Six southern states (North and South Carolina, Texas, Florida, Georgia and Tennessee) now add more to the national GDP than the Northeast, according to a Bloomberg analysis of recently published internal revenue service data.
The transition happened during the pandemic. Millions of transplants generated about $100 billion in new revenue for the Southeast in 2020 and 2021 alone, while the Northeast lost about $60 billion.
Friends, this is the new New South. And it’s home to 10 of the 15 fastest growing cities in the US.
The growth is real. The question is this: how sustainable is it? And at what point would the new New South resemble the places where people are migrate of? let’s dive in
economists in first american made a cool thing recently. They grouped home price growth during the pandemic era into four categories for metro areas: Boom-Bust, Boom-No Bust, No Boom-Bust, and No Boom-No Bust. Have a look.
Check it out? Home prices and demand skyrocketed through the new south, and only Austin, Texas has seen prices drop close to 10% from the peak (which is still a 55% increase since February 2020). These markets will remain hot for the foreseeable future.
corelogic data supports this view, even if some markets in Florida are expected to cool off. Miami again posted the highest year-over-year increase in home prices of the nation’s 20 metropolitan areas tracked in May, at 11.8%. Atlanta and Charlotte, North Carolina, posted the next highest gains, both at 4.4%.
The tax filing data shows how much has changed from a wealth perspective since the pandemic.
- In Miami, the net flow of adjusted gross income for taxpayers moving from other states reached $17 billion in 2021, up from $9.6 billion in 2020 and $7.8 billion in 2018, according to Bloomberg.
- In Dallas, it reached $5.6 billion in 2021, up from $4.5 billion in 2020 and $3.8 billion in 2019.
- Charleston, South Carolina, reported $4.6 billion in 2021, up from $3.8 billion in 2020 and $3.1 billion in 2019.
- Jacksonville reached $2.1 billion in 2021, up from $1.6 billion in 2020 and $1.5 billion in 2019.
- By contrast, New York, Chicago, Los Angeles, and DC cumulatively lost $107 billion in 2021 alone.
What is pushing people to move to these areas? It’s simple: affordability and jobs.
“It’s a lot cheaper to live here,” said Jon Overfelt, co-owner of american security mortgage corporation in Charlotte, North Carolina. “We hear it all the time: someone leaving New Jersey or New York says, ‘I couldn’t pay the taxes.’ I’m like, why did you stay in New York? Or why do you stay in New Jersey with such high taxes? They say it’s because schooling (school systems are good) or it’s family driven. If one of those two changes, they end up here quickly.”
In the Northeast, few homebuilders are even attempting to build new single-family homes.
Between regulatory and zoning challenges, NIMBYism, and financing costs, the product simply doesn’t work. Multi-family homes are also in short supply, making land much more expensive and keeping costs high. Homebuilders don’t have that problem in the New South.
According Senior Research, there were only 25,653 single-family homes available for sale in New York and New Jersey as of July 14. In Texas alone there were 73,223 single-family homes for sale. Florida had 48,474 and Georgia had 18,552. North Carolina had nearly 17,000 single-family homes for sale, while Tennessee had 14,650 and South Carolina had 10,539.
The lack of density, sprawl, if you will, is an important factor. Still, Americans prefer car culture, and homebuilders have plenty of vacant lots they bought for pennies on the dollar, and demand is strong in the South.
“If you’re in Charlotte or Raleigh, if you drive 12 miles, it gets rural fast,” Overfelt said. “I’m on the lake, so the houses are $2 million and up. But drive three miles down the street and you can buy a new home on DR Horton for $360,000 – 2,000 square feet. That’s where I see a lot of older people from the north. They sold their house for $700,000, $800,000, $900,000 and bought a slightly bigger house. Keep the money and they’ll be on the outskirts of town anyway.”
Retirees and empty nesters aren’t the only ones moving. Corporations are flocking to the South, taking high-paying jobs with them, according to Census Bureau data.
“We now have more employees in Texas than in New York state. It shouldn’t have been like this.” JPMorgan Chase CEO Jamie Dimon commented at the beginning of this year.
Financial companies, hospitals, biotech companies and auto companies have brought jobs from other areas of the country, census data shows. Apple is even building a $552 million campus in the Research Triangle area of North Carolina.
Tax incentives have helped attract corporations. business solutions company dun & bradstreet received a package of $100 million in cash and tax incentives to move from New Jersey to Jacksonville. The average employee has an annual salary of $77,000, 25% above the national level and well above most local employers. Many roles pay about 15% below average at the former New Jersey headquarters, and the company is not even halfway to its goal of 500 workers, Bloomberg reported.
People will put up with high taxes in exchange for big cities with top quality services made possible by public investment. But the people will not put up with the deterioration of public services and the extreme unaffordability of housing. Between 2009 and 2019, New York City added 907,600 jobs, or 24.3%, and attracted 629,057 new residents. But the city only built 206,000 homes. No wonder people are fleeing in 2020 – the Northeast needs to govern better and commit to making housing more affordable or it will continue to lose out to the New South.
With over 2 million people moving to the New South in the past few years, the culture is sure to change. Will the housing market and way of life eventually change?
“That’s where things get weird and the economy works for the long run,” Overfelt said. “When they come here it’s all they were trying to escape from New York or New Jersey. They always end up saying, ‘Well, that’s how we did it there. Yes, you had it there, but you were paying more there.”
My parents are a perfect example. In August 2021 they moved from northern New Jersey to Clayton, North Carolina, 15 miles south of Raleigh. They bought their new house in a subdivision with cash, and my stepdad got a part-time job at a golf course down the street. They’ve never been happier and it doesn’t hurt that they’re saving $15,000 a year in property taxes. But you know what they don’t like? All new construction in all directions.
“We didn’t have that in New Jersey,” my mother said. Indeed, mom. Indeed.
In our weekly DataDigest newsletter, HW Media Managing Editor James Kleimann breaks down the biggest housing stories through a data lens. Register here! Do you have a theme in mind? Send an email to [email protected]
