2022 saw booming demand for U-Haul gear from California, Illinois, and New York as citizens chose to flee the West Coast, Northeast, and Midwest. Growth states are calculated using the net gain of one-way U-Haul trucks entering a state versus exiting that state in a calendar year. California and Illinois finished 50th and 49th, respectively, marking the third straight year in those positions.
But what could cause such a mass exodus from states like California, New York and Illinois?
Long-term migration patterns remain stable
U-Haul rental trucks had the highest demand for outbound moves from California and Illinois in 2022.
In 2022, according to U-Haul’s Annual Growth Index, the fastest growing states were Texas, Florida and the Carolinas, which emerged as hot spots for one-way truck rentals. Since 2016, when U-Haul began tracking statewide migration data, Texas and Florida have consistently been at the top of the list of preferred states, while California and Illinois have been at the bottom of the list.
The top countries for growth by this metric (including their ranking in 2021) are as follows:
3.South Carolina (4)
U-Haul’s records show that migration to the southern and southwestern United States has surged over the past year — an event triggered and amplified by the pandemic. While DIY moving has eased slightly from the record moving rate of 2021 in most states, it has remained at elevated levels.
Texas remains the fastest growing state for a record-breaking second straight year and fifth time since 2016, outperforming all other states. Florida, an equally impressive growth state, follows close behind, ranking second for seven straight years!
The Census Bureau confirms the population increase by state, with Texas being the state with the largest increase, with a total population of 30,029,572. Along with California, Texas is one of two states with a staggering population of 30 million or more.
In 2022, Florida became the fastest growing state in the nation, with an annual population growth rate of a remarkable 1.9% and a total population of 22,244,823.
Is migration due to political ideologies?
The five states with the most mass exodus (including their 2021 ranking) are all controlled by Democrats.
46. New York (45)
47. Massachusetts (47)
49. Illinois (49)
50. California (50)
In the nine years between 2010 and 2019, the US Census Bureau reports that California, New York, New Jersey, Michigan, and Illinois all experienced population declines totaling 4 million.
Additionally, a recent U-Haul study found that the five states with the highest influx of new residents are Republican strongholds, such as Texas and Florida. These migration trends could indicate the political management of the states driving the exodus.
Effects of changing economic conditions
Statistics from the US Bureau of Economic Analysis (BEA), released on December 23, 2022, show that 47 states and the District of Columbia (DC) saw their real gross domestic product (GDP) increase in the third quarter of 2022.
Alaska led the percentage change in real GDP at 8.7%, closely followed by Texas at 8.2%.
The BEA tracks the income of each state resident from wages, property income, dividends, interest, rent, and government benefits to assess and compare the economic well-being of state residents.
The mining industry was the largest contributor to real GDP growth in Alaska, Texas, Oklahoma, Wyoming, North Dakota and New Mexico, the top six states in real GDP growth, and in West Virginia, the state with the eighth largest increase in real GDP real GDP.
In the third quarter of 2022, state personal income grew at a 5.3% annual rate in all 50 states and DC
Personal income in Texas and Florida grew 6.9% annually, compared to just 5.2% in California.
The percent change in real personal income trend from 2021 showed similar patterns, with Texas and Florida coming in at 4.8% and 4.7%, compared to California at 3.7%.
Why are certain states losing residents?
From the high cost of living to remote work opportunities to the weather, there are numerous reasons people have left California and Illinois in 2022. Regardless of their motivation for migrating, one thing is certain: there has been a significant movement away from these states this year.
With the increasing availability of remote work options, there will be population growth and migration to areas with a lower cost of living. Additionally, these cities and states now offer more job opportunities than ever before.
The Census Bureau reports that the pandemic had a modest impact on retirement timing. Those in poor health were more likely to retire early, with 5.6% saying they have already retired or are about to retire.
Also, the exiting baby boomer generation would likely migrate to states with warmer weather and lower living costs and taxes. Texas and Florida are ideal locations for those worried about income taxes as they have no state income taxes.
Businesses move across state lines due to taxes, labor costs, and a lack of available employees. Unfortunately, when companies leave a region, job opportunities disappear. Consequently, this could lead to an influx of citizens into the new state and stifle economic growth for the states that companies have left.
Importance of tracking migration trends
The movement of human capital across state borders would affect the state’s potential economic output by changing the size of the labor force. As a rule, highly qualified employees take on important functions that are essential for any economic development.
Migration trends also have a direct impact on the tax base and the government’s net tax contribution. It is also affecting property values for local people and the demand for real estate investment.
Population growth is one of the many factors to consider when choosing the best states for real estate investors. Property taxes in Texas are based on appraised value compared to California where appraised value equals purchase price and annual increases are capped at 2%.
For the first time in its 171-year history, California saw a decline in congressional representation due to changes based on new population estimates for each state reported by the US Census Bureau. The number of seats allocated in Congress fell from 53 to 52 representative districts.
One less representative in the House of Representatives also means one less vote from California in the electoral college, which decides the presidency, and correspondingly fewer federal funds allocated each year based on population. Power shifts to Texas adding two seats and Florida adding one seat based on population growth.
As these migration trends continue to increase, California and Illinois, which rank at the bottom of the list annually, need to consider the long-term impact of their citizens’ departure.
This post was produced by Financial Freedom Countdown and syndicated by Wealth of Geeks.