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.
- Posted in : Real Estate, Savings
- Author : Kyle
Comments»
[…] A follow-up to my post yesterday on moving to a less expensive city to save money, NY Times had an article on the population boom projection into NYC. So if I said that moving from an expensive city such as NYC will reduce housing costs for most people, why the increase in population in NYC? I think it’s the same reason that real estate in NYC will weather a National real estate bust. From Urban Digs post yesterday, NYC will lag in a slowdown because: […]
[…] California’s tax system isn’t helping. The business tax rate of 8.8% is the highest in the West, and is the second highest to New York when it comes to marginal income-tax rate at 12.0%. According to WSJ, this has contributed to the trend of wealthy taxpayers disappearing from the state and has cost the state $9 billion a year in uncollected revenues due to a loss of almost 20,000 million-dollar income earners from 2000 to 2003. Migration out of CA is seen in the map from Next Bracket’s previous entry on migration patters in the US. Since many of these millionaires are small business owners who create jobs, there must be more incentives for business owners to keep their businesses there and in other high taxed states such as New York (12.15% state income tax rate) and New Jersey (9.0% state income tax). This on top of the Federal tax rate and local taxes. […]
Thanks for the post above. It helps me immensely in the research that I am carrying out.
I am a realtor myself and follow most of the posts with regard to Real Estate Boom.
In most of the posts, there are spins on demographics and interest rate.
Historically, the ratio of housing price to annual income
has been 2.1, with very little variation. In many parts of the country, this ratio is now approaching 10.5!
Our stock/housing pattern appears remarkably similar to the one Japan had 20 years ago. First the stock market busted.
Right after, the real estate market rallied, and it busted too
It is my belief that there is a wider human psychology involved and people are feeding on the basic fear and greed
principle.
Cheers!
Peter
Your Miami Realtor