Population Migration and Home Appreciation – What is the Link?

Neil KearneyKearney Realty Co.Boulder Colorado

The Basics

The underlying principle for the real estate market is basic supply and demand.

If there are too few buyers for any supply of homes, there will be downward pressure on prices.

If there are too few homes available for the available buyers, that lack will cause prices to increase.

Data Used

This is not a comprehensive study. Just a curious Realtor at work.

Home appreciation data from Federal Housing Finance Agency www.fhfa.gov

Migration maps from an interactive map by Jon Bruner at http://www.forbes.com/2010/06/04/migration-moving-wealthy-interactive-counties-map.html?preload=08013

The Premise

A large net inward population migration would cause home values to appreciate.

A large net outward population migration would cause home values to fall.

Migration Maps

• Black line means net inward population from any other given county.

• Red line means net outward population migration to an other given county.

• The heavier the line the more people who are moving between those two counties.

• IRS data is used and only net changes of 10 or more people are noted. So, if one person moves from Yuma County in Colorado to Carlton County in Minnesota it will not show up on the map.

Top Five Areas for 5 year Home Appreciation (FHFA 5 yr. ending March 2010)

1. Wenatchee, WA (36.57%)2. Houma, LA (30.08%)3. Mobile, AL (28.53%)4. Baton Rouge, LA (27.58%)5. Spokane, WA (26.44%)

Wenatchee, Washington

The population of Wenatchee is around 30,000 so the migration patterns are not very dramatic. Most lines are inward. This small town with good natural surroundings in Eastern Washington was discovered about a decade ago.

Houma, Louisiana

Houma is located southwest of New Orleans right on the Gulf of Mexico. The map shows only outward migration which is in direct opposition of the premise. Obviously the home appreciation pattern over the past five years has much to do with the post Katrina economy in the area.

Mobile, Alabama

Mobile shows a mix of inward and outbound migration. It’s interesting to see inward migration from Detroit and Las Vegas as well as a strong migration from Florida.

Baton Rouge, LA

This map shows mainly outbound migration which would normally lead to home depreciation. Again, the normal patterns have been interrupted by Hurricane Katrina.

Spokane, Washington

Spokane has had home appreciation of 26.44% over the past five years. This map shows outbound migration to the east and inbound migration from the southwest and Seattle area.

Bottom Five Areas for Home Appreciation (FHFA 5 yr. ending March 2010)

1. Merced, CA (-49.34%)2. Stockton, CA (-45.3%)3. Modesto, CA (-44.59%)4. Las Vegas, NV (-42.13%)5. Vellejo, CA (-39.6%)

Merced, California

Homes in Merced has had lost roughly 50% of their value. This map shows a clear outbound migration. The same is true for the slides to follow. This holds true to the premise that home values have a positive correlation with migration.

Stockton, California

Modesto, California

Las Vegas, Nevada

I love this map. It shows both strong migration and immigration during 2008. Just because home values have decreased 42% it doesn’t mean that all people are leaving. Some people are attracted now that homes are “on sale”.

Vallejo, California

Again the same pattern as other California areas on this list.

Other Areas of Interest

Although these areas are not in the top or bottom lists I find the maps very interesting. Detroit Los Angeles Phoenix Seattle Miami

Detroit, Michigan (5 year appreciation = -33%)

Los Angeles, California (5 year appreciation = -9.21%)

Phoenix, Arizona(5 year appreciation = -11.83%)

Seattle, Washington(5 year appreciation = +12.98%)

Miami, Florida(5 year appreciation = -13.71%)

Conclusions

There is a direct correlation between migration patterns and home appreciation rates.

It is somewhat difficult to spot the patterns and draw meaningful conclusions in areas of modest population without further study.

Migration patterns are only one piece of the puzzle and do not always give the full picture (Hurricane Katrina).

Sources

Federal Housing Finance Agency – Home Price Index publishes May 25, 2010 http://

www.fhfa.gov/webfiles/15780/1q2010hpi.pdf Forbes.com – Interactive Feature

“Where Americans are Moving” http://

www.forbes.com/2010/06/04/migration-moving-wealthy-interactive-counties-map.html?preload=08013

This feature uses 2008 IRS data.

About the Author

Neil KearneyKearney Realty Co. / Metro BrokersBoulder, ColoradoNeil@NeilKearney.comwww.NeilKearney.com303-413-6624Has been a Realtor in Boulder

Colorado for over 18 years and received his MBA from the University of Colorado in 1999.