Americans moved around a lot over the past two years.
And many have generally gone either south or west.
And those destinations also happen to have the highest
inflation rates in the US.
The story of inflation is more a story about hotbed
migration destinations and how that changed during the
pandemic.
Phoenix, Atlanta and Tampa are among the metro regions
seeing both hot inflation and the pandemic surge of
home buying.
The reason why Atlanta is one of the hot spots in
terms of inflation in the country is because people
are moving into Atlanta.
Two or three times a week we get phone calls, people
wanting to buy our house for cash, complete
strangers.
We saw right away that inflation was highest in
Phoenix and the lowest in San Francisco.
Nationally the Consumer Price Index rose by 8.3% in
April 2022.
They're effectively becoming poorer as prices rise.
Now, once people get here, they find, 'Wow, this
inflation is so high' compared to where they moved
from.
It's important as ever to pay attention to how
migration is impacting things like inflation.
Here's where inflation is burning red hot and how
migration across the country has affected it.
Many Americans relocated from expensive coastal
cities to more affordable urban areas, according to an
analysis from real estate broker Redfin.
However, this kind of inflation migration trend
seems new.
In 2021, where we started to see an acceleration of
migration driven by the pandemic into these hot
places like Tampa and Phoenix and Atlanta.
Where we really started to see the relationship expand
and pull out, where the hot migration destinations are
driving the big increases in inflation.
According to Redfin's analysis, Phoenix has the
highest inflation rate of any US metro area.
Prices spiked 10.9% in the first quarter of 2022.
Plus, Phoenix was one of the most popular places to
move yo, second only to beachy Miami, Florida,
according to Redfin.
Housing is definitely a large component that is
driving that. Housing costs in Phoenix, as of the first
quarter, are about 12% growth right now.
Most people in Phoenix that are homeowners are watching
the home price inflation with a great deal of
enjoyment. Essentially, home prices are darn near
double what they were two or three years ago.
Hot housing market like Atlanta.
We have a lot are the people moving in.
That's definitely the increased demand for goods
and services and especially housing.
Redfin said Atlanta had the second highest inflation
rate at 10.6%, and the Georgia metropolis also
happened to be the 10th most popular migration
destination.
People have more work flexibility and they are
also looking for more affordable places compared
to San Francisco, New York and all the other bigger
metropolitan areas.
Atlanta is still much more affordable.
That margin is definitely shrinking.
The Sun Belt trend continues with Tampa, Florida, having
the third highest inflation rate at 9.9% and is being
the third most popular migration destination.
Meanwhile, the city that saw the most people moving away
was San Francisco.
And San Francisco had the lowest inflation rate in
Redfin's analysis at 5.2%.
We know a lot of people that we've been tracking
throughout the pandemic have been leaving in places
like the Bay Area and moving and pouring into
these hot migration destinations through the
pandemic.
The New York City area had the second lowest inflation
rate at 5.4% and saw the third most migration away.
And keep in mind, this is price change, not price
level. So we're not saying it's less expensive to live
in New York. It's just that their current inflation rate
is a little bit lower.
Measuring inflation as the percentage change of the
price index, it's the consumer price index.
So that is a basket of representative goods that
people consume and housing accounts for one third of
that basket.
The Consumer Price Index, the CPI, is a measure of the
average change over time in the prices paid by
consumers, according to the Bureau of Labor Statistics.
That basket of stuff is developed from information
provided by families and individuals on what they
actually bought.
But the prices calculated from each item in the basket
are weighted.
And we have a sample of all sorts of goods and services
that we collect data from every month.
In about 75 areas across the country.
We're collecting in the neighborhood of 80,000
prices a month, so around a million per year.
And we're using that to compute both overall price
change, how much the price has risen for that whole
market basket.
So if the CPI represents the average weighted prices of
goods across the country, regional CPI measures have
their own unique weighted baskets of prices, just
slightly different weights.
And that variation depends on the region.
It can be different from place to place.
Now our data shows that there's substantial
inflation in every area of the country, a little bit
less than the Northeast, a little bit more in the south
and west. The first place to look is sort of the
weight of gasoline and also just the shelter or rental
costs, because that's where we see the most variation.
In the most recent 12 month period gas prices in Phoenix
are up over 40%.
People buy a lot of cars, some people buy used cars.
Prices of both of those have really increased
nationally. But also here in Phoenix, that's been a
big driver.
People feel the pain at the pump.
The gas price increase?
That will increase the cost of many other things.
And why you're going to see the food price and the
overall other services, so that definitely affects the
cost of living.
Even though the national housing market is showing
signs of a cool down, Phoenix, Tampa and Atlanta
will remain attractive to out-of-town homebuyers,
according to Redfin.
Thanks, in part, to pandemic fueled remote work.
I think there's a long term migration in the US towards
sort of the Sunbelt, towards the south and west,
away from the northeast and that's probably continuing.
Homes are becoming less affordable more quickly in
the Sun Belt metros than in coastal areas.
Does that affect migration?
I don't know. It hadn't seemed to as of this point
because prices are going up everywhere.
Big factor that will drive both inflation and migration
pattern is the housing market.
The rate hike now the Fed is conducting now, we know
right, when the mortgage rate is higher, it will cool
down the housing market a little bit.
Right? But specifically how the Atlanta housing market
will move. That is hard to say.
Redfin suggests that the financial benefits of moving
to relatively affordable areas may eventually
diminish.
The cost of living might be really affordable to someone
who is moving into the area. But for an existing
resident who is already there, they might be feeling
more of the pains if they haven't had a strong income
gains and they are still facing higher prices.
That's why wages are the key component that ties this
together, especially for locals.
Locals are simply priced out and they have to either move
much further out or to a place like Dallas instead,
where it's relatively more affordable.
If your wage and your salary cannot increase and keep up
with the pace of inflation, your purchasing power will
be hurt.
Wage increases nationally were 5%.
Phoenix wages were up 6.4%.
Now, that's, of course, not really keeping up with
inflation.
People will be hurt a lot more.
And that is more pronounced and more of an issue in
these hot migration destinations. What do we
need to do to address that?
Raising interest rates at the Fed is going to continue
to do will be one way to mitigate inflation into to
tame it. That's one strategy. Another strategy
shows up with this analysis that we need to build more
homes in these hot migration areas to add
housing supply, to also ease the burden of renters
and that are experiencing growth in their rents.
There's also transportation infrastructure that people
could invest in and maybe ease the burden of relying
on cars in these very car dependent metro areas, like
Atlanta and Phoenix, that are experiencing really high
growth.
There's a lot of uncertainty in the economy about what is
next. You have the issues related to labor
availability, labor shortages.
When you have that kind of churn in the labor market,
it puts upward pressure on wages.
So what is the big unknown?
Of course, its several unknowns, really.
What the effect of Federal Reserve policy, you know, is
it going to be a soft landing?
Is it going to be a catastrophe?
Who knows?