.png)
We’ve looked at the impact of internal migration before, exploring the way COVID-19 changed the way people move and the subsequent ripple effects on local industries. Now, as the pandemic recedes into the background, rising inflation rates have become a major concern – and the rising cost of living may be leading some individuals and families to relocate to more budget-friendly states and cities.
The rising cost of living may be leading some individuals and families to relocate to more budget-friendly states and cities.
This white paper looks at recent location intelligence data to better understand the factors driving migration trends today. To understand what drove domestic migration in 2022, we analyzed the correlation between statewide household income and rates of inbound migration and looked at how cost of living differences impact migration on a local level. We found that there appears to be a small but significant movement of people from regions with higher income and higher cost of living to more affordable areas.
For the most part, the domestic migration trends of 2021 continued in 2022. The entrenchment of pre-existing patterns is highlighted by the 12-month comparison maps below, which show some variance but no major shifts.
Sunbelt states like Arizona and Florida continued to see positive net migration, while the negative net migration out of states like California and Illinois continued.
The recent rise in the cost of living throughout the country may also be encouraging some people to take advantage of their newfound workplace flexibility and move to more affordable areas that are further away from office hubs.
Combining 2020 Census Data with location analytics metrics indicates that, between January 2022 and January 2023, many states with a higher median household income (HHI) experienced negative net migration. Meanwhile, states with a lower median HHI tended to see positive net migration. Some of the move towards lower-income states could be driven by people looking to purchase an affordable home amidst the rapid increase in housing prices over the past two years. Many of the states with lower HHI also have lower – or no – income taxes, which could be attracting individuals and families looking to offset inflationary pressures.
Analyzing the origin-to-destination HHI ratio of each state for domestic migration between January 2022 and January 2023 further showcases the trend of people moving into states with a lower median HHI than their origin state. This metric calculates the median HHI of all origin regions, weighted to reflect the share of people coming from each state, and compares the weighted median origin HHI to the median HHI of the destination. For example, between January 2022 and January 2023, the weighted median HHI of the states from which Americans were moving to Vermont was $72.1K – 14% higher than Vermont’s median HHI of $63.5K. This means that Vermont had an origin-to-destination HHI ratio of 14% between January 2022 and January 2023.
States with a net positive migration tend to also have a positive origin-to-destination HHI ratio.
As the chart below shows, states with a net positive migration tend to also have a positive origin-to-destination HHI ratio. In other words, most domestic migration involved relocations from more affluent, higher HHI areas to more affordable, lower HHI states. And as the cost of living remains high, the movement from higher income areas to lower income areas observed in 2022 may well continue in 2023.
Location intelligence seems to indicate that the increased cost of living across the country is pushing some individuals and families to relocate to more affordable pastures. But does the movement of people from higher-income areas to lower-income ones end up bringing about price increases in the destination region? How does inbound migration impact local inflation? Digging into the data for Florida and Arizona suggests that, indeed, migration patterns may be influencing inflation rates, with states experiencing high rates of migration also seeing some of the highest levels of inflation.
Migration patterns may be influencing inflation rates, with states experiencing high rates of migration also seeing some of the highest levels of inflation.
Florida and Arizona have some of the highest migration rates in the country, and both states have experienced inflation rates above the national average. But despite this inflationary pressure, the increased migration to both states shows no signs of slowing down.
The Phoenix-Mesa-Scottsdale, Arizona CBSA (core-based statistical area), with a median HHI of $67,000, emerged as a popular destination during the COVID-19 pandemic, becoming the 14th fastest-growing large metro area in the country in 2021. The influx of newcomers may have contributed to the state's high inflation rates as demand for housing and goods increased. Still, despite these rising costs, the state continues to attract new residents.
Migration to the Phoenix CBSA tends to be seasonally driven, with fewer people moving in the spring and migration picking up again in the summer, fall, and winter. Between January 2021 and January 2023, the metro area saw a positive net migration of 1.6%, which may have contributed to Phoenix’s higher than average inflation rate. But the fact that the high inflation didn’t slow down migration suggests that other factors, such as the city's strong economy and job market – including Phoenix’s growing tech scene – may offset the impact of inflation on migration patterns.
Another factor offsetting Phoenix’s high inflation is the area’s relatively low baseline cost of living. Inflation increases the cost of goods and services, but the impact of inflation on prices doesn’t just depend on the inflation rate – the initial baseline cost of goods and services also determines how much these goods and services will cost post-inflation.
According to Forbes’ Cost of Living Calculator, the top five origin cities to the Phoenix CBSA all have significantly higher costs of living than Phoenix does. The cost of living in Seattle, WA, for example – the most popular origin CBSA to Phoenix between January 2022 and January 2023 – was estimated to be 30% higher than that of Phoenix, despite Arizona’s higher inflation rate. Phoenix’s population boom could indicate that some individuals and families looking to relocate to more affordable locations are focusing more on cost of living, and less on inflation trends.
Phoenix’s population boom could indicate that those looking to relocate to more affordable locations are focusing more on cost of living, and less on inflation trends.
So even though inflation in Phoenix is higher than it is in Seattle, the overall cost of living remains lower thanks to Phoenix’s initial low baseline. With remote and hybrid work here to stay, cities with lower cost of living may well continue to attract people looking to stretch their budgets and get the most bang for their salary.
Florida was the country’s fastest-growing state in 2022 – a particularly noteworthy feat given that Florida is already the third-most populous state in the country. The state’s combination of sunny, tropical weather, low tax burden, and affordable cost of living have made it an attractive place to move.
One of the fastest-growing cities in the Sunshine State is Tampa, which, like Phoenix, is quickly becoming a tech hub. Also similar to Phoenix, Tampa has one of the highest inflation rates in the country – perhaps driven in part by the recent inbound migration. And, much like with Phoenix, the rising inflation rates in Tampa do not seem to be tempering inbound migration – Tampa saw net positive migration of 2.6% between January 2021 and January 2023.
Like with Phoenix, people moving to Tampa are also coming from CBSAs with a higher cost of living than that of Tampa. The top five origin CBSAs for people moving to Tampa were New York, Miami, Chicago, Philadelphia, and Minneapolis – all cities with a higher cost of living than Tampa’s. This suggests, or perhaps reaffirms, that many of those relocating – whether to Phoenix, Tampa, or a different city – are looking to take advantage of the lower cost of living.
Even as the price for housing and basic goods and services increased throughout the country, the cost of living still exhibited significant regional variation. And these regional variations seem to be driving many of the recent domestic migration patterns, which have been characterized by a movement from areas with higher HHIs to areas with lower HHIs, and from areas with a higher cost of living to areas with a lower cost of living.
With many people no longer commuting to the office five days a week, a significant number of individuals and families seem to be choosing to relocate to areas where their dollar can go further. And, in turn, the inbound migration to these affordable regions seems to be driving economic growth and creating new employment and commerce hubs.
Migration Patterns Mostly Remained Constant Between 2021 and 2022: Sunbelt states like Arizona and Florida and states with lower population density such as North Dakota, Montana, and Wyoming, continue to see positive net migration. Meanwhile, the negative net migration out of states dominated by larger cities – such as California and Illinois – continued.
A Continued Shift from Higher Income States to Lower Income States: The state-by-state origin-to-destination HHI ratio highlights that people are moving from states with higher median HHIs to states with lower HHIs. This seems to indicate that many are choosing to relocate to areas where their income can go further.
Higher Rates of Inflation, But Lower Overall Costs: States experiencing high migration rates tend to see high inflation levels – perhaps due in part to newcomers coming from states with higher incomes and driving up costs locally. Still, many metro areas with high inflation still boast a lower-than-average cost of living, and the high local inflation does not seem to be tempering inbound migration to these areas.
.svg)
