We've talked recently about how more people may shift to rural housing post-COVID, which is playing itself out a little bit south of the Metroplex. One homebuilder there admits a big surge in his demand is because "people want out of urban-area apartments." (He also admitted demand is subsequently down because people are losing their jobs, noting that overall it's a "fluid market.")
We've also previously talked about the population surges in DFW from 2010-19, largely from coastal areas, and what that might look like 2020-29. Now, some of those projections are going to be off because 2020 is essentially a wash for relocations -- and, sadly, about 1200 evictions have been filed since March 16. 1,200 is not a lot in the context of 7M people, but we will see a wave of evictions, and those people need to end up somewhere -- but that's for another post.
Overall, we know that apartment demand has bounced back -- the absorption rates for the prime leasing season will probably be down overall, but the DFW market is pretty solid April-to-April and May-to-May. We've mentioned this before too.
Now let's talk about "flight plans" -- no, not AA or anything -- of people potentially escaping big, expensive urban cores in the next 2-3 years. That could mean an influx of people into DFW, as we tried to predict about Dallas in 2025. (The article on Fort Worth in 2025 is coming later this week.)
Let's frame this up
Here's a relative cost of living map from about mid-2017, with data from late 2015:
Look for the reddish colors. See where they're clustered? Not surprising -- coastal areas, specifically Northeast corridor and SF/LA/Seattle.
Problem is, this is where some of the "sexier" jobs -- Amazon! Silicon Valley! Boston startup scene! The Big Apple! -- are now. But from the same article where I got that map:
For example, the New York City metropolitan area had a 2015 RPP of 121.9, which means NYC and its suburbs are about 21.9% more expensive than the national average. Meanwhile, Beckley, West Virginia, had an RPP of 79.7, meaning that goods and services cost just about four-fifths as much as the national average.
TL:DR on this section -- it's expensive to live on the coasts, and less so to live in the middle (although that will eventually change too).
Quick interlude story
Got some friends in Boston. Mid-30s. 1-2 kids.
They buy a house. Had a budget of about $550K. You can't really get that in Boston, so they end up around $750K with money from each set of parents.
This is the bouncing ball of this decision:
- That parent/grandparent level has less money now -- what if they live into their 90s?
- If your budget was 550, you cannot afford a 750 mortgage; you are now scraping
- The argument for staying in Boston is "Our friends are here," but...
- ... with two small children, how often do you see your friends? Is it in the same way?
Imagine if this couple had -- and I realize this is a stretch -- up and moved to Tulsa. I bet that $750,000 house is about $175,000 max. Make new friends. With the extra money, fly to Boston 4x/year. Have more space.
Obviously only a small percentage of people would be capable of doing something like that, but see how it makes some economic sense?
Understand firm-size wage effect: this is why companies keep your salary down.
Also understand "the stakeholder problem:" this is another reason your salary won't be that high.
To live a comfortable life in a NYC or Seattle, you need to be making $120,000, I'd argue. You can mess with the numbers and make it work, but that's a decent baseline.
Fewer and fewer people are making that.
Plus: real estate is more expensive in those areas. HQs are real estate. And we don't know what commercial real estate is about to look like.
So what's starting to happen?
Tech companies on the west coast are starting to relocate their HQs.
If people love their jobs -- or just need their jobs to, well, live -- they often relocate with them.
So now you've got Salt Lake City as "Silicon Slopes," right? Or a bunch of tech companies in the Kansas City metro?
Elephant in the room here: coastal cities are close to, well, coasts. There's a sea level rise concern.
If you consider I-95 (NE) and I-5, etc. (west coast) as primary economic corridors of the US, I'd argue I-35 is the "B-Corridor." It's got a bunch of cities with jobs and decent costs of living -- Minneapolis, Wichita, KC, Fort Worth, San Antonio, Austin (less good cost of living).
Companies know they can spend less, and employees know they can get more for their white-collar money (at least short-term).
We didn't even address taxes here, but obviously the corporate and individual tax picture in Texas is pretty solid. All of this might see a greater shift to the DFW Metro (and its outskirts) as society "re-opens."