What is Driving America’s Exurban Migration and Three Small Cities Benefiting from It
Many of the largest costal and midwestern population centers recorded their lowest population gains in over a decade this past year. This is primarily driven by domestic out-migration (people moving from one state to another), lower immigration levels, and a declining birth rate. Even before Covid-19, many of the largest U.S. metros started to experience stagnating, or even declining, population growth.
At the beginning of the 2010s, major metro areas outgrew their small city counterparts. This was driven by young people flocking to cities in the wake of the 2008-09 financial crisis in search of jobs and housing. Around 2015-16 things began to change as the U.S. economic recovery gained steam. Pre-recession trends from the early 2000s started to take hold again, and outer-most exurban (areas outside of the traditional suburbs) counties more than quadrupled in population compared to 2011-12.
This was propelled primarily by populations that had finally built up excess savings and were looking for a higher-quality of life and a lower-cost of living moving from the Snow Belt (the Northeast and Midwest) to the Sun Belt (the South and West). 36 of America’s largest 100 metropolitan areas were located in the Snow Belt in 2015-16. Out of those 36, 28 experienced net out-migration in 2015-16. Out of the 64 metropolitan regions in the Sun Belt, only 20 metros registered net out-migration in 2015-16, and this was led by 87,000 people leaving the Los Angeles area during that time.
While the two areas showing the greatest out-migration in 2019-20 are the nations two most populous metros, New York and Los Angeles, increased out-migration has also effected a number of other major metropolitan areas including Minneapolis-St. Paul, Atlanta, and San Francisco. Though when people move, they generally do not go far. According to data from the U.S. Postal Service and the Census Bureau, out of the people that moved between March 2020-February 2021, 91.5% stayed within the same metro area or the same state.
What is happening is that people are moving outward. Populations are going from the cities to the suburbs of their existing metro areas and even further out to satellite cities within the same region. Migration patterns are extraordinarily important to metropolitan areas. They effect housing prices, the cost of living, city/state tax revenue, and new business creation which leads to greater long-term job growth. Cities that receive an influx of new residents from other municipalities in the same region or from different parts of the country need to make sure that their existing infrastructure and housing-supply does not become too strained from new population growth.
Here are three satellite cities that are benefitting from recent migration patterns and why populations are flocking to them.
Provo is the beneficiary of the young talent coming out of the region’s universities, particularly BYU, which is located in Provo. Other features like the low cost of living and beautiful mountain landscape, have appealed to tech talent that moved to Provo from other tech hubs. The Milken Institute named Provo as the best economically preforming city in the nation in 2021, after ranking second on the list in 2020.
Large tech firms like Qualtrics, Vivint, and SmartCitizen are all located in Provo and the city has been able to retain these firms as they have grown. The STEM (Science, Technology, Engineering, and Math) focus and entrepreneurial culture at BYU helps to explain why young firms account for 18% of the jobs in the region. Provo ranked first in the nation in 2021 in terms of both one and five year job growth. Provo’s unemployment rate is about 2.5%, well below the national rate of 5.8%. This is despite the city’s labor force growing 1.8% from March 2020 to March 2021.
About 40,000 people moved to Utah County, where Provo is located, over the past six years, exacerbating an already dire housing crisis in the region. The Utah Association of Realtors reported that inventory for sale was down in the region 64% in April 2021 over the prior year and that housing prices were up in the region 26.8% year-over-year. The Utah State Legislature recently passed $50 million in additional funding for affordable housing to help try and allocate more resources to tackling Utah’s growing affordable housing crisis.
The median list price for homes in the greater Allentown area has risen 24% from this January. The average price of a home in Allentown, which was just $225,000 this time last year, is now more than $270,000. Allentown is just 90 miles west of New York City and a little over 50 miles north of Philadelphia. Allentown, with a population of around 121,000 people, is now becoming appealing for family’s looking for more space, lower taxes, and a lower cost of living.
Allentown is seeing a major inflow of millennials coming from New York City and Philadelphia who no longer are required to go into their office five days a week and can now work from home for a majority of the work-week. For these people, who used to want to live within an hour of their office, they now do not mind moving further away from the cities that they work in if they only have to commute longer distances one or two days a week.
New warehouses are also sprouting up along Interstates 80, 81, and 78, which all run through or are nearby Allentown. About 30% of American consumers are within a day’s drive of the Lehigh Valley, the region that Allentown is in. The e-commerce business is driving new job growth in a region that has long been synonymous with major industrial centers and factories that were off-shored in the 1980s and 1990s. Multifamily builders in the region are struggling to keep up with the dizzying demand from new workers flocking to the area to work in e-commerce centers, especially as raw-material shortages and supply-chain constraints make it difficult to develop new buildings or renovate existing ones.
College Station, Texas
College Station is home to Texas A&M, the largest university in Texas with an enrollment of well over 60,000 students. College Station is strategically located about equidistant between Houston and Austin. 80 miles away from Houston and 100 miles away from Austin. Texas A&M boasts one of the top engineering programs in the country and its alums are more-and-more deciding to stay in College Station and work for burgeoning tech start-ups in the region.
Cognizant Technology Solutions sparked the College Station tech boom, by moving its U.S. operational headquarters from New Jersey to College Station to take advantage of the educated STEM workforce that the city has to offer. Employees from Cognizant have left the company and started new tech ventures in the region to help spur further economic growth and job creation.
Home sales have spiked 26.5% in the College Station metro year-over-year and home prices have increased 8.8% year-over-year. Like in Allentown, many people are migrating away from larger cities to College Station. Home-buyer’s budgets go a lot further in College Station than in Austin or Houston, while College Station is also only an hour and a half to two hour drive to both cities.
College Station’s population has grown exponentially over the past two decades. The city, which had a population of just 67,900 people in 2000, now boasts a population of over 121,000 people, growing its population over 75% in just twenty-or-so years. This population growth does not look to subside in the near future, as more people and companies move to the region to take advantage of its educated workforce and low-cost of living.
As America’s population continues to migrate to smaller cities, real estate operators should pay close attention to which municipalities are willing to work with new and small businesses to accommodate their needs. Those cities will experience greater prosperity than others. These cities and towns will be rewarded with vibrant and dynamic business communities over-time that will help to spur economic growth and lead to the creation of high-quality and high-paying jobs in their regions.