the average renter’s income is stretched thin by inflation, and over 40 Renters are considered cost-burdened because they are spending 30% or more of their income on housing costs. People are looking to slash their budgets by any means—even if it means moving in with roommates, family, or in more affordable areas out of state. latest Rent.com Migration Report The South and Midwest shows growing interest as many renters are looking to leave the West and Northeast.
Rent.com researchers analyzed data for July, August and September to determine the lead delta for each region, state and metro. A lead is a potential tenant who contacts a property manager or landlord to express interest in a property. The lead delta is the numerical difference between outbound and inbound leads as a share of all leads in the region. It is important to note that these figures do not represent actual migration but provide a good insight into areas of high demand and interest, which correlates to actual migration patterns.
People leave for a variety of reasons, which are not measured by reports. They may move to be closer to family or start a new job. Trends show that higher rents are pricing out some renters in certain urban areas, and they are looking for rental homes in nearby metros and states, as well as in desirable areas in the South and Midwest. Investors can look at popular areas with positive lead deltas and where rental demand is high, and price-to-rent ratio is below.
Where are the tenants leaving?
The following metro areas had the highest outbound lead deltas:
- Chicago, Illinois (-46.00%)
- Traverse City-Cadillac, Michigan (-43.32%)
- Atlanta, Georgia (-30.91%)
- New York City (-26.49%)
- Charlotte, North Carolina (-26.23%)
Outbound Lead by Metro – Rent.com
Chicago rose to the top of the list this quarter. The city’s foggy winters may drive residents elsewhere, as may its reputation for crime. But high rents are another problem—Chicago’s most expensive city in the Midwest. It’s also much more affordable than New York, where rent prices have increased by about 25% year-over-year, but relatively expensive compared to Illinois and surrounding areas of the Midwest. In Atlanta, rents are up nearly 14% year-over-year, which may cause residents to seek homes elsewhere.
The following states had the highest outbound lead deltas:
- Illinois (-46.41%)
- New York (-44.04%)
- Maine (-17.91%)
- Georgia (-17.14%)
- Colorado (-16.43%)
Where are the tenants looking to move?
People inquire about nearby regions and states when considering moving, but the southern states are attracting interest from afar. For example, renters in Chicago inquired about Midwestern metros such as Milwaukee, Minneapolis-St. Paul and Indianapolis, but showed equal interest in the Dallas-Ft. Worth and Nashville. New York City renters primarily looked to other Northeast metros, but also expressed interest in Georgia communities.
The following metro areas had the highest inbound lead deltas:
- Biloxi-Gulfport, Mississippi (51.15%)
- Huntsville-Decatur (Florence), Alabama (48.41%)
- Madison, Wisconsin (42.32%)
- Waco-Temple-Bryan, Texas (41.55%)
- Springfield, Missouri (40.88%)
Inbound Lead By Metro – Rent.com
Chicago residents inquired about all five of these cities and were particularly interested in Biloxi-Gulfport. Other metros attracted residents from neighboring areas, but renters from notoriously expensive areas also showed interest in the southern and midwestern metro areas.
For example, residents of Atlanta, New York and Chicago inquired about Huntsville-Decatur. Huntsville was named the best place to live us news, and Madison also made the top 20. Madison fielded interest from Los Angeles, New York, Denver, Milwaukee and Chicago. Waco-Temple-Bryan also brought inquiries from Chicago and New York, but most came from within the state. Leads to Springfield came from St. Louis and Kansas City, but also from Chicago, Denver, and the Dallas-Ft. worth.
The state-level trends were similar. Many of the Illinois tenants wanted to live in Illinois or neighboring Indiana, but some also expressed interest in Texas and Tennessee. Many New York and Maine renters were interested in staying in their respective states or moving to New Jersey, while some also sought homes in Florida, Pennsylvania, and Ohio. Renters from Georgia inquired about properties in the South, while renters from Colorado looked at properties in neighboring Utah as well as the Midwest. Missouri, Wisconsin, and Michigan were all popular sources for outbound leads from Colorado.
The following states had the highest inbound lead deltas:
- North Dakota (38.7%)
- New Jersey (36.35%)
- Louisiana (35.71%)
- New Hampshire (31.30%)
- Mississippi (29.80%)
People are looking to move to North Dakota from all over the country. More than a quarter of the clues came from states as far away as Illinois, New York, California and Texas. New Jersey mostly brings in leads from within the state or from New York or Pennsylvania, but some Southern renters expressed interest in New Jersey as well.
Louisiana took the biggest lead over Texas. Other leads came from within the state, but about 10% of inquiries came from the Midwest. Most people looking for homes in New Hampshire lived in the state or in Massachusetts or New York, but some renters from southern states also expressed interest. Tenants from Louisiana, Georgia and Alabama also looked at properties in Mississippi, but Illinois was the second largest source of leads in the state besides Mississippi.
How migration affects housing prices
Analyst at multiple firms House prices are expected to fall across the country in 2023, but how hard each area will be affected will depend partly on the demand for homes. Housing demand increases when more people are moving into an area than are moving out of it. If there are not enough homes to accommodate all the people moving into an area, the lack of supply relative to demand can act as a floor that prevents housing prices from declining in an economic downturn. In fact, some southeastern markets that are drawing high-income homebuyers away from costlier regions such as the West Coast and Northeast are still appreciating rapidly, while price growth is slowing in other overvalued markets. corelogic report,
general migration trends
When a city increases in popularity due to factors such as incentives for businesses, a booming job market with high-paying jobs in a variety of industries, and a vibrant culture with growing entertainment options – rent prices tend to rise. They may remain high for some time, even as people continue to pay the price as demand from high-income renters remains high. But ultimately, the increase in prices often becomes unsustainable. As people start moving out of the area where prices have skyrocketed, demand for properties goes down and prices may fall.
This trend is even more relevant now that remote work has become so prominent. In 2019, only about 5.7% Americans mainly worked from home. By 2021, this figure is set to triple to 17.9%. With the freedom to live and work anywhere, more people are migrating to nearby areas—or to different states entirely—to catch the drop in prices. This is illustrated by higher inbound and outbound lead deltas this quarter than Last,
This change in cooling prices is already happening Austin, which has been extremely hot due to the pandemic – the reduction in rent there has exceeded the national average. In the Denver area, you can see the change in action. While rent prices are still rising year on year in the city, price rise has slowed down More in Denver than any other city in the metro. In the more affordable surrounding suburbs, meanwhile, rent prices are skyrocketing. Will Denver start copying Austin? Or will the market remain competitive? Denver Metro’s Lead Delta of -23.75% suggests that demand may be low.
How investors can use migration data
When home price growth exceeds the norm, prices follow the principle of mean reversion – but investors can maximize their returns by buying when prices are low and selling when prices are high. One way to achieve this is to try to stay ahead of migration trends. If you can find the next locale that is likely to attract residents from other areas due to more affordable pricing relative to nearby cities and a thriving economy, you may be able to capture those skyrocketing rents and reap the appreciation. may be capable.
Huntsville is a classic example of a desirable location where housing demand is rising, but prices are low. But perhaps the best strategy is to look two steps ahead in your planning. Where will people go if Huntsville gets too hot?
Since investors cannot predict the future, there are always risks, and migration trends should not be the only data influencing decision making. But the more information you can gather when investing in a new market, the better. Following migration trends is a strategy that can help investors focus on the future and avoid jumping straight into hot markets that may soon decline.
Click here to see the methodology used in Rent.com’s report.
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Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
