In the first episode of Season 4 of Core Conversations, Host Maiclaire Bolton Smith and CoreLogic Chief Economist Selma Hepp dive into the aftermath of the pandemic's influence on migration patterns and how remote work has reshaped the housing landscape.

While the pandemic may no longer dominate headlines, it continues to exert its influence. Remote work opportunities flourished, prompting an exodus from high-cost coastal metros to more affordable regions. This migration then spurred home price inflation across the country, while also altering income distribution, patterns of gentrification and urban sprawl.

The consequences for major cities are profound. Already, large metros have been presented with challenges in retaining high-wage workers, navigating shrinking tax bases and facing declining home prices. Conversely, smaller towns have experienced upticks in wages and local spending.

This episode explores the ripple effects of these changes, discussing how cities like San Francisco and New York are adapting and how smaller, more affordable metros are seizing opportunities. Similarly, going forward, it will be critical to ponder the long-term consequences of remote work on cities' functions and how they can reinvent themselves.

• LinkedIn Remote Work Study
• Fannie Mae study: Remote Work and Housing Location Preferences
• Selma Hepp's Op-Ed on pandemic migration
• Read CoreLogic Intelligence

Copyright 2024 CoreLogic

In This Episode:

2:29 – What is "pandemic migration" and how did remote work enable this trend?

4:05 – Will there be any long-term consequences for cities and towns from remote work migration?

7:06 – What are the economic and housing market implications of migration to more affordable areas?

10:28 – Erika Stanley goes over the numbers in the housing market in The Sip.

12:13 – What is the future for America's high-price cities and tech hubs?

16:11 – How will migration influence the future of small towns?

17:33 – Erika Stanley reviews natural catastrophes and extreme weather events across the world.

18:40 – How have U.S. home prices fared in the face of this continued migration?

22:44 – How have high interest rates affected migration trends and home prices?

Links:

• Read CoreLogic Intelligence
• Register for INTRCONNECT 2024

Up Next: 2023 Economic Look Back: A Tale of Two Housing Markets

Find full episodes with all our guests in our podcast archive here: https://clgx.co/3zqhBZt

Selma Hepp:

Well, unfortunately, high mortgage rates have brought home sales to a hold, particularly existing home sales. But when we look at mortgage application data and the share of applicants that are out-of-metro, they remain at the same rate that they were during the pandemic. So about a quarter of applicants in the metro area are from out-of-metro.

Maiclaire Bolton Smith:

Welcome back to Core Conversations: A CoreLogic Podcast where we tour the property market to investigate how economics, climate change, governmental policies, and technology affect everyday life. I am your host Maiclaire Bolton Smith, and I'm just as curious as you are about everything that happens in our industry.

Welcome to Season 4. The pandemic may not be making daily headlines anymore, but we're still feeling its effects. One of the many ways in which it fundamentally altered the U.S. is the scale at which companies across the nation began to experiment with remote work. While not all jobs can be done from a remote setting for those that were able to work from home, these new flexible working policies opened the pathway for migration out of big cities.

Over the last several years, there have been reports of people leaving high-cost coastal metros for smaller, more-affordable regions. But now the question is how have these migration patterns redefined income distribution as well as the patterns of gentrification and urban sprawl? And how have all of these changes affected home prices across the country? So to dive into this, we're welcoming back one of our favorite guests that we just had to finish off Season 3 last year. Our chief economist, Selma Hepp. Selma, welcome back to Core Conversations.

SH:

Hi guys. Thanks so much for having me back.

MBS:

Okay, so I feel like we just chatted because you were just here, but I really wanted to continue the conversation with you because I want to talk about migration patterns and how we're seeing things. So I think can we just start by talking about when we say pandemic migration, what do we mean by that term "pandemic migration?"

Erika Stanley:

Before we jump into talking about migration patterns and what that means for the overall U.S. housing economy, I wanted to remind our listeners that we want to help you keep pace with the property market. To make it easy, we curate the latest insights and analysis for you on our social media where you can find us using the handle @CoreLogic on Facebook and LinkedIn or @CoreLogicInc on X, formerly known as Twitter, and Instagram. But now let's get back to Maiclaire and Selma.

SH:

So during the pandemic, we saw an increased share of population across U.S. moving to other parts of the country. So people that couldn't necessarily afford in one metro area would move to another area that was more affordable. Or people that just felt that rents in a certain area are beyond what they wanted to spend on a monthly basis, they ended up moving. And all of this was enabled by rise of remote work or hybrid work. Well, at the time it was remote work because we all went remote for about a year to two years, it depends. But it was really the remote work, rise of remote work that enabled a lot of people to keep their jobs but then live in an area that was more approachable to them, more affordable or more something that they preferred better.

MBS:

Well, you and I, Selma are both part of this that we both-

SH:

Yes, we are.

MBS:

SH:

Yeah, one thing to keep in mind is this is all new to us, and so we are not sure how it's all going to unfold, but so far what we are seeing is that people are very, very much in favor of hybrid work. And so a presentation recently from LinkedIn that show that jobs that are hybrid or preferably remote people actually are more likely to apply for a job that's remote than it's hybrid. But then, by contrast, if it's in-person versus hybrid, they're more likely to apply for a hybrid job. So people want that flexibility. And the other data show that we really haven't gone back to the level of office usage that we had going into the pandemic. And so the cards that you swipe to get into the office, they're still at about 50% level of pre-pandemic.

MBS:

Interesting.

SH:

And this is now, what, three years going into fourth year now, so people are really appreciating this.

ES:

SH:

And with that in mind, it does have a consequence on distribution of cities, meaning what are the top cities for top paying jobs or cities that offer opportunities for certain types of occupations such as tech or movies, for example, right?

MBS:

Yeah.

SH:

So that's all being thrown into disarray with rise of remote work. And we are already seeing some of this play out in some of the large metro areas that were top centers for tech work like the Bay Area, right?

MBS:

Yeah.

SH:

And so we are seeing rise in vacancy of commercial real estate. We are seeing less spending on ridership or on transit ridership because people are not going into the city anymore. We are seeing now cities lose some of that tax base that they were counting on because people are moving elsewhere and paying taxes. So it does have long-term repercussions of... Remote work does.

MBS:

So there's a lot there, Selma. So I want to dig into a few of those things there. I mean, you talked a lot about people aren't taking transit anymore, there's tax implications, what are we looking at? Like economic implications of people moving, especially some really high-paying jobs in major metros moving to the Midwest, moving to these more... I know Boise was a big one that there was an influx of people, people just moving to these what were traditionally more affordable metros. What has that done from an economic perspective? Economic implications, really.

SH:

Yeah. Yeah. So when you think about how cities developed, we always had this model of mono-centric city, meaning that all the employment activities that was happening in one center, usually downtown and proximity to those jobs was costly. So your cost of housing was higher because you had that ability or proximity to higher paying jobs. And so people were willing to pay higher housing costs. And as a result of that, as a result of a lot of higher income in population density, you would have generally more amenities like restaurants and concert halls. And I don't know, anything you can think fun to do when you're not working. That was also the concentrated. And what remote work is doing now is that it's enabling a lot of these high-wage workers to keep the high wage but move somewhere else. And that has a repercussions for these large cities because now they're not the dominant cities for attracting high wage workers, but the opportunities are sort of spread out wider.

And so on one hand you have the existing city that now is losing that tax base, but on the other hand, you have these new cities that are becoming more attractive and they're attracting a lot of the high-wage workers that are now getting a lot of tax base. They're getting people with high wages that are spending locally on local services. So as a result of that, now in light of the fact that we also have labor shortages across the country, that could put pressure on local wages as well because now you need more restaurant workers and because of the shortage of them, they're going to ask higher wages. And so it becomes a rollover of higher costs of living from that big city to the smaller city. But because people are coming in and demanding all these services and having money to spend, that new city also will have more to spend on local schools, on police and firefighters and things like that. So just in some ways, you end up redistributing the income from one center to more centers.

ES:

Before Selma and Maiclaire continue the conversation about migration patterns in the U.S., it's that time again, grab a cup of coffee or your favorite beverage, we're going to do the numbers in the housing market. Here's what you need to know.

Also, in the third quarter of 2023, the average U.S. homeowner gained approximately $20,000 in equity during the past year. California and Hawaii, as well as northeastern states such as Massachusetts, Rhode Island, Connecticut, New Hampshire, and Maine posted about double the national gain in equity as home price growth continues. New York, Texas, Utah, and Washington D.C. all saw equity losses. And that's the sip. See you next time.

Before we finish our episode though, we wanted our listeners to know about an upcoming event in January where they can meet some of our experts, including Maiclaire in person.

Garret Gray:

MBS:

Okay. I want to look at both sides of that then. So let's take some of the really popular cities that people often think of. We've got San Francisco, we've got New York City, we've got Seattle, these very high-price cities that people have moved out of. So what does the future look like for them and how do you think they can adapt to some of these changes that have happened with people leaving their cities?

SH:

It's not clear yet exactly how all the cards are going to fall, but those cities do remain attractive. We do see particularly younger generation now coming back to the city, and those always tend to be cities that attracted more younger generations. That was the sort of cradle of creativity and cradle of that's where you meet your spouse, your partner. So these cities are not going to be gone or completely deteriorate, but I think their functions are going to change. So these commercial spaces that are now being largely vacant or not fully utilized are going to have to find other ways of filling the space. And people get creative. And I think what's going to end up happening is we're going to see more mixed-use development. So instead of just having an office building or just a condo building, you get more mixed-use in one building and eventually you end up getting more people on the road walking around, and that spurs local stores opening and things like that.

So those urban centers are going to have to reinvent themselves basically in order to attract people. But one thing that I think is very important for them to reinvent themselves is to deal with some of the issues due to which people left in the first place. And one of them is we had a rise of homelessness. We had rise in crime, theft, for example.

So we are seeing definitely more crime in urban centers, and that's not something new. I mean, back in 70s and 80s when we had the urban flight, when people were leaving urban areas centers too for more suburban areas, because of the rise in crime, we had to address that to get people to come back and we did actually. Prior to pandemic, urban centers were booming. We saw so much new construction in urban centers. So basically there are issues that we need to deal with and for cities that successfully deal with these issues, I think they're going to see people come back.

So that's one important thing. The other thing is we will see people keeping ties to these urban centers. So whether that's through living in suburban or even exurban area, exurban meanings beyond suburban, so like 50 to 100 miles away from the urban center, but still being able to commute that two-days-a-week basis. So some people will prefer that, well, other will completely move to other metros. But still what we do see is that people that move, for example from San Francisco, they move to areas where there is similar types of people and jobs. So they'll move to Austin, they'll move to LA or San Diego. They won't necessarily move to, I don't know, St. Louis. Same thing with people from New York. They tend to move to Philly or Miami, particularly Miami over the last few years. Miami has been booming as a result of migration from New York City. The ties between cities remain. So there's a lot there to still happen, but we are already seeing these trends now develop.

MBS:

Okay. I've got a couple things I want to ask you on that, but first I do want to go to the other side of that. What about for these smaller towns or more affordable metros that people have seen migration patterns and an influx of people, what are some of the opportunities that these new cities might be having?

SH:

Well, I mean the really obvious one is that their wages increase because people of higher income are coming in, spending more on local services, which then increases the wages of local residents. And the other thing is maybe proximity to these specialized skills enables local residents to sort of gain access to these high-income jobs as well that they would not otherwise have because they were just so far away from where those jobs are. So you overall can get an increase in income of a metro area.

MBS:

It triggers a big thought for me is what have home prices done both in cities like San Francisco and New York, if people are moving out of them, are the home prices still stable? Are they dropping? And what has it done to these more affordable communities that are they still affordable now that people are moving to them? So can we talk broadly about what it's done for home prices across the nation?

ES:

Before we end this episode, to talk about how interest rates have impacted migration patterns. Let's take a break and talk about what's happening in the world of natural disasters. CoreLogic's Hazard HQ Command Central reports on natural catastrophes and extreme weather events across the world. A link to their coverage is in the show notes. In December, tornadoes and severe thunderstorms hit Tennessee and Kentucky. CoreLogic estimated that 10,345 single- and multifamily homes in the areas affected by the storms have at least a 30% chance of tornadic damage. This late season tornado is partially due to the current phase of the El Niño-Southern Oscillation or ENSO. El Niño phases coincide with the southeastern shift in the jet stream, as well as increased precipitation in the Southeast.

SH:

Yeah, yeah, absolutely. So we've seen all of this really play out in home price data. At the height of the pandemic when people were generally moving more, I mean, we've seen a little bit of a reduction in a rate of mobility, but at the height of the pandemic, all these metro areas where higher-income people were moving to saw much stronger home price appreciation and at the rate of like 40% in Austin, for example, and Boise City saw a similar rate of increase in home prices. So it did put pressure on home prices in these metros that were receiving new population. And that brings questions of sort of gentrification, what happens to people that can no longer afford in their own communities to buy. And what we ended up seeing there is they end up moving to even smaller towns or even towns that are more affordable or maybe suburban regions of these smaller metro areas.

I call them smaller. They're not small at all. They're pretty large metro areas, but in comparison to New York City or San Francisco, for example. So we saw this cascading effect due to migration during the pandemic, and now we continue to see that in many ways. So metro areas that are seeing a lot of incoming population, and Miami for example, still has the highest rate of year-over-year appreciation in home prices. But New York is actually catching up and Boston is, and San Francisco is too, because home prices either slow to halt or in some instances declined over the last year.

And we can talk about interest rates as well, how they impacted the home price growth, but they have in some metros, these large metros declined. Like we've seen Seattle and San Francisco, among the large metro areas, top the list in terms of the overall decline in home prices. Now, San Francisco has caught up in many ways to where it was prior to the declines, but Seattle, unfortunately, does remain with the relatively higher difference between where it peaked and where it is right now. And Austin too, in some ways. Austin just became victim of your own success, so it became so overly unaffordable that now it's hard to keep up with those prices in Austin.

MBS:

Yeah, that is super interesting. I mean, Austin in particular really was a boom town and one that probably people didn't necessarily anticipate quite to the degree that it did happen. So that one was really interesting to see.

SH:

Yeah, but it does still remain a very... Is still growing and it's growing well. So I was recently at an event where they were discussing their own housing policies and new construction, and it was interesting for me to hear that because Austin is one of the cities that the highest rate of new construction of...

MBS:

Interesting.

SH:

But they're still fighting with housing shortages. They still believe that they don't have enough housing because of so many people coming into the area and consequent affordability challenges that they have now. That's the interesting thing to me is how many cities, despite having gained or lost population, still fight with the issue of shortage of housing because we have that issue cross country, no matter where you go.

MBS:

Sure. That is a really good point too, and that's really interesting. One thing I do want us to dive into, maybe just to close here, Selma, is during the height of the pandemic, these migration rates were kind of the highest that we've seen them in history. However, we also had historically low interest rates as well. And you and I have talked about this a lot on previous podcasts and in particular the season finale last year. Now that we've seen interest rates so much higher, is that correlated to people, the slowdown of people no longer maybe moving as much because they are locked into a very low interest rate? Or how have the interest rate fluctuations impacted the pandemic migration trends as well?

SH:

Yeah. Well, unfortunately, high mortgage rates have brought home sales to a halt, particularly existing-home sales. But when we look at mortgage application data and the share of applicants that are out-of-metro, they remain at the same rate that they were during the pandemic. So about a quarter of applicants in the metro area are from out-of-metro. So I don't necessarily think that it's slowed migration for these higher-income folks. I think the people that have limited budgets, they are maybe sitting still at the moment, but people that have a little bit more to spend and a little bit more flexibility and they wanted to move.

And mind you, they generally tend to move from more unaffordable area to more affordable area. So even with the higher rates, the impact, it's not as high. The other thing is that we've seen increase in cash activity too, and particularly in these areas that are more affordable or areas where we see a lot of migration too, like Miami for example. Simply because people that are moving from higher-cost areas tend to have more home equity buildup, and when they sell their home, they have more cash to work with, so they tend to carry that over. So we do still see a lot of people moving, but unfortunately overall home sales are really dampened by high mortgage rates.

MBS:

Well, Selma, I suspect this story is not over, and you will be back throughout the year of Season 4, and we will continue our conversations on this. But thanks so much Selma for joining me today on our first episode of Season 4 of Core Conversations: A CoreLogic Podcast.

SH:

Thank you. Thank you so much for having me, Maiclaire

MBS:

I always enjoy having you here. And thank you for listening. I hope you've enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released. And thanks to the team for helping bring this podcast to life. Producer Jessi Devenyns; editor and sound engineer, Romie Aromin; our facts guru, Erika Stanley; and social media duo Sarah Buck and Makaila Brooks. Tune in next time for another Core Conversation.

ES:

You still there? Well, thanks for sticking around. Are you curious to know a little bit more about our guest today? Well, Selma Hepp is CoreLogic's Chief Economist. Selma leads the economics team, which is responsible for analyzing, interpreting, and forecasting housing and economic trends in real estate, mortgage, and insurance. Selma frequently appears on local and national radio and television programs and has been widely quoted in the Wall Street Journal, the New York Times, and many industry trade publications. She also regularly contributes to the CoreLogic Intelligence blog where you can read her work at corelogic.com/intelligence.