As the great migration takes place in the U.S. an interesting phenomenon is unfolding; migration is driving up inflation in the very cities people are migrating to. High inflation, including rising home prices, means the financial advantage of living in what are now relatively affordable places is likely to diminish.
Atlanta is the 10th most popular migration destination in the fourth quarter, saw prices of goods and services increase by 8.9% year over year, the highest inflation rate of all the metros analyzed by Redfin.
Phoenix, with an 8.4% year over year increase in prices, came in No. 2 for both inflation and migration in the fourth quarter. Meanwhile in Tampa the fifth most popular destination prices rose 8% year over year, the third highest inflation rate overall. As summarized by Redfin Chief Economist Taylor Marr, “an influx of people moving to a popular, relatively affordable place like Atlanta increases demand for housing and transportation, pushing up prices on those things and contributing to soaring prices on everything else, from food to utility bills. An influx of people moving to a popular, relatively affordable place like Atlanta increases demand for housing and transportation, pushing up prices on those things and contributing to soaring prices on everything else, from food to utility bills.”
It seems outrageous but watching this trend unfold, it is likely that over time higher inflation in Phoenix vs Los Angeles will diminish the financial advantage of living in Phoenix. The flow of people moving from traditionally expensive cities to more affordable areas will slow down because, quite simply, prices are rising so fast that those places won’t be as affordable anymore. For example, gas prices were up 67.2% year over year in December in the Phoenix metro, and prices of cars and trucks were up 34.4%. Meanwhile, in the Los Angeles metro (the number-one origin for people moving to Phoenix) gas prices were up 46.5%, and the price of cars and trucks increased by 13.7%.
I don’t think anyone saw this coming: San Francisco, the place that Americans moved away from most during the fourth quarter, had the lowest inflation rate (4%). New York, had the second-lowest inflation rate (4.6%), ranks number three on the list of places people are leaving, and Los Angeles number two on the list of places people are leaving had the seventh-lowest inflation rate (6%)!
Home prices are certainly contributing to rising inflation in these popular destinations, for instance Atlanta home prices were up 22.8% year over year in December, compared with a 10.3% increase in San Francisco.
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