Real Estate, Migration, and Saving More February 21, 2006
I’ve talked about getting to the next income bracket by either saving more or earning more. The mantra in life for financial freedom is that it’s not what you earn, it’s what you keep that will get you towards your financial goals. One way to save more is to migrate to a less expensive area. For many of us, housing costs make up most of our expenses, so bringing down housing costs will allow us to save much more.
I read an interesting entry at “Calculated Risk”, a blog about economics and finance about US migration patterns. He compares the migration to housing prices:
There are two regions seeing significant migration inflow: the West (excluding California) and the Southeast (excluding Florida). It is no surprise that western states like Arizona, Oregon, Nevada and Idaho have seen housing prices surge based on the migration data.
However, a similar pattern is not happening the Southeast. The states seeing inflows, like the Carolinas and Georgia, are not seeing above average house price increases. Perhaps there is more available land and higher rental vacancy rates.
Based on his assessment, home values in the Southeastern states are relatively less expensive. Also, based on the migration patterns, these high inbound states such as GA, SC, NC, AL, TN, and KN should bring more demand in housing.
Another blog, Adventures in Money Making, had an entry about “understanding real estate market cycles and how do to your own reserach“. He talks about researching population migration as an indicator of real estate cycles. For example, the California market periodically experiences a rapid runnup in pricing, then it crashes, stagnates, and then rises again. As housing becomes less and less affordable, people start to migrate to neighboring states.
As baby boomers grow older and become empty nesters, it’s likely that they will also downsize to save costs on heating, real estate taxes, and maintenance. They will be in a lower income tax bracket but the savings in cost will be a lot less than if they stayed in their large homes. For us, we’re willing to downsize for a while, but our housing payments are pretty low and finding a rental or another home to move to isn’t likely with the current prices in the area. Stay tuned for our other ideas on cutting monthly costs.