California Ex-Pats Driving Up Home Prices in Nashville, Atlanta and Austin

As Californians flee the Golden State for (literally) greener pastures, they’re bringing budgets that are nearly 50% higher than locals, according to a new Redfin report. That’s driving up house prices exponentially in cities like Nashville, Atlanta, and Austin, all metro areas with populations that were surging even before the COVID-19 pandemic (and resulting work-from-home policies) began impacting migration. 

Locals in Music City typically bring an average budget of $485,500 to their homebuying search, whereas the average budget for out-of-towners moving to the city in 2020 was $719,500 – an increase of nearly 48%. Similarly, locals in Atlanta are being outbid by transplants with an average budget that’s 33% higher than theirs, and in Austin – a city that’s experienced explosive growth in the last few years – the difference is 32%.

The trend is primarily driven by the influx of new corporate HQs and clusters away from urban areas (particularly San Francisco) to secondary markets, which picked up considerable pace in 2020 as COVID-19 forced companies to adopt more flexible work-from-home policies.

Austin, the most common destination for Redfin.com users looking to move in 2020, has earned the moniker “Texa-fornia” among some Redfin agents because so many Californians are flooding the market. (Buyers’ agents, according to one Redfin asset manager, are bringing actual lawn chairs to showings because the lines to get into houses are so long.) A San Francisco salary can buy a lot more in Texas – and while competition from out-of-town buyers will drive up home values for existing homeowners, these locals looking to enter the market are also facing tough competition.

“Many homebuyers are now able to widen their searches to parts of the country that weren’t options when they were tied to offices in expensive cities, and the consequences for popular destinations will be numerous,” said Redfin chief economist Daryl Fairweather. “That’s great news for remote workers… and for locals, the influx of wealthy homebuyers is both good news and bad news. Homeowners will see the value of their homes rise, but first-time homebuyers will face tougher competition from out-of-towners with big budgets. Local economies will change as well, with people like construction workers, plumbers, childcare workers and landscapers seeing increased demand and increased prices for their services–but that would mean higher prices for locals as well.”

There’s also a growing consensus among experts that these new migration trends – almost certain to evolve as large tech companies and Bay Area stalwarts like Google extend their WFH policies well into 2021 (and potentially beyond) – will worsen affordability in the long term and keep more people in apartments. Renting remains more affordable than buying in 18 of the 25 most populated U.S. counties, including major metros like Los Angeles, San Diego, San Francisco, Seattle, and New York City. 

And the landscape of cities like Austin – which expects the creation of 10,000 more jobs this year due to relocations from companies like Elon Musk’s Tesla – are already rapidly shifting. The city added more apartments from 2014 to 2018 than any other major U.S. city, according to National Apartment Association data, but state law doesn’t require developers to include below-market units on new projects. That essentially has the effect of creating more options for higher earners (including out-of-towners).