Inman News

13 February 2018

Redfin study shows residents are leaving California and New York for central Sun Belt metros.

• More homebuyers currently living in expensive East Coast and West Coast cities are migrating inland to warmer, more affordable and more tax friendly cities such as Phoenix, Sacramento and Nashville.

A surge in migration from expensive, high-tax cities like San Francisco, New York and Los Angeles has benefited more affordable metros, such as Sacramento, Phoenix, Las Vegas and Nashville in the final quarter of 2017, according to a report released by tech-centric brokerage Redfin.

East and West Coast residents are becoming increasingly drawn to the mid-tier metros of the Sun Belt — or the Southeast and Southwest regions of the country — where lower taxes, mild winters and economic growth are the norm, says the report,

The brokerage expects this trend to continue in 2018 as tax reform settles in.

“People leaving coastal hubs in search of affordability has been a consistent trend for the last five years,” said Redfin chief economist Nela Richardson in a press release. “Late last year there was a twist. Many of the popular migration paths that we saw Redfin.com users exploring yielded tax benefits along with increased affordability.”

While Sun Belt metros welcomed the influx, large net outflows were experienced by larger cities, such as San Francisco (-15,489 of the one million users sampled), New York (-12,532), Los Angeles (-11,326), Washington D.C. (-3,892) and Chicago (-1,772), according to Redfin.

Seattle is also starting to feel the effects of migration. After being a magnet for newcomers since Redfin started tracking the data at the beginning of 2017, it now seems the city will start losing more people than it’s gaining, based on a net outflow of 258 in Q4, said the report.

Many Seattle residents are leaving for Los Angeles and, in some cases, Bellingham, Washington, Portland and Phoenix — each snagging 8 percent of people looking to leave.

Of course, it’s all relative. San Franciscans’ top in-state and out-of-state migration destinations were Sacramento and Seattle, respectively.

Meanwhile, New Yorkers’ top destination was Boston, Massachusetts, while those living in Washington, D.C., were heading for Philadelphia.

Agents should expect to be having more conversations with their clients about taxes and affordable housing in the coming year, it seems.

“Lower taxes and more affordable housing have historically drawn Californians away from the coast to places like Nevada and Arizona,” said Hermosa Beach-based Redfin agent Heidi Ludwig, in the Redfin press release. “The recent changes in tax law have been coming up in my conversations with prospective homesellers. Last year, several of my homeselling clients followed their employer, Toyota, to its new facility in Plano, Texas. I expect to see more people move in the same direction this year, but for different reasons including taxes and overall affordability.”

Drawing from annual property, state and local tax information from the report, 2016 Tax Rates and Tax Burdens in the District of Columbia: A Nationwide Comparison, Redfin is able to calculate what a move from one metro to another might mean from a tax point of view.

Las Vegas is a popular relocation move for Los Angeles families, Redfin found in Q4. The “typical home” in Las Vegas is priced around $333,000 less than a similar one in Los Angeles, and a family with a household income of $150,000 would save $7,785 in taxes.

Those in the New York metro area looking to relocate to Atlanta, on the other hand, might save $5,800 in taxes and $161,000 on a home, said Redfin.

Redfin based its analysis on a sample of more than 1 million Redfin.com users searching for homes across 75 metro areas from October through December,