Covid-19 May Fuel Migration From High-Cost Cities, Analyst Says

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(Bloomberg) --

The Covid-19 pandemic and the resulting remote work boom is accelerating a “Great Migration” from expensive and tax-heavy coastal regions and major cities into more affordable states in the U.S. South and West, according to Susquehanna Financial Group.

The “forced transition” to remote work among white-collar firms will lead employers to reevaluate their approach to real estate and workforce location more broadly, analyst Jack Micenko wrote in a note published Monday.

As evidence, he pointed to data from real estate companies that showed less interest in California, New York and New Jersey as well as slowing searches for homes in larger cities. Micenko identified states including Nevada, Colorado, Florida and the Carolinas as frequent destinations for migrating city slickers.

“This rationalization will further accelerate what’s already been happening, and that will clearly change the complexion of U.S. housing demand for years to come,” Micenko said.

The note feeds into a broader conversation about the fate of dense urban centers once the coronavirus abates. New York state became the epicenter of the virus in the U.S., with the greatest number of cases in the country. Densely populated New Jersey has the second-highest case count. The virus’s preeminence in cities has raised questions for some about living in closely packed areas.

The current “Great Migration” -- not to be confused with the early 20th century movement -- also dovetails with home owners looking to evade ballooning costs nationwide, particularly in large cities where real estate is at a premium.

The median existing-home price in March was $280,600, an 8% increase from the same time last year, according to a National Association of Realtors statement released in late April. Prices increased in every region, according to that same report. The NAR said prices have risen nationally for 97 straight months on a year-over-year basis.

Micenko identified homebuilders active in growing real estate markets, including D.R. Horton Inc., KB Home and Lennar Corp., as likely beneficiaries of the trend: “We’d be ‘short’ high-tax markets and ‘long’ low-tax markets over the long-term.”

©2020 Bloomberg L.P.

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