Rebecca Chen· Reporter Tue, June 13, 2023, 2:07 PM EDT
Housing remains competitive in the South as Americans continue to flock there, pushing up home prices in the region.
“Where is the population growing? Florida, Texas, the other kind of warm weather, low-cost, low-tax states,” Craig Lazzara, managing director at S&P Dow Jones Indices, told Yahoo Finance Live (video above). “So you have this big demographic surge moving toward the Southeast.”
Four Southeast cities of the 20 nationwide tracked by the S&P CoreLogic Case-Shiller index led year-over-year price growth in March. The home value index for Miami soared 7.72% year over year, followed by annual increases of 4.85% in Tampa, Fla., 4.55% in Charlotte, N.C., and 4.51% in Atlanta.
The popularity of the South contrasts with the West where some cities showed double-digit annual declines, such as Seattle (-12.43%) and San Francisco (-11.19%) — where homes are selling for hundreds of thousands of dollars less than last year.
The robustness in the South underscores how often real estate markets are as dependent on local factors like climate, taxes, and costs as much as national ones such as inflation or mortgage rates.
Domestic migration
Home price increases followed these migration patterns, which only accelerated during the pandemic when the working-from-home culture allowed Americans to consider further flung places to call home.
“This country has been moving south for decades. It’s not something that just started because of Covid,” John Sabelhaus, a nonresident senior fellow at the Brooking Institution in Washington DC, told Yahoo Finance. “You can go back to the 60s where you start to see boomtowns — Houston, Dallas, Atlanta, Jacksonville [in Florida]. These towns have really grown over the past several decades.”
Florida saw the highest net domestic migration in the last two years. Nearly 444,500 people moved to the Sunshine State between July 2021 and July 2022; the cohort increased Florida’s population by almost 2%, according to US Census data.
Florida cities also saw home prices surge across different metro areas. The median sales price in Miami was $575,000 in April, according to data from Redfin, an annual increase of 7.5%. This also marked a staggering 80% growth since April 2018, when the median home price was $318,650.
Tampa saw similar gains. April’s median home sale price sat at $417,500 there, per Redfin, a 4.4% price increase versus last April and an 85% increase from five years ago.
“You would expect to see housing prices to be relatively strong in areas where there’s internal migration, prices to be relatively weak where there’s outmigration,” Lazzara said, “and that’s more or less what we’re seeing.”
The S&P Case-Schiller housing index also showed strength in Charlotte and Atlanta markets. Their respective states each welcomed many more residents in 2021 and 2022.
North Carolina received nearly 100,000 new residents, upping its population by 1.3%, the third-highest net migration in 2022 after Florida and Texas. Georgia added almost 81,500 newcomers during the same period, the sixth highest in the nation, while bumping up its population count by 1.2%.
“People don’t like to live where it’s cold,” Sabelhaus said.
Lower cost and remote work
Work-from-home culture was one of the biggest reasons why Americans have been able to move, according to a study last year from UpWork. Many employees with the flexibility to work remotely can now choose their home based on warmer weather and lower cost rather than proximity to their office.
“Are people able to have jobs at Apple and Google and NVIDIA, the big Silicon Valley companies, and have to be there?” Lazzara said. “Because clearly, one of the things that’s driven a lot of the trends in the past several years has been the rise of remote work.”
More than 16% of Florida residents work from home, a cohort that more than doubled compared with 2019. And aside from new residents bringing in remote jobs, Florida has also seen employment opportunities grow. In 2022, Florida had more jobs than New York for the first time ever, recording 9,578,500 non-farm employment, 2,400 more than the Empire State.
Although home prices are rising due to demand in the southeast cities, one thing that reassures the movers is relatively lower income tax rates.
For instance, Florida charges no individual income taxes, a stark contrast to New York where individuals pay between 4% – 10.30% in state taxes on top of New York City taxes between 3.078% to 3.876% if they live in the city. That’s also on top of the federal taxes. (Still, new homeowners need to factor in the rising cost of property taxes and homeowners insurance in some of these Southern states.)
“I have three colleagues normally in our New York office every day who are in Texas and Florida now. Those are just the three I know about,” Lazzara said. “Write that on a large scale and it’s a difficult environment for [expensive states] to overcome.”
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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