Friday, April 21, 2006

Bubble Migration

One of the things that fascinates me most about this housing bubble is the whole psychology of the people involved (e.g., get rich quick, changing attitudes regarding debt, Ponzi thinking, denial, self-justification, rationalization, etc.) and the fact that the lessons of the very recent stock bubble seem not to have been learned (ok, that's two things).

Another interesting aspect is the bubble's effect on population movements. I don't know quite how to feel about this one. Sure, people relocate all the time for all sorts of reasons some of which are due to economic needs (e.g., a better job). But as I've said before (and here and here and here) on this blog, moving because of the housing bubble does not feel right to me. I mean, sure, moving because of job loss, retirement, earning more somewhere else, war, plague, etc. is just what you have to do sometimes. But moving because your house is ludicrously expensive and/or just to find something affordable and that isn't a POS? That just doesn't seem right. I guess I could just be callous and say "whatever". What do you think?

But given that migration due to the bubble is happening, there is the question of who are buying the houses that these out-migrants are selling? It does not seem likely that the bubble immigrants are buying houses in the bubble areas because of the presence of better/higher paying jobs (relative to the cost of living). What proportion are "greater fools" financially stretching themselves to the maximum hoping to be able to make a quick wind-fall by doing nothing other than occupying a house? That would only make the current bubbles all the more precarious. What proportion are folks who are sufficiently wealthy to afford our crazy-priced houses (and why would they even want them for that price)? They would make the bubble situation less worrisome. So maybe whether this bubble busts or not and how bad it will be for the economy at large depends on the mix of folks who are moving to the bubble areas.

And how do the locals feel about an "invasion" of equity-rich bubblites coming in and inflating their housing markets to unaffordable levels? And will that cause them to migrate away from their homes too resulting in a cascading bubble migration?

Will the net effect of all this mass bubble migration be the redefinition of vast regions such that some are reserved for just the "upper class elite" and everywhere else is for everyone else? This is America, isn't it? Doesn't this make you mad?

A reader directed my attention to this article:
The movement of Americans from north to south is trending as strong as ever, according to the latest report on net domestic migration released today from the Census Bureau.

And, it seems, housing prices are driving the trend. The net out-migration of residents is from high-priced northeastern and West Coast cities to more affordable housing markets in the Sun Belt.

"Many are surmising that housing values are so different around the country that it's impacting migration," says Marc Perry, a demographer with the Census Bureau. "Some people are cashing out housing and moving to cheaper areas. Others who don't own homes are moving so they can afford to buy one."

The net out-migration from the San Francisco metro area ($718,700) was even stronger [than Los Angeles], averaging 14.7 per year for a total of 60,984.

Migration seems to be at least somewhat independent of economic conditions. In Massachusetts, for example, out-migration has occurred at more than a 50 percent higher rate the past few years than in the decade before, according to Perry. Yet the state suffered much more economic distress in the 1990s than it has in the 2000s.
What states/districts are they leaving?

California
Much of New England
New York
Washington D.C.

And where are they going to that is so much better than where they left?

Riverside-San Bernardino-Ontario
San Joaquin valley
Phoenix
Tampa
Atlanta
Florida

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