Major cities reliably feed residents to the same smaller markets, and housing booms predictably travel with them
By now, you may have heard about a handful of second-tier U.S. cities that have become unlikely hotspots for relocating workers. Places like Boise, Idaho, Nashville, Tennessee, Jacksonville, Florida, and Austin, Texas — areas that used to be only regionally popular — evolved into some of the fastest-growing metros in the country as newcomers from surprisingly far-away cities poured in. Pilgrimages to such unlikely destinations typically picked up in the 1990s, but they escalated after COVID-19 untethered millions of workers from their offices.
The newfound demand for homes in these smaller markets oftentimes sparked price run-ups of magnitudes far more common to major job centers. In Nashville, for example, the average home price rose about 59% from March 2015 to February 2020, just before the COVID-19 lockdowns, according to Zillow data. Prices in Los Angeles rose about 41% in the same period. Since then, Nashville home prices are up another 47% (to June 2023), compared with a 26% increase in Los Angeles.
Research by UCLA Anderson’s Gregor Schubert suggests we could use migration patterns to better forecast such quirky booms — predict upcoming rises in home prices, home mortgage lending and residential construction in places distanced from major job markets — years before they happen.
In a working paper, Schubert describes migration patterns that underscore strong, long-running connections between large, job-creating superstar cities like Los Angeles, Boston and New York and fast-growing smaller markets like those unlikely hotspots.
You can trace a few of these networks in the map above. The superstar cities aren’t necessarily the largest supplier of newcomers to regional outposts, but they are important ones.
Between 1990 and 2017, workers fleeing rapidly rising home costs in any particular major job center headed for roughly the same target cities year after year, according to Schubert’s work. Revisiting the data in 2022, he confirms that migrations to the smaller markets continued along roughly the same lines during the COVID-19 years, even though the impetus for moving was different.
With predictable migration patterns, you can make some educated guesses about where workers priced out of, say, Los Angeles, will take their housing demand next, Schubert’s results suggest. He illustrates by modeling a 10% increase in house prices in one set of urban areas. Five years later, house prices in areas with strong migration connections are up on average 4.0%, and populations have increased 2.2% over unconnected regions.
The study helps explain why what became regarded as a national home price boom between 2000 and 2007 still left home prices in two-thirds of the nation’s counties up less than 5%. And why economies like Naples, Florida, and Albuquerque, New Mexico, thrive today while Toledo, Ohio, can’t seem to get a break.
Top Destinations for People Leaving Superstar Cities
The three maps below show the most popular destinations for three of the major job markets when their workers relocate to places beyond the local exurbs.
Most of those destinations in the map atop this article — Reno, Nevada, Jacksonville, and Chattanooga, Tennessee, etc. — are not among the most popular destinations for movers from any major job city. The more common new home for a big city leaver is a smaller one nearby, or another large job market.
But it’s the smaller locations where job center migrants make the most impact. A lot of people moving between Los Angeles and the San Francisco Bay Area isn’t likely to significantly alter either massive housing market. Places with five- or six-digit populations, though, may struggle to smoothly absorb even a modest number of new residents. When a rising cost of living or a public health crisis sparks exits from their superstar sisters, these smaller markets experience home price escalation.
Schubert posits that regional areas that have the largest exposure to major job markets — they get a high percentage of all of their in-migration from superstar cities — are much more likely to experience large rises in housing prices and mortgage lending than those with low exposure.
Former superstar city dwellers made up a much larger portion of total domestic immigrants to Naples, Spokane, Washington, and Boise than to Toledo, St. Louis or Minneapolis.
Notice that most cities with less than 8% of in-migration from supercities are clustered in the lower left, where home prices rose less than 10%. Places that had higher exposure to supercities were more likely to be in the top half of the plot, with significantly higher increases in home prices.
Of course, superstar feeders are not the only determinant of housing prices. Most of the time, rising home prices are traced to local economic conditions, such as an expansionary period in a major industry or barriers to new home construction like zoning restrictions or a shortage of available land. But in Schubert’s research, considering an area’s exposure level alongside housing shocks in those connected superstar cities accounted for about 32% of the home price differences.
To sum up, let’s consider how we might have used Schubert’s theories to predict that Boise — population 135,000 in 1990 and a day’s drive from the nearest major job market — would add 100,000 residents in the years since and become one of the fastest appreciating housing markets in the country.
People were moving from San Francisco and Los Angeles to Boise as far back as 1990, not in huge numbers, but it didn’t take much to be a noticeable contributor to the town’s small population.
Why Boise? Schubert’s research doesn’t delve into why people from certain bigger cities latch onto these destinations. But his key findings show consistent migration links between those superstar cities and Boise year after year. Looking across the nation (Schubert tracked household tax returns), about 80% of the migration links between source and destination areas he studied were the same over a 10-year period.
In the late 1990s, tech companies had become dynamos of job creation that brought a steady stream of well-paid newcomers into those West Coast metropolises. Housing prices started rapidly rising, prompting more and more workers to leave for cheaper homes elsewhere. At the time, Boise was not a booming tech hub creating a ton of new jobs. (Although it has long been home to Micron Technology, a large chipmaker.)
Most of those leaving San Francisco and Los Angeles found their new homes close to those tech meccas, or in some other giant job markets. But predictably, many movers followed the well-worn path to Boise.
In 1993, when the S&P Case-Shiller Index was showing national average home price growth at 1.4%, it was 9.4% in Boise, according to data from the St. Louis Federal Reserve’s FRED. When prices nationally jumped 14% in 2005, they rose 24.5% in Boise. In 2021, as workers exited supercities in droves for health and recreation reasons, Boise home prices rose 28.7% against a national average of 17%.
The big-city migrants come often with large home equity to reinvest, with large incomes, too, and it doesn’t take a huge number of them to push home prices up in a smaller market. Some of the newcomers overpay but likely don’t notice it much.
Boise’s population stood at 237,446 at the 2021 census count, which is about 76% higher than it was in 1990. As workers trickle back to big city offices, Boise has been a hot topic in articles about overpriced housing markets and unaffordability. According to Zillow, Boise’s average home price dropped 8.1% in the first five months of 2023.
Assistant Professor of Finance
About the Research
Schubert, G. (2022). House Price Contagion and U.S. City Migration Networks.