This City Saw The Highest Net Migration in the U.S. This Year. Hint: It's Not Austin

People are moving. Out-of-state rental applications increased 42% between 2020 and 2021, according to TransUnion, as the pandemic and the resulting economic fallout have impacted both affordability and mobility. Americans are paying an extra 4.8% in rent this year, while some cities like Austin, Texas, and Seattle, Washington, have seen increases greater than 30%. At the same time, more Americans have the freedom to move than ever before. According to a 2022 survey from McKinsey, 35% of Americans have the option to work fully remote. And many of these digital nomads are tired of getting ripped off by the high cost of living in their home cities.

The latest migration report from Rent.com shows that renters who live in major cities in the West and Northeast are looking to relocate to more affordable areas of the South and Midwest rather than renew their high-priced leases. This, of course, will have an ever-evolving impact on real estate markets. Using the data from the report, investors can make informed decisions about where to buy property to capture increasing rents in cities that are about to heat up.

Lead Deltas by State – Rent.com

Understanding Migration Trends

To find which cities are attracting renters, Rent.com analyzed lead data from the second quarter of 2022. To define a lead: when a potential resident submits interest in a rental home to a property owner or manager, that is considered a lead.

Rent.com took the number of inbound and outbound leads in each city and found the difference, which was used to calculate the lead delta. A positive lead delta indicates that people are moving into an area, while a negative lead delta shows that folks are leaving the area.

Where Renters Are Leaving

Renters are initiating outbound inquiries in some areas where rents have risen the most in recent years. The following metro areas had the highest outbound delta:

Charlotte, North Carolina (-32.90%)
St. Louis, Missouri (-32.47)
Chicago, Illinois (-32.05%)
Austin, Texas (-29.72%)
Atlanta, Georgia (-23.15%)

While these aren’t the most expensive places to live in the country, they are all places that have had positive migration, positive appreciation, and an overall increase in rent in recent years. Notably, Austin saw the average rent for a one-bedroom apartment more than double over the course of a year.

Of course, rent prices aren’t the only factor. People may be leaving St. Louis for more desirable locations, considering it ranks on the list of the most dangerous places to live in the U.S. and is known for its low-ranking education system. The rampant snowstorms in Chicago last year were enough to make anyone flee. There are individual reasons for moving as well, but the data shows a clear relationship between high costs of living and outbound migration.

The following states saw the greatest number of renters inquiring about out-of-state properties:

New York (-34.75%)
Illinois (-31.69%)
Colorado (-12.70%)
Georgia (-9.60%)
North Carolina (-9.48%)

New York, Illinois, and Colorado consistently rank as some of the most expensive states to live in, while Georgia and North Carolina are more affordable.

Where Renters Are Going

Renters tend to feel more comfortable moving to a community within the same state or region. For example, most renters in Charlotte looked for rentals in North and South Carolina, St. Louis renters wanted to stay in Missouri, and Austin renters looked for rentals in other areas of Texas. Renters in Chicago inquired about nearby Midwestern cities like Indianapolis and Milwaukee but were also drawn to Dallas-Ft. Worth and Nashville. And more than half of Atlanta renters looked for rentals within the region, including other areas of Georgia or Alabama.

The metro areas with the highest inbound lead delta were:

Huntsville-Decatur (Florence), Alabama (41.77%)
Tri-Cities, Tennessee-Virginia (40.29%)
Biloxi-Gulfport, Mississippi (40.01%)
Knoxville, Tennessee (37.41%)
Springfield, Missouri (36.98%)

Inbound Migration by Metro – Rent.com

Most of these cities brought in leads from larger metro areas nearby. For example, Tri-Cities leads mainly came from Nashville and the metro area. Knoxville attracts current Nashville residents, while Springfield draws inquiries from other Midwestern metros like Chicago and St. Louis.

State-level trends were largely similar. Illinois renters looked at rentals in Illinois and neighboring Midwestern states, while North Carolina and Georgia residents inquired about places in the South. Most New York renters also sought apartments in New York or New Jersey.

Colorado was a bit of an outlier—renters were divided between moving to other areas of the state and getting out of the West. A good chunk of Colorado renters looked for apartments in Missouri, Oklahoma, Wisconsin, Kansas, and Texas, but 49% wanted to stay in the state.

The following states had the highest inbound lead delta:

Delaware (30.38%)
North Dakota (29.53%)
South Carolina (28.99%)
New Hampshire (26.32%)
Mississippi (25.16%)

How Migration Impacts Real Estate Markets

Typically, when more people are migrating into a city than moving out of it, the demand for housing increases. Sometimes, growing cities can accommodate the demand to an extent before prices start to rise. But often, supply can’t keep pace with demand, so prices rise in areas that are getting more popular. When that happens, residents start to get pushed out of the area to nearby cities with more affordable housing.

How Migration Data Can Inform Investors

Real estate trends in Austin, Texas, illustrate how investors can strategically plan for anticipated market changes. The fastest-growing metro area in the U.S. has seen rapid in-migration in part due to Silicon Valley tech businesses looking for less stringent regulations, more favorable tax rates, and a lower cost of living. That meant a booming job market that attracted younger workers while the city’s vibrant culture sustained them.

But as demand for housing in the area increased, prices did too. Austin’s median listing price now stands at $644,000, 8% higher than last year. It didn’t take long for the cost of living to rise above the national average, too. Businesses that didn’t have to pay corporate tax may have stayed put, but residents with lower incomes began to move to nearby areas.

This past year, Austin fell off the top ten list of the U.S. News Best Places to Live, not because it’s no longer desirable—but because it’s no longer offering a relatively low cost of living. And in pandemic times, job opportunities in an area mean less to prospective residents since so many Americans have the option of working remotely.

So, as the migration report reveals, Austin renters are seeking apartments elsewhere. That means nearby areas like San Antonio are growing rapidly in popularity. In fact, rising rent prices have already hit San Antonio, one of the top ten cities where rent is increasing the fastest. San Antonio’s lead delta was a positive 6.10% in the second quarter of 2022, but if the trend continues, it could flip negative.

Outbound Migration by Metro – Rent.com

Staying Ahead of the Trend

As prices are constantly changing due to shifts in demand, it’s helpful for investors to stay two steps ahead. As metro areas heat up, look to nearby areas with low price-to-rent ratios that will soon catch the wave. That way, you can find properties that will both appreciate more than average and capture increasing rents in the area.

For example, Knoxville, TN, has a lead delta of 37.41% and a housing cost-of-living index of 75. It’s seeing the fastest-rising rents in Tennessee while moving up the U.S. News Best Places to Live list.

Unfortunately, investors aren’t clairvoyant—it’s essential to make sure the numbers work for today’s conditions. But you also want to get as much insight as possible about what will happen tomorrow, and keeping an eye on migration trends is one way to increase your likelihood of success.

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