What’s Driving California Mass Exodus and Does It Affect Housing?

While it may be an overstatement to say we are hemorrhaging people out of California, some of the state’s major companies and wealthiest residents are leaving for states like Texas, Arizona, and Florida.

According to a recent U-Haul study, people are falling in love with those states as well as others like Tennessee, which saw the biggest gains. Ohio, Arizona, Colorado, Missouri, Nevada, North Carolina, and Georgia are also popular new home states. For California though, the relationship seems to be over as it ranked last on the list with a large margin between it and others on the list. 

Tech and Big Business Exit the State

In 2020 alone, Oracle, Hewlett Packard, and Tesla are a few that have made the decision to leave. Some of the wealthiest individuals like Elon Musk and stars like Tom Hanks and Julia Roberts are among those who have already left the state.  

According to an article written by CNBC, California’s population and job growth have slowed to a trickle, with many concerns about high taxes, cost of living, and heavy regulations. These new laws are making it hard for businesses to do what they best, so they are leaving for states that offer more incentives and rewards than restrictions. 

Remote Work Plays a Role

With the rise in remote work in 2020 due to the pandemic and many companies like Google saying they plan to keep the work environment that way, over 135,000 more people left California than moved in. This is the third largest migration loss ever recorded. Prior to the pandemic, the migration had already started. 

With the ability to work from anywhere, numerous California residents realized it just made financial sense to leave areas like the Bay Area and Silicon Valley where monthly rent and home prices were significantly higher than other areas. After all, who wouldn’t want to move given the opportunity to get a larger space for less money in an area that is less concentrated and urban? 

Migration Leads to More Change

The mass exodus will lead to change in many areas that could potentially impact those that remain here. With the richest people leaving, this will affect the amount of tax dollars coming in to pay for roads and infrastructure funding. As a result, taxes will rise, hitting the middle class harder. In turn, this could drive even a greater migration.   

Remote working has also leveled the playing field when it comes to job competition. With talent moving to states where cost of living is lower, employers can source less expensive employees to do the job. That means there will be less job opportunities that remain here in California, also adding to the financial pressure many will feel to move out. 

Added to this, housing is already so expensive, with prices rising and bidding wars driving up the cost to sky high levels. That has exacerbated the affording housing crisis,  pushing those who make under $100,000 per year out of the state, including small business owners who can no longer afford to operate a business or live here. Many of those leaving are critical employees for small businesses, which, in turn, are hurt and end up closing their doors. There is not much left that’s golden about the “Golden State” when you look at this reality. 

Impact on Housing Prices

Now, let’s look at housing prices overall in relation to this exodus. Of late, housing prices are hitting record highs. With not enough housing both in rental and home sales, our homeless population is growing and could be a contributing factor to the exodus in our fine state.

In looking at what might happen in 2021, the Homebuying Institute predicts that home prices will remain stable and continue to rise in some areas related to internal migration from expensive housing markets in Silicon Valley to other more reasonable suburban markets. As more people leave the state, housing inventory may rise. 

Your Home Buying or Selling Partner

Planning a move out of state for you or a loved one? For more information about the refi process, please contact me at Liz@jonesrealtysocal.com or visit us at JonesRealtysocal.com. 

For more information regarding this topic please watch the video below by Liz Jones.