Sun Belt States Benefit From Migration Trends in Pandemic

The U.S. Census Bureau’s latest population growth estimates by state, an important indicator for commercial real estate demand, provides the first granular look at how some lower-cost parts of the Sun Belt are benefiting from migration in the pandemic.

While data for metropolitan areas probably won’t be available until a few months into 2021, state-level trends can help give an idea of how population growth is shifting in major cities throughout the country.

Plentiful employment opportunities and relatively affordable housing continue to drive population growth in the Sun Belt. The region’s largest states, including Texas, Florida, Arizona, North Carolina and Georgia, once again led the nation in terms of nominal population gains in 2020. This shouldn’t come as much of a surprise, as cities such as Dallas-Fort Worth, Atlanta, Houston, Phoenix and Charlotte, North Carolina, have continued to post impressive multifamily demand figures and have been some of the most resilient economies during the pandemic.

Texas, with its quartet of fast-growing cities, came in far above second-place Florida and roughly tripled the population growth of third-place Arizona. Expect to see Dallas-Fort Worth and Houston top the list of metropolitan area-level nominal gainers, and Austin and San Antonio to come in as two of the fastest growing cities on a percentage basis when those figures are released later this year.

Also expected to have strong population growth numbers for 2020 are Atlanta; Phoenix; Charlotte and Raleigh in North Carolina; and the major Florida markets of Tampa, Orlando and South Florida.

When looking at the top states by percentage of population growth, the overall story is similar with many lower-cost Sun Belt states leading the pack. However, a few smaller Western states stand out, such as Idaho, Nevada and Utah. Cities such as Boise, Idaho; Las Vegas and Salt Lake City might not be growing as fast as some of the country’s large Sun Belt metropolises, but those locales are benefiting from robust population growth on a percentage basis.

Nevada, despite its tourism-based economy taking a substantial hit in the fallout of the pandemic, saw impressive population growth last year. This is probably a result of the continued hemorrhaging of residents from California.

Another standout on this list is South Carolina, which often flies under the radar when looking at population trends in the Southeast compared to larger states such as North Carolina, Georgia and Florida. But South Carolina ranked seventh in nominal population growth last year and sixth in population growth on a percentage basis — both figures that were roughly in line with the state’s 10-year average.

South Carolina’s largest cities are driving much of this growth. The state also benefits from spillover population growth in the area closest to Charlotte, as those exurbs are among the fastest growing towns in the region.

Few states diverged much from the annual growth rates seen since 2010, signifying that 2020 wasn’t too different from the population growth and migration patterns that have been observed over the past decade. Only Idaho outperformed its prior 10-year average by more than 50 basis points, while Colorado and Washington, D.C., notably underperformed their recent respective averages.

This also points to the slower population growth the U.S. has seen over the past decade. The country has averaged annual population growth of about 0.6% per year since 2010, but in 2020, growth slowed to less than 0.4%. While that difference doesn’t seem significant, it amounts to a nominal slowdown of nearly 1 million.

New York, Illinois and California saw the most significant move-outs over the past year, with each of the three high-cost states seeing their populations dwindle by more than 60,000 people over the previous year.

California, which saw impressive nominal growth over the past decade, saw a loss in population for the first time in 2020. It’s not unreasonable to think that the pandemic has pushed many Californians to nearby states such as Arizona, Nevada, Idaho and Washington to escape sky-high housing costs while remote work became the new normal.

But California has experienced negative domestic net migration for years, with immigration serving as a counterbalance for population losses. Therefore, while California’s population losses last year are a concern, it’s more likely due to the lack of immigration during the pandemic than an increase in net out-migration.

As an example, Los Angeles has seen net domestic out-migration every year since 2010. In 2019, more than 100,000 people left, the highest in the past decade. At the same time, international migration to the country’s second-largest city fell from more than 40,000 people to just 21,000 people in 2019. That trend will likely show up again once that new data is released by the Census later this year.

Similarly, New York, which also usually gets a boost from international migration, saw nothing of the sort in 2020, culminating in the largest percentage and nominal population loss in the country. These estimates put New York’s population just about even with its 2010 level.

Some of the states with a sizable difference between 2020 population growth and their prior 10-year average likely show some form of a pandemic effect. Tourism-dependent Hawaii’s population fell last year, while it was a net gainer over the past decade. Energy-dependent states such as Louisiana and Alaska also took a hit.

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