The Wrath of Grapes: America's Migration Inland

Earlier this month, I read an article on reporting Americans are increasingly leaving large costly coastal cities for affordable small cities in the country's interior. This seemed surprising to me, but I dismissed the article as a small news blurb on a slow news day, until I heard some additional reports also came out about this phenomenon.

The idea goes like this: The cost of living in major American cities is on the rise, and Millennials are flocking to city centers. I have witnessed this first hand. One of the last projects I underwrote in Washington DC was for condominiums that would sell for over $750,000 for 1,000 s.f. with two bedrooms and two bathrooms. How could anyone young trying to start a family begin to afford something like that?

The other option is to live out in the suburbs, which are an increasingly painful commute into the city. An average commute in a big city could easily be 45 minutes to an hour each way. For those without the means to live downtown, and for those with the desire to have children and own a home, the big city is making less and less sense.

The southern United States is seeing the effect of this migration. The South is known for more affordable real estate, and now its small cities are teaming with more amenities and jobs to draw people away from large northern cities. Likewise, we see plenty of growth in the upper Midwest. Des Moines and Omaha have successfully developed strong financial services sectors, and even small cities like Sioux Falls, Fargo and Rapid City are seeing strong growth not witnessed since before the Dust Bowl.

The South and the Midwest may be winners, but who are the losers? The Northeast is seeing many people migrating particularly to the South. California is known to be another big loser, with many of their residents packing up and leaving for a variety of destinations throughout the US, but especially Texas. The migration has led to the phrase “the wrath of grapes,” suggesting it is the reverse of what Steinbeck witnessed. Now people are leaving the big cities on the coasts to seek better lives where their predecessors may have originally come from.

Despite this phenomenon, it is also worth noting that migration in the United States is at an all-time low. While Americans are still much more likely than their European counterparts to move for work, they are doing so with less frequency.

This has brought about debates as to whether that is part of the current economic drag. If people are unwilling to move for better jobs, will this result in a more stagnant GDP? Some question whether people can afford to move, due to moving costs or the fear of selling a home that is underwater on its mortgage. Whether it is a matter of affordability or a change in culture won’t be clear until more time reveals the trend of the future.

As for me, I feel like I am living like a king in South Dakota after having lived in Washington DC. I can afford three times the amount of housing here and several other extra amenities, which would have been money spent on taxes and commuting in DC!