homes cost on average $7,500 less than where they came from, a new Zillow® study of United Van Lines® data shows. That's down a bit from $8,900 at the peak of the pandemic housing market in 2021, but up from a savings of just $2,800 in 2019. 

The five metro areas that saw the largest net migration gains according to the United Van Lines data were relatively affordable markets in the South, Midwest and Northeast. Although housing affordability has always played a key role in explaining migration patterns, the increase in house prices during the pandemic and the subsequent jump in mortgage rates appears to have intensified the search for more tolerable monthly payments.

"Affordability is one of the biggest considerations for home buyers and sellers, and clearly plays a major role in deciding where to put down roots," said Zillow Senior Economist Orphe Divounguy. "Housing costs hit record highs last year, and made both buying and selling difficult, even for homeowners sitting on massive equity. Finding a less expensive area where dollars aren't quite so stretched was a smart move for a lot of people." 

Affordability may improve slightly in 2024, but it has declined significantly over the past four years. The share of median household income needed to pay rent has risen from less than 27% in November 2019 to nearly 30% in November 2023. The share of income needed for a monthly mortgage payment on a typical home purchase has risen even more dramatically, from about 23% to nearly 39% over the same period. In many places, especially the West Coast, costs are so high that a family making the median household income won't even qualify for a mortgage. 

United Van Lines customers have higher average household incomes than movers overall, but migration flows in the U.S. Census Bureau's American Community Survey reveal a similar pattern. In 2021, the average interstate mover moved to a metro area where homes would save them about $10,000 when compared to where they came from; that's in comparison to savings of a little less than $700 in 2019, before the pandemic.

Among the 50 largest metros by population, those with the highest net in-migration from United Van Lines customers in 2023 were Charlotte, Providence, Indianapolis, Orlando and Raleigh.

Of those five metros, four ranked among Zillow's 10 hottest markets of 2024. This index is driven by expected home value growth, how fast home sellers are entering into contracts with buyers, job growth per new home permitted and growth in owner-occupied households.

Metros with the highest net number of residents relocating were Chicago, San Diego, Cincinnati, Detroit and Boston.

United Van Lines customers are also, increasingly, moving to markets with less potential competition for homes. Movers relocated to destination metros with an average of six fewer competitors per listing in 2019. That difference grew to 13 in 2023. 

Metros with more United Van Lines outbound moves than inbound moves tended to experience less growth in their working-age population in the same year, and lower growth in home values in the year that immediately followed.

Year	Average Origin Metro* Home Value	Average Destination Metro Home Value	Average Metro- level Home Value Difference	Average Origin Population Per Active Listing	Average Destination Population Per Active Listing	Difference in the Population to Active Listing Ratio
2018	$247,218	$245,273	-$1,944	203	209	-6
2019	$256,395	$253,600	-$2,795	205	210	-6
2021	$330,088	$321,261	-$8,827	333	342	-9
2022	$379,615	$371,254	-$7,361	319	328	-9
2023	$374,613	$367,181	-$7,432	377	390	-13

Source: United Van Lines and Zillow data

* Metropolitan Statistical Area (MSA)

About Zillow Group
Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make home a reality for more and more people. As the most visited real estate website in the United States, Zillow and its affiliates help people find and get the home they want by connecting them with digital solutions, great partners, and easier buying, selling, financing and renting experiences. 

Zillow Group's affiliates, subsidiaries and brands include Zillow®, Zillow Premier Agent®, Zillow Home Loans℠, Trulia®, Out East®, StreetEasy®, HotPads®, ShowingTime+℠, and Spruce®. 

All marks herein are owned by MFTB Holdco, Inc., a Zillow affiliate. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org). © 2023 MFTB Holdco, Inc., a Zillow affiliate.

About United Van Lines
United Van Lines is America's #1 Mover®. United Van Lines offers a full range of moving solutions. With headquarters in suburban St. Louis, United Van Lines maintains a network of 300 affiliated agencies. For more information about United Van Lines, visit: UnitedVanLines.com

 

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SOURCE Zillow

FAQ

What does the Zillow study show about households relocating in 2023?

The Zillow study shows that households relocating in 2023 moved to markets where homes cost on average $7,500 less than where they came from.

Which metro areas saw the highest net in-migration according to the United Van Lines data?

According to the United Van Lines data, Charlotte, Providence, and Indianapolis saw the highest net in-migration.

What role did housing affordability play in explaining migration patterns?

Housing affordability has always played a key role in explaining migration patterns, with record-high housing costs in 2023 driving the trend of moving toward affordability.

How has affordability changed over the past four years?

Affordability has declined significantly over the past four years, with the share of median household income needed to pay rent rising from less than 27% in November 2019 to nearly 30% in November 2023.