With Hewlett Packard — the tech giant that effectively started Silicon Valley — moving to Houston, and the Rose Bowl swapping Pasadena for Arlington, Texas, in 2021, there’s more than a population migration going on: This is a full cultural shift — and the steady influx of people moving from California to Texas shows no signs of slowing. So what’s behind this ongoing trend, and what will it mean for Texas real estate? We take a look at some of the key drivers behind the migration.
The nationwide trend toward Texas
Although Texas only just makes the top 10 of “inbound” states (those with more incoming than outgoing populations), the actual numbers are staggering. More than half a million people moved to Texas from other U.S. states in 2019, according to a report by Texas REALTORS®. On top of that, another 200,000 people from outside the U.S. made Texas their home. This is no statistical blip, either: Arrivals have surpassed 500,000 for the last seven years.
The pandemic created its own pattern of redistribution, with many newly remote workers fleeing expensive inner-city properties and upsizing to more comfortable homes in less-crowded areas. Texas topped the table once again in this respect, with Williamson County recording the nation’s highest gain. From March to October 2020, 37 percent of new arrivals in Texas came from Arkansas, 20 percent from California, with Illinois in third at 6.5 percent. Looking at the 10-year trend, however, California spearheads the influx, with more than 600,000 quitting the Golden State for the Lone Star State during the last decade.
Why are Californians moving?
Not everything is bigger in Texas, at least for now. California tops the 50 U.S. states in terms of economy and population, and the West Coast still has a distinct allure as a desirable place to settle. So why have so many Californians moved to Texas each year in the last decade? Some analysts point to the Tax Cuts and Jobs Act of 2017 as a key catalyst, as it disproportionately affected California, the state with the most taxes at state and local levels. Rising house prices fueled by low interest rates and meager inventory are another factor.
In 2019, the median house price in California hit a new record of $712,430, almost half a million more than the national average. Property owners in California are seizing the opportunity to cash in and relocate to states with lower taxes and shorter commutes, while those squeezed out of the property ladder, particularly in San Francisco, San Diego and Los Angeles, are giving up on the Golden State altogether.
New York is no longer top of the bill
New York State recorded its first population fall since the 1970s in 2020, with the highest rate of outbound movers (66 percent) than any other state. High property prices and taxes are again largely the reasons, but a particularly harsh pandemic experience also propelled normally proud New Yorkers either to the suburbs or out of state. For years, Florida has remained the most popular destination for New Yorkers, with just more than 5 percent opting to settle in Texas instead.
Why are people moving to Texas?
A lower cost of living seems to be one of the big draws to the Lone Star State, even more so when compared to states such as California or New York. The two most affordable cities in the U.S. based on median house price and income, Harlingen and McAllen, are both in Texas. But there’s as much leveling up as doubling down going on. Silicon Valley icons such as Oracle, Tesla and Hewlett Packard are not moving to Texas simply because it’s cheaper. They are responding to a stable economy and young, educated workforce, particularly in the tech hotspots such as Austin’s “Silicon Hills.”
What migration means for home sales
A steady influx of new arrivals is not the main cause of the house-price boom in Texas. That honor goes to a strong employment market and comparatively robust quality of life. But given the significant disparity between Californian and Texan median house prices, the considerable spending power of Californian incomers will drive up demand and prices in the more affluent luxury sectors. The signs are already there, trickling down into the overall market. The median sale price in North Texas reached a 10-year high of $290,000 in 2020, while the median price for the state overall reached a record $274,800 in November 2020. The highest increases were in Austin and San Antonio, vibrant 18-hour tech hubs with a thriving talent pool.
It’s important to temper any overreaction about the Californian exodus to Texas with the reminder that between 435,000 and 471,000 people move out of state each year, so the net gain is only around 100,000. Nevertheless, Texans can look forward to welcoming the West Coast to the Southwest for some time to come.