leaving California

Saying goodbye to California

November 6, 2024 By Ryan Lundquist 19 Comments

Goodbye California. Many households have said that in recent years, and in a housing market that feels frozen with so many sellers sitting, one of the groups that still has incentive to sell happens to be residents leaving the state. Today, let’s talk about fresh migration stats. Any thoughts?

UPCOMING SPEAKING GIGS:
11/7/2024 Think Like an Appraiser (3 hours) Register here
11/19/24 Downtown Regional MLS Meeting Q&A 9am
11/20/24 Delia Real Estate Group (private I think)
12/5/24 Made 4 More Team (Exporting Data from MLS)
12/11/24 Gateway: Think Like an Appraiser (private)
1/15/25 Mike & Joel Event (details TBA)
1/16/25 Sac Real Producers event (details TBA)
1/24/25 PCAR Market Update (details TBA)
2/6/25 She Invests event (TBA)
2/11/25 MLS Meeting TBA
4/8/25 Culbertson and Gray (private I think)
11/4/25 SAR Main Meeting

WHY ARE PEOPLE MOVING?

There isn’t just one reason why people are leaving California, but some of the usual suspects include retirement, climate change, looking for a different lifestyle, economics, politics, job change, cashing out, etc… I’m sure there are other reasons too. What are you seeing the most?

FRESH STATS:

All visuals are based on the American Community Survey / Census Bureau. These stats are based on 2023, which is considered fresh for migration data. For my real estate friends, please feel free to use my visuals however you see fit (just don’t cut and paste my entire post verbatim). Thanks.

WHERE ARE CALIFORNIA RESIDENTS MOVING?

Is everyone moving? Nope. But the latest stats show 690,127 people left the state in 2023. Here’s a look at the top destinations where California residents relocated. By far, Texas was the number one destination (like almost every year). This visual only includes a handful of states, but see an exhaustive list below. Is this what you’re seeing with friends or in your business?

MIGRATION HAS SOFTENED SINCE 2021

Duh, we don’t need stats to show us migration has slowed because the stories we’re hearing and conversations we’re having confirm that already. Look, I definitely still regularly hear about outbound migration, but it’s nothing like stories galore from 2021. And while we’re on the subject, I’m not hearing anyone in real estate say things like, “Bro, all the buyers are from the Bay Area,” which also speaks to migration change. Anyway, here’s a comparison of top migration destinations for Californians in 2023 compared to 2021. It’s not a shocker to see the trend decrease, but there are a few states such as Florida, Tennessee, and Virginia that showed more outbound migration in 2023 (impressive). There could be other states with more movement too, and I can dig into that if there is demand (let me know).

REMOTE WORK IS CHANGING

Another consideration for why migration hasn’t been as robust lately is due to remote work starting to pull back from the peak in 2021. Image from ResiClub / Lance Lambert.

YES, MOVING TO CALIFORNIA HAPPENS

People do actually move to California. In fact, the latest stats show 422,075 people moved to the state in 2023. The narrative is that everyone is leaving and nobody loves California anymore, but that’s just not true. Of course, the joke is it’s former California residents moving back. Haha. By the way, Texas almost always comes in first place for exporting residents to California.

A COOL MIGRATION TOOL

Here’s a pretty cool migration resource from the San Francisco Chronicle to see where residents in specific California counties moved. You can track inbound and outbound migration from counties (and even out of state). Keep in mind this tool is based on IRS data instead of the Census Bureau like my post today. And thanks Joe Lynch for the head-up (heard it from you first).

QUESTIONS FOR REAL ESTATE PROFESSIONALS

Many prospective sellers are stuck and unable to move since the math doesn’t work right now, but many of those moving out of state have incentive to list right now despite higher rates. My advice? Find those people.

– Who are your clients going to be over the next two years?
– Who is coming to the market?
– Who is leaving the market?
– What steps do you need to take to position yourself for the future?
– Where can you meet future clients?

WHERE ARE CALIFORNIANS MOVING THE LEAST?

Here’s a top list of areas where California residents are moving the very least. Does anything surprise you? And what works better? Horizontal or vertical bars?

COMING TO CALIFORNIA THE LEAST

And a top list of who is moving to California the least. North Dakota, where is the love? Haha.

BRO, I WANT TO SEE AN EXHAUSTIVE LIST

Okay, here are two more visuals to show migration data for every state instead of just top destinations above. These are probably too large for social media, but I’m anticipating questions about other states, so I’m trying to be thorough and avoid hate mail.

I hope this was helpful.

Questions: Does anything surprise you about the stats above? Why are people leaving and coming? Did I miss anything?

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Leaving California. Some fresh migration stats.

April 25, 2023 By Ryan Lundquist 18 Comments

Leaving California. That’s a buzzworthy topic. Let’s talk about migration today. I have lots of visuals and a few resources to share in case you’re in a different state and looking for data. I’d love to hear your take in the comments.

UPCOMING (PUBLIC) SPEAKING GIGS:
5/4/23 Housing Market Q&A 12-2pm
5/10/23 Empire Home Loans event TBA
5/18/23 SAFE Credit Union event TBA
5/22/23 Yolo YPN event (only for YAR members)
6/1/23 DJ Lenth Event TBA
7/20/23 SAR Market Update (in-person & livestream)

SOME LISTINGS DUE TO MIGRATION

Right now, it’s very difficult for many homeowners to list their homes because the price to replace a home is so much higher compared to the current monthly payment with a sub-3% rate. But there are still many owners who are going to list for lots of reasons including inheriting property, a change in family status, moving up, moving down, selling an investment, job change, economic pain, etc… And leaving the state is also a lifestyle category that we want to watch. In other words, outbound migration is a viable reason that some people today will sell as lifestyle needs and wants collide with market conditions. To be fair, not everyone who leaves the state is a homeowner, and not everyone who exits will sell their property either. Real estate friends, are you seeing listings due to migration? Do tell.

POPULATION CHANGE IN SACRAMENTO REGION

How has population changed locally? According to the latest U.S. Census Bureau stats, Placer County is clearly the big winner with the highest population growth, and Sacramento County lost population over the past couple of years. For real estate professionals, think about areas where people are buying and selling as you consider where to focus your business. By the way, I pulled the following stats here in case you want to make a table like this. There are stats available for every state.

PEOPLE ARE LEAVING CALIFORNIA (AND COMING)

When listening to media narratives, one might think people are ONLY leaving the state, but that’s not true. During the pandemic we saw a clear increase in migration out of California, but let’s not forget people who are entering the state too. When looking at data from the California Policy Lab during 2020 and 2021, about 1.92M residents moved out of California and 1.37M residents moved into California. This is based on credit card data for people who changed locations (interesting way to think about migration, right?). Anyway, here’s a visual from the California Policy Lab that shows exits (blue) and entrances (yellow). This data only goes through the end of 2021 unfortunately, but migration data takes a long time to publish. I’m interested to see where these lines go as we get more data.

MOVING BACK

People do actually move to California as the image above shows, and part of this stat is people moving back. Typically the number one destination for Californians is Texas, and often the number one sender of residents to California is Texas too. The joke is that it’s people who are simply moving back, but I haven’t seen stats to substantiate that exactly. I may push out some fresh stats soon to help show who is moving to California. Stay tuned.

THE CENSUS FLOWS MAPPER (A TOOL TO USE)

The Census Flows Mapper is a cool tool where you can pull up any county in the United States and track inbound or outbound migration. This data is based on the American Community Survey. The bummer is the latest stats only go through 2020, but I’m still excited that they finally added 2020 into the mix. Anyway, check out Placer County. Many counties send residents to Placer County, but Sacramento County is the number one sender.

MIGRATION STATS FROM PUBLIC POLICY INSTITUTE OF CA

Okay, some fresh stats. Who is leaving California? The Public Policy Institute of California has some stellar visuals they recently published. Having more residents leave the state than coming to the state really isn’t anything new as it’s been happening for decades (see first visual), but a declining population lately is a big deal since there has been a difference in other factors that affect population. Remember, population isn’t just about exits, but it’s also about entrances to the state, births, deaths, and international immigration. Thus, when only focusing on exits, we’re missing other components of population. But backing up, there has been an increase in higher-income residents leaving lately. Well, and residents of all income levels.

STATS FROM PATRICK CARLISLE

Patrick Carlisle is the chief market analyst with Compass in the Bay Area, and he put together this chart for Sacramento. This considers data from 2016 to 2020. For locals, I recommend following Patrick on LinkedIn because he puts out great charts. It’s important to stay in touch with Bay Area trends if you are working in Sacramento because there is a real estate relationship between the Bay and Sacramento (even though there is some tension right now between Kings and Warriors fans).

LINKEDIN MEMBERS CHANGING LOCATIONS

This is an interesting way to think about migration. While it’s only limited to people with a LinkedIn profile who moved locations, it’s pretty cool to consider. Check out other cities here from LinkedIn if you wish. Keep in mind Sacramento always has a relationship with San Francisco, so it’s not a surprise to see Sacramento higher on the list. I personally think migration has slowed, which I’ll talk about below, but Sacramento is still receiving residents from the Bay Area.

HOME SIZE IS A TELLING TREND

During the pandemic there was a spike in home size as buyers targeted larger and more expensive homes. Part of this was clearly Bay Area buyers moving to Sacramento during 2020 and 2021, but this could’ve also been buyers moving up to purchase their ideal home, so I wouldn’t say this was just the Bay Area. I don’t have deep migration stats to perfectly unpack this trend, but I can say the home size spike coincided with many stories from the real estate community about increased Bay Area migration. And we’ve seen this spike subside since the spring of 2021, which also lines up very well with the stories from the trenches of real estate regarding Bay Area activity.

THE WORD ON THE STREET

Today I’m NOT hearing anyone say things like, “All the buyers are from the Bay Area.” I used to hear that quite a bit in recent years, but that’s just not the case. This is only anecdotal, but there is something to it. I even spoke at the office of a big local builder a few months ago, and they echoed a change in the buyer demographic in that there have been fewer Bay Area buyers lately. In short, it looks like the pandemic migration bump has faded. At some point we will get some robust stats to potentially back this up, but for now all we have are stories from escrows. We’ll see what the numbers say eventually.

BRO, A BAY AREA UNICORN WILL BUY MY HOUSE

The danger about narratives is they can affect perception. So, if all sellers hear about is Bay Area buyers, they begin to expect a unicorn buyer to swoop in and drop fat stacks of cash on a house. My advice? Price for the market. Not the unicorn. If you get lucky with a lofty price, that’s a bonus. But don’t expect someone to overpay. And in today’s market, it just doesn’t feel like we’re getting the same migration.

WHEN MIGRATION DATA ISN’T MIGRATION DATA

I love Redfin as a data source. They put out incredible data. In fact, if you aren’t following their weekly trends, why not? All that said, I’m not a fan of the way their search queries stats are being used. To be fair, the misuse is often the media and real estate community, so this isn’t a Redfin issue per se. Anyway, here’s the issue. Sacramento has tended to make the top of the list for locations buyers are targeting based on search queries on Redfin’s website. Yet, we’ve literally had our worst volume ever while simultaneously making the top of the list for places buyers want to move. Thus, there is a disconnect between people who are searching for Sacramento on Redfin’s website and what is actually happening. Ultimately, this tells us search queries are NOT always actual buyers (not yet at least). Granted, this data is super interesting and we should be talking about it, but it can also create a false narrative when the media and real estate community conflate “queries” with “buyers.” I know, I’m such a killjoy. Again, nothing but love for Redfin for their data. And shoutout to Taylor Marr, Redfin’s Deputy Chief Economist (follow his weekly Substack).

I hope this was helpful.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Questions: What are you seeing right now in the trenches of escrow with migration? Do you know people who are leaving the state or coming to the state? I’d love to hear your take.

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Real estate trends to watch in 2022

January 3, 2022 By Ryan Lundquist 41 Comments

What’s the real estate market going to do in 2022? Let’s talk about some of the emerging trends. Scroll quickly or digest slowly. Anything to add?

January public speaking gigs:

January 12: Top Producer Panel in Granite Bay (sold out)
January 18: SAR Big Market Update (sign up here)
January 19: PCAR WCR Big Market Update (details TBD)
January 25: Joel Wright’s Market Event (details TBD)

TRENDS TO WATCH IN 2022:

Continuation of a lopsided market: Many were hoping the housing market would feel normal by now, but that’s just not the case. In short, buckle up because this year is poised to begin with an ultra-competitive feel. We’ll see how the year ends, but we are starting with heavy competition.

Upward price pressure: There is still pressure on prices to rise due to an imbalance between supply and demand. We basically have a supply issue in that there aren’t enough properties getting listed, but we also have lots of demand stemming from historically low mortgage rates and other factors.

The color of the year: Pantone‘s color of the year for 2022 is called Very Peri and it combines blue hues with violet. I guess as a non-fashionable dude I would say this is purple-ish (sorry to offend any designers). Anyway, will we see more color this year? Honestly, I hope so because these past two years have been dark, so a little cheer is okay in my book.

Slower price growth is expected: Everyone and their mom has predictions about price growth and I typically stay away from specific crystal ball prophecies. But I will say it’s likely we’ll see a slower pace of appreciation this year compared to last year in light of atypically-high price gains in 2021, growing unaffordability, and anticipated mortgage rate increases. In other words, the median price grew 19.6% last year in the Sacramento region and it’s not likely we’ll see that again this year (hopefully not).

Bubble prophets: As we enter our eleventh year of price growth I suspect housing prophets to preach doom and gloom. My advice? Be careful about people who continually gravitate toward dark housing themes and punt predictions down the road when they don’t come true. Instead, listen to actual stats. Also, recognize markets go up and down, so at some point we would expect for prices to no longer rise since that’s what normal looks like.

Some buyers are worried about buying at the top: There are buyers who are legitimately worried about purchasing a property in 2022 because they wonder if the top is near. Look, nobody knows the future and this is a big conversation that only brings up more questions. Here is a post I wrote with some things to consider as a buyer right now.

Divorce: All the divorce attorneys I know are really busy. While I don’t have divorce statistics (difficult to get), I suspect the pandemic has caused life reflection and many couples have decided to call it quits. Of course, having years of equity may propel this decision for some too.

We won’t get back to normal listings: Many of us are exhausted about talking about the pandemic, but the truth is COVID-19 has been a game-changer for real estate as we’ve seen fewer sellers listing their homes since this all began. Anyway, for this year hopefully we’ll see more listings than last year, but unless something unexpected happens it’s hard to imagine we’ll get all the way back to normal (I hope I’m wrong).

iBuyers will gain market share: Here’s the bottom line. Institutional money is targeting residential real estate and its going to keep trying to get a slice of the pie. While tech flippers don’t have a massive share of the market, for now it looks like they’re going to keep trying to crack the code. Zillow failed last year, but let’s be careful not to pin their failure on the iBuyer model itself because Zillow was simply overpaying. By the way, keep an eye out for OfferPad as a new iBuyer in California. Lastly, here’s the number of units owned by the following companies in the region: Opendoor (312); Redfin (52); Zillow (500); Invitation Homes (157 recorded since May 2021).

Affordability is heading the wrong direction: After such massive price gains recently it’s no surprise to see diminishing affordability. The California Association of Realtors states only 24% of households in Q3 2021 could afford the median price in the state. Therefore, I expect to hear more conversations about the struggle of affording a home. Yet as painful as it is for some individuals to be priced out of the market, so far we haven’t seen any mass exodus of buyers. The key here is to watch closely what happens with sales volume and whether local buyers are closing deals or not.

Leaving California is going to look good this year: The ability to work from home, early retirement, and a decade of equity gains will likely fuel more migration this year. Well, and people leave the state for other reasons too. I shared some migration stats at the end of last year and I’ll update my charts once the Census Bureau publishes data (they’re delayed). Ultimately California lost population last year, which is a huge deal. But to be fair it’s important to recognize population stats aren’t just about people leaving. Remember, population has to do with inbound migration (people coming), outbound migration (people leaving), the birth rate, and the death rate. All I’m saying is this year when having migration conversations, let’s consider all of these factors. Where are people you know moving to? If you are considering moving, what is your motivation?

Mortgage rates rising can affect the feel of the market: Nearly everyone has predicted an increase in mortgage rates this year. Assuming rates do rise (we’ll see), this is bound to help soften some of the housing insanity and remind us how sensitive the housing market is to rate changes. I’m not saying rates are going to shoot up dramatically, but do you remember how dull the market felt in 2018 when rates went above 4.5%? This is worth noting because recent history reminds us the housing market is sensitive to rate changes. In my mind we hit an inflection point in mid-Summer 2020 when rates went below three percent. At that point the market started to feel more like an auction with intense bidding wars due to excessive demand. The struggle is if rates rise to 3.6% like Redfin thinks, that’s still incredibly low and probably not enough to make the market feel “normal” so to speak. However, I suspect a rise to the mid threes would at least be enough to take away some of the insanity we’ve felt lately (some). Check out Len Kiefer’s visual to show how ridiculous rates have been since 2020.

Saying goodbye to single-family zoning: A few cities have amended single family zoning rules in recent years, so this is a brewing national trend to follow. In California SB9 is now in effect and this law allows property owners to build a duplex on any residential lot or subdivide to build up to four units. I tend to think this isn’t going to change the landscape of neighborhoods because most property owners won’t do this because it’s expensive. But it’s important to watch this as a trend popping up in patches throughout the country and pay attention to any talk of building multi-units within single family zoning.

Racism in real estate: I expect we will see many more headlines about racism in real estate. Much of the conversation has focused on appraisers, but it will likely spread to other professions within real estate too. My advice? Listen, be a part of the conversation, take inventory of the words you use, and change as needed. If you are local and want to understand some of the history of redlining and restrictive racial covenants, check out this UC Davis talk by Dr. Jesus Hernandez. And when it comes to appraisals, please be aware there are many reasons why an appraisal might come in lower than expected (or too low). I don’t say this to dismiss the seriousness of claims of racial bias we’ve all seen in the media. I’m just saying I’ve also seen some flippant accusations this year and that’s not right.

Other: What did I miss? What’s on your mind for the year?

RECAP NEXT WEEK: Stay tuned for an annual market recap post with new visuals. Check out my social media this week for some previews.

I hope this was helpful or interesting.

Questions: What else do you think will be important in 2022? Did I miss something? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Real estate trends to watch in 2020

January 7, 2020 By Ryan Lundquist 27 Comments

What’s the real estate market going to do in 2020? Let’s talk about some of the bigger emerging trends. Scroll quickly or digest slowly. Anything to add?

Class I’m teaching on Jan 16th: I’m doing a big market update at SAR from 9-10:30am. We’ll talk through where the market is at, tips for talking to clients, and ideas for where to focus business. I’d love to see you there. Sign up here.

TRENDS TO WATCH IN 2020:

Affordability: Buyers are struggling to afford higher prices. Despite positive economic news lately the truth is home price growth has outpaced wage growth and rents have also risen substantially. This means many buyers and renters are having a difficult time with higher prices.

Blue is the color of the year: This year the Pantone color of the year is Classic Blue. Does this mean we’ll see more blue? Maybe. Maybe not. In recent years we’ve already been seeing blue in kitchens especially. No matter what, when looking through home magazines there are many vibrant colors instead of just gray and white.

Sliding sales volume: A byproduct of shrinking affordability is a smaller pool of buyers able to handle higher home prices. This is something to watch and even more important than prices in my opinion. Often we fixate on what prices are doing, but the number of sales happening is the best indicator of the temperature of the market. Are buyers putting their foot on the gas or brakes? Show me the number of sales and I’ll let you know.

Addicted to low rates: We’ve had eight years of historically low rates and we’re now feeling the effects. Prices have risen dramatically, people are staying in their homes longer, and the market feels hyper-sensitive to rate changes. Thus what happens with mortgage rates this year will play a huge role in how the market feels and unfolds. Check out this mortgage rate table from Len Kiefer below (or here). Can you see why 2018 felt so dull? I know it seems crazy that buyers would freak over rates just above 4.5%, but that’s where we’re at (and climbing rates lessens affordability).

Ending single family zoning: There’s a movement to do away with single family zoning in order to help create more housing. In 2019 we saw Minneapolis do this by allowing up to three units to be built on a single family lot, and this is definitely something to watch in many markets across the country. By the way, if you own land, could it become more valuable if zoning changed?

Tech company invasion: It almost feels like there’s a tech bubble because so many companies are trying to get a piece of the real estate pie. On one hand some start-ups are going to fail because their algorithms are designed for labs rather than a relationship-centric real estate market. On the other hand some tech companies are poised to gain market share this year. In Sacramento Opendoor looks to have sold about 1% of transactions last year and they currently own 90 homes. I’m guessing Zillow is aiming for 1-2% of market share this year. Will they be successful? I’ll let you know next year… In all of this it’s good to remember the traditional model represents the vast bulk of the housing market despite the massive attention these companies are getting. Yet we can’t ignore this trend because it’s bound to spur the traditional model to become more efficient.

Overpricing will still be an issue: Price growth has clearly slowed, but sellers still think it’s super hot. This is a glaring issue because sellers tend to think they’re going to get ten offers at any price they choose from very desperate buyers longing for their home. It’s like sellers have shown up at the end of a movie and they have no idea what the movie is about (but they think they do). My advice? Price for the dynamics of the current market rather than a hot market from yesteryear.

Buyers grow even pickier: In 2019 there was a greater sense of hesitancy about the market. Lots of buyers felt leery. Am I buying at the top? Am I going to get stuck if the market changes? What does the future hold? These questions aren’t easy to answer of course until the future actually happens (sorry, but it’s true). The reality is uncertainty is bound to cause buyers to become even more discerning about condition, location, paying the right price and waiting for the right house.

Staying put instead of moving: We have a market of homebodies where nobody is moving. Okay, that’s an overstatement. It was reported recently that homeowners are staying put an average of thirteen years compared to just eight years a decade ago. There’s simply less incentive to sell in light of low mortgage rates and higher prices. Why move if you’re sitting pretty? This of course is one reason why we’re not seeing as many listings.

Checking out of California: Despite some residents staying put, this year there will be lots of Californians moving to all the usual places like Texas, Nevada, Arizona, Oregon, Idaho, etc… For the real estate community, I highly suggest you consider who has incentive to move this year. Remember, a California pension goes a long way in a lower-priced state. Check out a deep piece by CalMatters and you can dig around the U.S. Census Bureau site all day to try to find some data that might be insightful for your business. On a related note, let’s keep an eye on areas plagued with rising fire insurance too as that can unfortunately force migration.

More 1031 Exchanges: We’ll likely see more 1031 Exchanges this year as investors move their money. In my experience there are more in an up market than a down market, and we’re still going up, so be ready. I’ve seen quite a few Bay Area investors park their money in Sacramento, and I’ve seen some Sacramento investors move their money to lower-priced areas. That’s the dream, right? Cash out when prices are higher and buy something better elsewhere.

Consolidation in real estate: Having lower sales volume can be painful for both mortgage companies and real estate offices. Thus we’re likely to see some banks continue to lay people off, mortgage companies will join forces, and some real estate brands and brokerages will need to get creative about staying afloat and trimming the fat with less purchases flowing.

Election year hype: “It’s an election year, so it’s going to be a strong year.” That’s the sentiment we often hear in the real estate community, but an election year isn’t the silver bullet to alter the bigger trend the market is already experiencing. I have a deep blog post coming soon about this.

Flipping seminars: There will be no shortage of celebrity flipping seminars this year to teach the “secrets” of getting rich in real estate.

The narrative of Boomers & Millennials: Be on the lookout for Boomers who need to downsize and Millennials trying to get into the market. We’re bound to see lots of generational conversation this year as Boomers age and Millennials “come to age” so to speak to get into the market. One looming issue that’s been getting more press lately is there is an enormous Boomer population whereas GenX was a smaller generation. Thus at some point it makes us wonder who is going to buy the homes of aging Boomers in years to come. This is something to watch more thoroughly over the next decade. And to make a safe prediction, we’re definitely going to keep seeing “Okay, Boomer” references in articles.

Well, that’s what’s on my mind. I could go on and on, especially about things like fire insurance woes, PG&E, Prop 13 reform, rent control, cannabis laws, etc… But at some point I have to stop.

By the way, click to see 2019 market recap images for a few local counties.