Are the High Fliers Pricing Themselves out of the Market: The Impact of Housing Cost on Domestic Migration Rates in U.S. Metropolitan Areas

Urban Affairs Association MeetingsChicago, IllinoisMarch 4-7, 2009

Barry BluestoneNortheastern University

Mary Huff StevensonUniversity of Massachusetts Boston

Russell WilliamsWheaton College

Boston

Monthly Housing $1,266Monthly Food $ 587Monthly Child Care $1,298Monthly Transportation $ 321Monthly Health Care $ 592Monthly Other Necessity $ 500Monthly Taxes $ 824Monthly Total $5,388

Annual Total $64,656

Raleigh-Durham-Chapel Hill

Monthly Housing $ 779

Monthly Food $ 587Monthly Child Care $ 866Monthly Transportation $ 358Monthly Health Care $ 368Monthly Other Necessity $

369Monthly Taxes $

350Monthly Total $3,677

Annual Total $44,124

A Tale of Two Cities:The Cost of Living Challenge

Source: Economic Policy Institute, “Family Budget Calculator, 2005”

Boston vs. RaleighNet Domestic Migration (2000-2006)

Employment Growth(2000-2006)

Boston - 6.0 % -2.0 %

Raleigh +17.8 % +11.9 %

Net Domestic Migration by Housing Costs Decile (2000-2006)

0.38%

-0.21%

0.48%

2.95%

2.01%

3.56%

4.94% 5.07%

5.66%

-1%

0%

1%

2%

3%

4%

5%

6%

1st Decile 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile

Housing Costs – Top 10 MSAs1. Honolulu, HI2. San Francisco-Oakland-Fremont, CA3. Santa Cruz-Watsonville, CA4. Oxnard-Thousand Oaks-Ventura, CA5. San Diego-Carlsbad-San Marcos, CA6. Boston-Cambridge-Quincy, MA-NH7. Santa Barbara-Santa Maria-Goleta, CA8. Washington-Arlington-Alexandria, DC-VA-MD-WV9. New York-Northern New Jersey-Long Island, NY-NJ-

PA10. Los Angeles-Long Beach-Santa Ana, CA

Net Domestic Migration Rates (2000-2006) by Housing Cost Decile

-0.21%

0.48%

2.95%

2.01%

3.56%

4.94% 5.07%

5.66%

-1.99%

0.38%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

1st Decile 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile 10th Decile

A Similar Pattern for Employment Growth

Generally, employment has expanded faster in higher housing cost metro areas

But … not true in the most expensive MSAs

Employment Growth (2000-2006) by Housing Cost Decile

3.56%3.97%

5.65%5.30%

4.07%

5.54%

9.89%

8.96%

11.84%

0%

2%

4%

6%

8%

10%

12%

14%

1st Decile 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile

Net Domestic Migration Regression

-.1651 + .000451 Monthly Housing Cost (4.78) - .00000028 Monthly Housing Cost Squared (5.48) + .3744 Employment Growth Rate (2000-2006) (13.69) - .0000994 Days Under 32 Degrees (1.77)

N = 347 Adjusted R-Sq = .444

Estimated vs. Actual Net Migration Rate from Regression #5

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

1st Decile 2ndDecile

3rdDecile

4thDecile

5thDecile

6thDecile

7thDecile

8thDecile

9thDecile

10thDecile

Boston

Actual Mean Est. Mean

Employment Growth Regression

-.2374 + .000591 Monthly Housing Cost (3.46) - .000000255 Monthly Housing Cost Squared (2.77) + .0015 Days Over 90 Degrees (9.13) - .000113 Violent Crime Rate (3.92)

N = 347 Adjusted R-Sq = .219

Net Migration Simulation Boston MSA

Actual Net Domestic Migration Rate: -6.0%

Estimated assuming 10% Lower Cost of Housing: -3.4%

43% decline in out-migration rate

Change in Net Domestic Migration Rate if +10% Employment Growth Rate: - 0.1%

A Change in Statistical Regime Up through the 9th Decile, in-migration and

employment growth contribute to higher housing cost as housing demand outstrips housing supply

But once you reach the top decile, the statistical regime abruptly changes

Now home costs drive migration and employment patterns … contributing to population and job loss.

Conclusion The highest cost metro areas, failing

in the recent past to build adequate housing stock to meet rising demand, are now pricing themselves out of the market for people and business investment