How About "The Rest of the Story"?

Last year, 40 million Americans moved to another residence, 7.6 million of them to another state. California’s hemorrhage ended with a 38,000 net inflow of people in 2023; that tempered the Golden State’s population drain since 2019 to a decline of 416,000. Most states gained population during the pandemic. Surges in Texas and Florida 1.5 and 1.1 million, respectively, stand out. Taxes? That’s the popular story. Perhaps for some. But taxes are only one of many explanations. A dive into Census’ just-released American Community Service survey for 2023 tells “the rest of the story”, as the late Paul Harvey would have put it, and it doesn’t really fit the “taxes story”.

Most moves tend to be about family situations, new job opportunities, layoffs, retirement, and health considerations, not just living costs. The tax explanation isn’t all that convincing, because;

First of all, states that have no income tax have to rely on other funding sources (sales and excise taxes, property taxes, estate taxes) to provide the services that most states offer. The total tax “bundle” doesn’t look that different for most states (California’s 10.4% overall tax load matches the 10.3% national average of state and local tax burdens). And, even in the arena of public service, there’s something to the quip, “you get what you pay for”.

Net population flows mask the important stories. States like California where large numbers left also had large inflows. For example, in 2023, 690,000 moved out of California. They went to Texas (93,970), Arizona (54,222), Nevada (41,997), Washington (40,858), Florida (39,052) … basically to every other state in smaller but still large numbers. But 525,000 people also moved into California from other states like Texas (48,732), New York (35,062), Washington (32,218), Nevada (22,218), Oregon (22,162), Florida (19,149) … also, virtually from every other state.

Immigration from outside the United States has counterbalanced some state-to-state population movements. California, with its 316,000 immigrants in 2023, had more than its share of newcomers.

Everyone knows that it’s costly to move. It can take some time for any state tax benefits to recover moving expenses.

But the elephant in the “no, it’s not taxes” room is all about the dislocations caused by the social distancing lockdowns during the early days of the pandemic. That’s what the age profile of movers shows. California’s story is stunning. Most of California’s almost-half million population drain since 2019 is because 455,000 young people (20-32 years of age) left the state. Many hoping to get into the entertainment industry pick up odd jobs at restaurants to pay bills. But social distancing lockdowns shuttered the restaurant business and film projects, leaving many high and dry. Most interesting, the exodus of young people (they’re not thinking much about taxes) was counterbalanced by a similar-sized inflow of older newcomers (call them, tax payers).

America’s restless population is a bonus for the real estate industry. If people stayed put, the real estate industry would be in trouble, because the growth of the U.S. population—what creates infrastructure needs—is slowing down. The U.S. population, which grew 1% annually in the closing decades of the 20th century, has slowed to ?% each year on average in this millennium. A population that is in motion offsets demographic drags. Infrastructure (houses, businesses and commercial real estate, roads, hospitals …) won’t fit in the U-Haul. Of course, it's a bigger deal if the number of people entering a state is greater than the number leaving (if inflows merely matched outflows, folks would effectively be swapping places with little need for new real estate infrastructure). This explains the real estate happy talk in the Southeast, Texas and mountain states compared with elsewhere.

All across the nation, people in motion. Not to San Francisco (those gentle people have aged). But if you’re going to Maricopa County (Az), Collin, Denton, and Williamson Counties (Austin/Dallas/Fort Worth), Polk, Pasco, and Lee Counties (Disney World/Tampa/Ft. Myers), Montgomery and Fort Bend Counties (Houston), Horry County (Myrtle Beach), or Riverside County (California)—you’re going to meet some busy real estate people there.