A decade ago, the communities inland from Los Angeles became the poster children of the housing bubble. As real estate agents urged clients to “drive until you qualify,” the communities of Riverside County filled with eager house-buyers who weren’t afraid of 90-minute commutes – each way.
Then the economy crashed, jobs dried up, the loosey-goosey mortgages people had relied on to finance their purchases stopped cooperating, and the exurbs emptied out.
Now, that trend seems to be back. Californians are fleeing the high-cost cities and heading inland. Is it a sign of another bubble? Or a confirmation that the cutthroat housing market is turning some pricey cities into gated communities?
One economist thinks the story is more nuanced that all that. The coastal exodus isn’t necessarily a return to the bad old ways. And while it is, in part, a reaction to the affordability crisis, Issi Romem, chief economist at BuildZoom and fellow at the Terner Center for Housing Innovation at Berkeley, says it’s healthy to see Americans on the move, in California and everywhere. The bigger question is: Where do they go, and what do they do when they get there?
See: As the housing market stagnates, American homeowners are staying put for the longest stretches ever
Romem and a Terner Center colleague, Elizabeth Kneebone, published a study in October on people leaving the Bay Area.
In a blog post, they summarized their findings this way: “The San Francisco Bay Area exchanges people of all income levels with all parts of the country, but the origins and destinations of those coming and going differ substantially by income. Low-income residents are over-represented among those moving between the Bay Area and more affordable parts of California, such as the Sacramento region and the Central Valley, while those moving between the Bay Area to farther destinations—primarily large metropolitan areas in other parts of the country—tend to have higher incomes, especially if the move is to or from the Northeast.”
At MarketWatch’s request, Romem extended his research to the Los Angeles metro area. He found that many of the Bay Area patterns also exist in LA: people leaving for the Bay Area and the Northeastern U.S. tend to be more affluent, while those going to places like Las Vegas are less so. Interestingly, those going to the Inland Empire are more mixed. As Romem put it, they “aren’t especially affluent, but they aren’t the opposite either.”
In some ways, these findings reinforce unpleasant truths about a housing market that seems to be growing more unequal.
“The expensive coastal cities are, in a sense, an amenity or a good that people want,” Romem told MarketWatch. “It’s a sought-after thing to live in those expensive coastal areas and the number of slots to live there is restricted. There are fewer slots for the less affluent incumbents. These people tend to be people of color, but not only, and they are pushed into situations where in order to afford housing they undertake a difficult daily commute, or they move to other parts of the country and leave the coastal cities to those who can afford to enjoy them.”
But Romem sees the coastal exodus in a glass-half-full perspective. “I want to say that makes the area less inclusive, but at the same time, immigrants from outside the city see the city as a gateway.” Areas like LA are kept diverse by the churn of in-migrants from all over, Romem believes, whether they are immigrants or not.
Read: Meet the little bank that’s helping immigrants achieve big American Dreams
The point on which LA and San Francisco differ hearkens back to a unique idea put forward three decades ago by a writer named Joel Garreau. In “The Nine Nations of North America,” Garreau described San Francisco as the capital of a vast region called “Ecotopia,” stretching all the way up into Alaska. Los Angeles, meanwhile, is the capital of “Mexamerica,” the southern and central valley of California, southern Arizona, and parts of New Mexico and Texas.
What defines Ecotopia and Mexamerica? In the former, in Romem’s words, “growth is a dirty word,” while places like LA and Las Vegas have no compunction about sprawling outward. “What does that mean for their economies? That’s not clear to me,” Romem told MarketWatch.
Sprawl has happened for as long as there has been a metro area and space that can be defined as “beyond” that area. It may have been aided and abetted by lax lending in the aughties, but it didn’t start then. Now, people leaving LA for the Inland Empire presumably either don’t mind the long commute back to the coast, or have jobs lined up locally. Those leaving LA for Las Vegas may be planning to telecommute to jobs in LA. And people heading to Phoenix may be retiring and bringing with them a fixed income.
Also see: As housing reignites, even bust towns are booming again
Andrea Riquier reports on housing and banking from MarketWatch’s New York newsroom. Follow her on Twitter @ARiquier.
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