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?
