Americans are on the move. With the pandemic still part of our daily lives and inflation raging, many families are deciding it’s best to uproot their lives and start over. With more and more people leaving some of the most populous states in the country, it is more important than ever to consider how this will affect investments in these particular areas.
In early 2022, United Van Lines released its annual study, which uses its data to track its customers’ migration patterns and reasons for moving – including retirement, health, family, lifestyle, costs and job-related reasons.
The report concluded that “Americans moved to low-density areas and closer to families throughout the past year” before revealing which states had the most in-migration and out-migration.
High-density population centers topped the list, as New Jersey was found to have the highest rate of in-migration, with about seven people leaving the state for every about three people moving in. Here’s every state that made the top ten:
States that had the highest outbound move percentages
- New Jersey – 70.5%
- Illinois- 67.2%
- New York – 63.1%
- Connecticut- 60.1%
- California – 59.3%
- Michigan- 57.7%
- Massachusetts – 57.6%
- Louisiana – 56.5%
- Ohio- 56.3%
- Nebraska- 55.7%
Digging deeper into the report, it uncovered the reasoning behind so many people leaving these states: 31.8% of Americans who moved cited “being closer to family” as the main reason.
Additionally, while 32.5% said they moved for job-related reasons, that number pales in comparison to figures from 2015, when more than 60% of Americans moved for job-related reasons.
States that had the highest percentages of inbound moves
- Vermont- 74.3%
- South Dakota – 68.8%
- South Carolina – 63.3%
- West Virginia – 63%
- Florida – 62.3%
- Tennessee- 62%
- Oregon – 60.5%
- Rhode Island- 59.1%
On closer inspection, smaller, more rural states made up the majority of this list, showing that Americans were keen to let larger states focus on major urban centers over the past year.
What it all means for a potential investment
While these statistics show there may be potential investment opportunities in states that have recently seen an influx of people, Blaine Thiederman, founder and senior adviser at Progress Wealth Management, cautions that it’s rarely that simple. In fact, population growth or decline often does not predict future real estate investment trends.
“While most people assume that more people leaving an area should lead to lower house prices, it’s rarely that simple. California, for example, lost 117,552 people in 2021, and its real estate values still increased by 43%.”
What does this mean for real estate investing?
Ultimately, as Blaine explains, a wise investment should reflect your answers to a variety of questions, not just the latest population migration data.
“The key to success is to understand the motivation of your target market; the same goes for real estate. When analyzing where to invest in real estate, the first step is to decide which state you want to invest in and who is most likely to move there.
Blaine recommends asking yourself what the potential buyer plans to do with the house.
First and foremost, it is crucial to identify your target market moving to the area. Is it a family looking to settle down with a modest home and a large backyard? Is it a retiree looking for comfort and a location within walking distance of everything in town?
These are the questions you should ask yourself.
“If you can figure out what your target market is moving to the area you’re investing in, you’ll be able to find the homes that are more likely to appreciate faster than average in your area,” Blaine advises.
“The next step is to find a home like the one you think you should buy and buy it for less than it’s actually worth. This is the hardest part and will require more analysis and artistry for your decision than the first.
For any investment, due diligence and proper research are top priorities.
As 2023 approaches, investors need to keep an eye on these patterns of population migration and ever-changing real estate market trends. But, above all, keep it simple with these tips in mind:
“As with any business, start with ‘why’ someone would be interested in living in the home you’re buying as an investment,” suggests Blaine.
“And then buy it for less than it’s actually worth.”
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