Remote work, rapidly rising rents in some cities, and a desire for more amenities are all factors driving Americans to relocate—but the areas drawing the most new renters are shifting, according to the new Rent.com migration report for the first quarter of 2023.
Back in January, we reported that renters were showing interest in the South and Midwest regions due to relatively affordable housing available in many cities in these regions when compared to the West and Northeast. But as more people flocked to these regions to escape higher-priced areas, rents went up.
For example, while Miami is still cheaper than New York, rising housing costs in Florida from an influx of new residents are causing the Sunshine State to experience the highest inflation rate in the nation. As a result, some residents may be pushed out of the state, even as more people from New York and California move in.
A similar trend may be happening in Georgia and Texas, according to migration data for those areas. It now appears that more residents are leaving, rather than entering, the South.
The Rent.com Q1 2023 migration report is based on data from January, February, and March. Researchers measured inbound and outbound leads based on user interest in properties and combined the numbers to get a lead delta for each geographical area. A negative lead delta shows more people are interested in leaving the area than moving to the area.
The lead delta for the South declined to -2.07% in the first quarter, the only negative regional lead delta observed. But while the Southern region is losing popularity as a whole, many people are still seeking to relocate to cities like Knoxville, Tennessee, and Augusta, Georgia. Notably, none of the metro areas with the highest inbound lead deltas were in the West, although interest in the region has increased when compared to previous quarters.
It’s important to note that people move for a myriad of reasons, and these trends shift from one quarter to the next. But some cities, like Madison, Wisconsin, have reappeared on the list for inbound migration, while others, like Chicago, keep ranking highly for outbound migration.
While you shouldn’t make real estate investment decisions based on this data alone, it can be helpful to see where rental demand is the highest as you’re researching new markets. Let’s dive into the state and metro area lead delta data.
What Areas are People Leaving?
Outbound migration by state
People leaving Maine were interested in states like New Jersey, Pennsylvania, Florida, Georgia, and Ohio, and renters getting out of Vermont had similar interests, with the addition of New York. West Virginia renters wanted to stay close by in adjacent states, while residents of Illinois planned to stay in the Midwest.
Montana, a new state to the outbound migration list, has seen rents rise rapidly over the last three years. Residents of the state were most interested in moving to Arizona, followed by elsewhere in Montana, Colorado, Utah, New Mexico, and Texas.
Outbound migration by metro
|St. Louis, Missouri
|Charlotte, North Carolina
People who considered leaving St. Louis were interested in moving to other parts of Missouri or leaving the state for Minneapolis-St. Paul, Indianapolis, and Dallas-Ft. Worth. Atlanta’s renters preferred to stay in Georgia or other Southern states.
Chicago’s renters sought apartments in other Midwestern cities like Milwaukee and Minneapolis-St. Paul or Southern cities such as Nashville, Tennessee; Birmingham, Alabama; and Memphis, Tennessee. Denver’s renters wanted to go to other Western metros, like Salt Lake City and Colorado Springs-Pueblo, or Midwestern cities, like Detroit and Kansas City. And Charlotte residents hoped to stay in the Carolinas.
Where are People Headed?
Inbound migration by state
New Jersey is a hot spot for movers, drawing residents from New York and Pennsylvania, as well as Southern states, like increasingly expensive Florida and Georgia. Interest in Delaware originated from nearby and Midwestern states, including Virginia, Maryland, Ohio, and Pennsylvania. And North Dakota leads came from far-away places like Illinois, Texas, New York, and California. Louisiana and Rhode Island each drew interest from other states in their respective regions.
Inbound migration by metro
Most of the desire to move to Augusta came from Atlanta. Compared to Atlanta, Augusta is 27.6% cheaper and less dense, with more space to spread out and still plenty of amenities to enjoy. The Harrison-Lancaster-Lebanon-York community drew the most interest from renters in busy urban areas, like Philadelphia; Washington, D.C.; Baltimore; and New York.
Madison, Wisconsin, which took the 11th spot in the U.S. News and World Report ranking of Best Places to Live, drew residents from Chicago, Charlotte, Denver, and Atlanta. Waco-Temple-Bryan mainly brought renters from within its own region, while Knoxville saw leads from other Southern communities and Chicago.
What the Data Means
Because the Rent.com migration report shows interest in relocation among renters before they move, it’s way ahead of Census population data in capturing migration trends. However, it has its limitations—for example, a lead on an apartment in Augusta from a current Atlanta renter isn’t the same as a move from Atlanta to Augusta. Still, when outbound leads exceed inbound leads for a city, it may be an early indicator of waning housing demand in the area.
Rents tend to go up in cities that are desirable yet inexpensive as more people relocate there, and home values also increase when new residents come to an area. Investors can try to get ahead of the shift by purchasing in low-price areas that might see overflow from neighboring metros as populations increase. Migration trends tend to show people moving into nearby desirable areas that still pack amenities, although cross-country moves are not uncommon to some popular cities.
Augusta, Georgia, and Madison, Wisconsin, are excellent examples. They’re both listed in the top 100 Best Places to Live by U.S. News and World Report for their high quality of life and low cost of living. They’re logical relocation spots for people in bigger cities like Atlanta and Chicago, and Madison is even drawing residents from far-away places. Plus, both cities have median home values below the national median.
Bear in mind that lead delta is just one data point to consider when evaluating a market. You’ll also need to evaluate the rent-to-price ratio and the rent-to-income ratio—finding areas that can generate positive cash flow, where rents still have room to increase based on area median income, is key. Additionally, you’ll want to find an area with a robust job market where unemployment is low, property values have historically trended upward, and property expenses and taxes are manageable, given your expected rental income.
The Bottom Line
Compared to previous migration reports, interest in the Northeast and the West is growing, while interest in the South and Midwest is declining slightly. But several Southern and Midwestern metros are still drawing interest from renters. And the trend of people leaving expensive areas continues.
The data is just a snapshot of early demand based on leads for apartments, but analyzing migration trends can help investors estimate the next hot city for renters. Just make sure to consider other available data before investing in a new market.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.